Roundup: Cypriot banks not in danger of contagion from possible Greek banking crisis

July 3, 2015 10:40 am 

NICOSIA, July 3 — Cyprus' authorities offered a strong assurance on Thursday that the restructured banks of the eastern Mediterranean island are not in risk of contagion from a crisis in the Greek banking system.

"The situation is manageable," a member of the Central Bank of Cyprus told a special session of the parliamentary finance committee.

Giorgos Syrihas told the committee which was convened to discuss the Greek debt crisis that the Cypriot banks have been completely weaned from the Greek banking system and the Greek economy.

Cypriot banks lost 4.5 billion euros (USD 5 billion) when the Greek debt was written down by about 75 percent in 2012, as part of the country's economic adjustment program and were forced to sell of their extensive operations in Greece.

The loss of the banks, which resulted from over exposure to the Greek debt, forced Cyprus to seek bailout, which involved the world-first recapitalization of a bank with depositors' money and the winding down of another bank which had been overburdened with Emergency Liquidity Assistance.

The closing of the Greek banks and the introduction of capital controls has brought back bitter memories to Cypriots, who had to cope with capital controls for almost two years.

Syrihas said that four Greek-owned banks operating in Cyprus are fully separate from the corresponding banks in Greece.

They are the National Bank of Greece, Alpha Bank, Piraeus Bank and Eurobank.

But Syrihas said that they are registered as Cypriot banks and are controlled by the Central Bank of Cyprus, having no links whatsoever with the banks in Greece.

He said their share of the Cypriot market stands at 14 percent, having just over 6 billion euros in deposits.

"However we remain alert, since we are talking about capital markets, and the Central Bank has made contingency plans to take all appropriate measures, if necessary," he added.

There has been a higher than usual withdrawal of deposits from the four banks since the crisis in Greece but not to the extent of causing concern.

Finance Minister Harris Georgiades said that Cyprus does not stand to lose much financially from the Greek crisis as it is mainly an buyer of Greek goods and services, mainly air transportation.

Cyprus' exports to Greece amount to 55 million euros for goods and 274 million euros for services.

But a prolonged Greek crisis may affect tourism to some extent.

About 100,000 tourists came to Cyprus from Greece in 2014, spending 45 million euros on the island. Not many are expected this year.

The bulk of Cypriot tourists estimated at 400,000 annually travel to Greece.

Georgiades said that despite losing 4.5 billion euros in 2012 from the devaluation of Greek bonds, Cyprus is prepared to pay its dues and agree to a deal on the sustainability or restructuring of the Greek debt.

Cypriots and Greeks share the same religion and language and national events, though Cypriots boast that they retained more and closer links with Homer's language than mainland Greeks did. (PNA/Xinhua)

JBP/EBP

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