Alexa

Cypriot banks to reduce exposure to Greece

 A woman walks by a storefront in southern port city of Limassol, Cyprus, Thursday, June 28, 2012. Cyprus became the fifth eurozone country this week ...
 A woman passes by a branch of Bank of Cyprus in the southern port city of Limassol, Cyprus, Thursday, June 28, 2012. Cyprus became the fifth eurozone...

Cyprus Financial Crisis

A woman walks by a storefront in southern port city of Limassol, Cyprus, Thursday, June 28, 2012. Cyprus became the fifth eurozone country this week ...

Cyprus Financial Crisis

A woman passes by a branch of Bank of Cyprus in the southern port city of Limassol, Cyprus, Thursday, June 28, 2012. Cyprus became the fifth eurozone...

Cyprus' Central Bank chief said Thursday that he plans to reduce Cypriot banks' dependence on the Greek economy by converting bank branches operating there into subsidiaries.
Panicos Demetriades said he expects the initiative to be finished by the end of the year.
He said he also would seek to determine what the "optimal" size of the Cypriot banking sector should be _ now roughly eight times the eurozone member's (EURO)18 billion ($22.35 billion) economy _ with the help of International Monetary Fund and other experts.
Cyprus this week became the fifth eurozone member to ask for financial aid from the currency union in order to prop up its banks, which suffered huge losses as a result of the writedown on their Greek government bond holdings and the deteriorating private loans they hold in the country of around (EURO)22 billion ($27.3 billion).
Cyprus needs at least (EURO)2.3 billion ($2.86 billion) to support its top two commercial banks. Most of the money would go to Cyprus Popular Bank, the island's second largest lender and most exposed to Greece. About (EURO)500 million would go to leading Bank of Cyprus.
Demetriades referred to the (EURO)6 billion ($7.45 billion) that ratings agency Fitch said Cypriot banks would ultimately need to cover all their losses, but stressed that the Central Bank's own calculations have yet to be completed.
Demetriades said Cyprus needs to balance its books according to its EU commitments, but noted that the way out of the crisis is to curtail inordinate lending and clean up the banking sector, not slash wages and pensions which would feed the "vicious circle" of economic contraction and worsen public finances, as exemplified by Greece.
"Therefore, reducing government spending can and must come though the gradual reduction in the number of government workers, eliminating red tape, increasing productivity and the proper functioning of the state machinery," said Demetriades.
He said the discovery of a large natural gas deposit off Cyprus' south coast bodes well for the island's future economic prospects.
Officials from the European Commission, the European Central Bank and the IMF will arrive next week to evaluate how much Cyprus will need from the bailout fund.
The Cyprus Finance Ministry on Thursday again played down concerns that the so-called `troika' would impose harsh terms in exchange for the bailout money and insisted that the island's low 10 percent corporate tax rate which brings much business Cyprus would not be touched.
Meanwhile, Cyprus President Dimitris Christofias said the country would still pursue bilateral loans from either Russia or China apart from the bailout fund money.
Unable to borrow from international markets because of its junk rating, Cyprus is surviving on a (EURO)2.5 billion ($3.1 billion) low interest loan that Russia provided last year, but that money will run out by the end of this year.
"Why not?" Christofias said when asked about the loans at the EU summit in Brussels. "Permit me to say that it's not a sin to receive help from the EU and at the same time help from the Russians or the Chinese."