Russia Rules Out Rescue for Cyprus Savers

Russian official disavows responsibility as customers of Bank of Cyprus face losing up to 60% of their uninsured deposits.

Russia won’t bail out people or companies that stand to lose money held at Cyprus’s two largest banks, First Deputy Prime Minister Igor Shuvalov said.

“If someone gets stuck and loses money in those two biggest banks, that’s really too bad,” Shuvalov said in an interview broadcast late yesterday on Russian state television. “But the Russian government isn’t planning to do anything in this case.”

Russia turned away requests from Cyprus for additional financial assistance last month after criticizing plans that would have forced losses on insured deposits. President Vladimir Putin ordered the government to resume talks with the cash- strapped Mediterranean island on restructuring its 2.5 billion euro ($3.2 billion) loan granted in 2011 after an agreement reached last month over a new European-led rescue.

Russia’s government bristled at suggestions that it was responsible for bailing out the euro member as politicians from states including Germany alleged that Cyprus was used to launder illegal Russian money. Funds held by Russians on the island aren’t all illegal, Shuvalov said.

“There’s money on which taxes weren’t paid, and there’s money where taxes were paid but for some reason people decided to keep it in Cypriot banks,” he said.

Russia would be willing to discuss “specific instances,” where companies partly owned by the state or individuals are facing “serious losses,” from deposits held at Bank of Cyprus Plc or Cyprus Popular Bank Pcl, according to Shuvalov.

“We’re prepared to consider it, publicly, transparently, and here in Russia,” he said. “But that absolutely doesn’t require any assistance to Cyprus.”

Cyprus may force losses of as much as 60 percent on Bank of Cyprus accounts exceeding the 100,000 euro insured threshold, according to the central bank in Nicosia. To secure a 10 billion-euro bailout last month, Cyprus President Nicos Anastasiades agreed to terms including closing Cyprus Popular and putting its deposits above the insured level in a “bad bank.”

Shuvalov told reporters last month that Russia may ultimately benefit from Europe’s decision to target deposit holders. By setting that precedent, Europe has cast doubt on the reliability of its banks and makes Russia’s financial system look comparatively more attractive, he said.

 

Bloomberg News

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