Deposit theft could rise to 8 billion...
http://www.cyprus-mail.com/cyprus/depositors-could-lose-much-8-billion/20130416
The Cypriot banking sector got into trouble after the restructuring of Greek sovereign debt last year
http://www.cyprus-mail.com/cyprus/depositors-could-lose-much-8-billion/20130416
Depositors could lose as much as €8 billion
Published on April 16, 2013
The Cypriot banking sector got into trouble after the restructuring of Greek sovereign debt last year
LARGE depositors who kept their money in the two biggest Cypriot banks stand to lose up to €8.3 billion through the restructuring of the two institutions, a European Commission document showed.
It is part of an estimated total €10.6 billion contribution from investors for restructuring the Cypriot banking sector, which also includes wiping out shareholders and bondholders in Laiki, or Popular, Bank as well as imposing losses on junior bondholders in the Bank of Cyprus and a deposit-for-equity swap.
Cyprus will close Laiki, its second biggest bank, and restructure its biggest, Bank of Cyprus, in return for an international loan of €10 billion over three years, without which the country would be unable to pay its debts.
The Eurogroup decision on March 25 set the terms of the bailout, which included massive losses for uninsured depositors with over €100,000 in Laiki and Bank of Cyprus.
In a first for the eurozone, the two banks’ depositors are being forced to contribute to the recapitalisation of the institutions, along with shareholders and bond holders.
"The bail-in of uninsured depositors of Laiki and Bank of Cyprus will provide an estimated contribution to recapitalisation of €8.3 billion," said the document, dated April 12 and marked "final".
In a footnote, it added: "This is a maximum estimate. The final amount will depend inter alia on the conversion under the debt-for-equity swap in Bank of Cyprus and the recoveries of Laiki Bank."
A Cyprus Central Bank source said yesterday, however, that the total amount of depositors’ contribution cannot be calculated until the government completes its list of those organisations and institutions exempted from the haircut in the two banks.
So far, these include educational institutes and municipalities, while a final decision remains pending on what to do with insurance deposits and provident funds.
According to Reuters, the final version of the Commission document no longer makes the distinction - found in an April 9 draft - between gross financing needs, which include money that Cyprus can generate itself, and net financing needs, which is the amount Nicosia needs to borrow.
In the draft, the Commission said the gross financing needs of Cyprus between the second quarter of this year and the first quarter of 2016 would be €23 billion- €6 billion more than initially estimated last month- of which €13 billion would come from Cyprus.
That meant the net financing needs were €10 billion, of which the eurozone bailout fund, the European Stability Mechanism (ESM) would provide €9 billion and the International Monetary Fund the remaining €1 billion.
Of the €10 billion loan, €2.5 billion is earmarked for the recapitalisation of the rest of the restructured banking sector, in case more people than expected cannot pay back loans, money possibly needed to recapitalise the Hellenic Bank and the island's cooperative banks.
A further €4.1 billion of the loan will go to redeem maturing debt and €3.4 billion to cover government expenses.
The Cypriot banking sector got into trouble mainly because it lost €4 billion, or 22 percent of Cypriot GDP, on the restructuring of Greek sovereign debt last year, which itself was a condition for a second emergency loan package from the eurozone to Greece.
After the closure of Laiki, the sell-off of Greek subsidiaries of Cypriot banks and the restructuring of the Bank of Cyprus, the sector's size relative to the economy will have halved, to about 350 percent of Cypriot GDP.
Meanwhile, ratings agency Moody’s released a report yesterday stating the bailout agreement for Cyprus fails to address the island’s fundamental solvency issues, predicting a second memorandum for the struggling island and a continuation of the uncertainty over a possible euro exit.
According to financial news site MNI, Moody's says if the deal is approved by eurozone parliaments, it will provide Cyprus with much-needed liquidity and reduce its risk of an immediate default.
