Russian Bank Chief Says Cyprus Deposit Tax Plan Discriminatory

Artem Konstandian, president of Russian lender OAO Promsvyazbank, said the proposed deposit tax in Cyprus is “discriminatory” because it penalizes its customers for the Mediterranean island’s economic problems.

Promsvyazbank Cyprus is a unit of the Russian lender and should not be subject to the so-called country risk of another state, Konstandian said in a statement on the lender’s website.

The levy represents “an expropriation of money” from honest market participants, according to Konstandian. The measures “violate rights of depositors” and do not comply with “rules of trade,” he added.

Finance ministers in the euro area reached an agreement on March 16 that will impose a tax on depositors in Cypriot banks, which are estimated by Moody’s Investors Service to have held about $31 billion in Russian funds as of the end of last year. Russian President Vladimir Putin yesterday called the proposal “unfair, unprofessional and dangerous.”

Cyprus’s parliament may reject the proposal in a vote today, according to President Nicos Anastasiades. Banks in the country are closed until at least March 21.

Moscow-based Promsvyazbank is among at least a dozen prominent Russian lenders that have Cypriot units. State-controlled VTB Group, Russia’s second-biggest bank, appears to be the “most exposed” to risks in Cyprus because its local unit manages about $13.8 billion of assets, Moody’s said. OAO Sberbank, Russia’s largest lender, and OAO Gazprombank, the country’s third-biggest, also have operations on the island.

Billionaire Brothers

“It’s not discriminatory against Russians because presumably it applies to Ukrainians, Greeks and whoever has deposits there,” Tom Adshead, chief strategist at Kazimir Partners, a Moscow-based hedge fund, said by phone. “The plan is rather to punish the Cypriots and to make it impossible to let their banking system become much bigger that it should be.”

Billionaire brothers Alexei and Dmitry Ananyev set up Promsvyazbank, Russia’s tenth-largest lender by assets according to Interfax, in 1995. Alexey has overseen Promsvyazbank’s board since 2006, while Dmitry represents the northern Russian region of Yamal-Nenets in the upper house of Parliament.

The brothers, who started out importing computers in the early 1990s, paid about 150 million euros ($194 million) in June to buy back a 14.4 percent stake in the bank that Commerzbank AG, Germany’s second-largest lender, acquired in 2006.

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