Global finance ministers urged Cyprus to allow problem-free banks to resume transactions on frozen accounts, saying strict limits on banks are hurting the country’s economy, Russian Finance Minister Anton Siluanov said.
Cyprus reached an agreement with euro-zone governments in March to impose losses on uninsured depositors at Bank of Cyprus Plc and Cyprus Popular Bank Pcl, the country’s two biggest banks, as part of negotiations for the 10 billion-euro ($13.1 billion) rescue of its financial system. The country’s banks were shut for almost two weeks to avoid capital flight before reopening March 28 with controls limiting financial transactions.
“The way the problems are being addressed in Cyprus has cast doubt on the trustworthiness of its economic policies,” Siluanov told a press conference after Group of 20 meetings in Washington yesterday. “The sooner we solve that problem and remove all the limits on transaction, the faster the banking system will revive, and so will the economy of Cyprus.”
Russian lenders and companies had about $31 billion in Cypriot banks by the end of 2012 and VTB Group, Russian’s second-largest lender, appears to be the “most exposed” because its local unit manages about $13.8 billion of assets, Moody’s Investors Service said in a March 18 report.
Siluanov said Russia, which last month agreed to restructure a 2.5 billion-euro loan granted to the island nation in 2011, now expects Cyprus to return the favor and lift banking controls.
“We will provide support, keeping our own interests in mind -- we want VTB’s Cyprus unit to be able to function normally,” Siluanov said. “We have a lot of money of our companies pending down there, and we want them to reach the recipients.”
Siluanov said last week that Russia, which holds the rotating presidency of G-20 this year, plans to discuss ideas for an early-warning mechanism to prevent future Cyprus-like crises.