It adds, however: "Despite the relief from liquidity pressure, Cyprus still faces formidable economic and financial problems. We believe that achieving debt sustainability will likely require additional official support or a restructure of existing debt, and therefore, we expect the risk of default and euro-area exit to remain elevated in the coming years".
Moody’s notes Cyprus will have to come up with an extra €6 billion through additional taxes, gold sales and potential further imposition on bank depositors.
The ratings agency expects Cyprus’ nominal GDP to contract by at least 12 per cent by 2015.
It adds that the immediate downsizing of the Cypriot banking system "fundamentally impairs the sector's potential contribution to growth for years to come".
http://www.cyprus-mail.com/cyprus/president-responds-draghi-central-bank-governor/20130416
( Cypriot President still taking steps to fire the Central Bank Governor of Cyprus as he explains the Governor needs to go ! )
President responds to Draghi on Central Bank Governor
By Stefanos EvripidouPublished on April 16, 2013
TOPIC TAGS
Cyprus, letter, Mario Draghi, Nicos AnastasiadesRELATED CONTENT
PRESIDENT NICOS Anastasiades has written a letter to European Central Bank (ECB) President Mario Draghi allegedly listing the shortcomings of Cyprus’ Central Bank Governor Panicos Demetriades, it was reported yesterday.
In the initial letter, which was also sent to House President Yiannakis Omirou, Draghi reminded both men that a central bank governor could only be dismissed on grounds specified by EU law, adding that any dismissal would be subject to review by the EU’s Court of Justice.
Speaking on Sunday, Anastasiades said he planned to inform Draghi about some incidents which he hoped would be taken to heart, hinting that had there been the proper supervision by European institutions, Cyprus wouldn’t be in the position it’s in now.
Government spokesman Christos Stylianides yesterday confirmed that a reply letter had been sent and that parliament would be informed about the contents.
According to state broadcaster, CyBC, Anastasiades replied to Draghi yesterday in a six-page letter, clarifying neither the government nor parliament had initiated proceedings to dismiss Demetriades.
In the letter, the president allegedly critically examined some of the actions taken by the central bank governor since taking office last May.
CyBC reported that Anastasiades referred to Demetriades allowing the uncontrolled flow of money from the ECB’s emergency liquidity assistance to Laiki.
He also allegedly hinted that a measure of blame could be apportioned to the EU institutions, referring to violations of ECB regulations in the process.
Anastasiades then highlighted Demetriades’ failure to include a thorough investigation of Laiki in the mandate drawn up for private firm Alvarez and Marsal, noting that the problem in the Cyprus banking sector was clearly much more serious for Laiki than Bank of Cyprus.
The president also reportedly criticised Demetriades for his poor implementation of what has been agreed with the Eurogroup so far.
Apart from the alleged contents of the letter, Demetriades also drew fire from coalition partners DISY and DIKO yesterday with MPs Prodromos Prodromou and Nicolas Papadopoulos both calling for his resignation during a daytime news show on CyBC.
http://famagusta-gazette.com/shipping-giant-stung-by-cyprus-haircut-p18991-69.htm
Shipping giant stung by Cyprus haircut
Two of Russia's biggest companies said there is a substantial risk that they won't be able to recover tens of millions of dollars frozen in Cypriot banks, reports the Wall Street Journal.
OAO Sovcomflot, Russia's biggest shipping group, said it has $25.8 million frozen in Popular Bank.
"There is significant risk a large part of these funds will not be recoverable and for the immediate future are blocked and not accessible," SCF said in its 2012 earnings report.
The shipping company, the world's fourth-largest tanker operator in terms of tonnage, reported annual revenue of $1.4 billion.
OAO Sovcomflot, Russia's biggest shipping group, said it has $25.8 million frozen in Popular Bank.
"There is significant risk a large part of these funds will not be recoverable and for the immediate future are blocked and not accessible," SCF said in its 2012 earnings report.
The shipping company, the world's fourth-largest tanker operator in terms of tonnage, reported annual revenue of $1.4 billion.
