The Cypriot Bailout Hasn't Rocked Markets—YetBy
Could the tiny Cyprus banking system be the powder keg whose explosion reverberates around the planet? A bank run in Cyprus, a euro zone nation of 1.1 million, should be an island-contained crisis. But the entwinement of Cyprus and Russia, the world’s ninth-biggest economy, makes things complicated. Russia’s banks and companies have $31 billion parked in Cypriot banks, according to estimates by Moody’s Investor Services—on top of almost as much in Russian bank loans to Cypriot companies. The immediate question is: How confident are 145 million Russians that their money is safe at their Russian bank? By extension, how confident are global banking multinationals—in the U.S., Switzerland, London, Brazil, and China—that their Russian counterparties are good for their rubles if Cyprus rots up to their balance sheets? Will this all prompt a mass run on banks in weak links such as Italy, Greece, and Spain? And a bolt to the exits by equity investors the world over?
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.