Russia intends to credit Cyprus again

04.09.2012

According to negotiations with the International Monetary Fund Russia intends to provide a credit to Cyprus in total of EUR 5 bn. However, such decision needs an official confirmation by the Russian government. The credit is caused by crisis of the banking system of Cyprus (in particular, the biggest banks Popular Bank and Bank of Cyprus), which appeared because of restructuration of the Greece debts. Popular Bank stated the need of support to the extent of EUR 1,8 bn, Bank of Cyprus – EUR 500 mln.

It should be noticed that in the end of 2011 the Russian-Cypriot credit contract was concluded for the sum of EUR 2,5 bn, that granted Cyprus with 3 tranches of loan of 4.5% per annum for 4,5 years. Herewith other European jurisdictions made a condition of not less than 15 % per annum.   

Expert’s opinion

Today many specialists are interested in expediency of granting a loan to Cyprus, because considering the current unsettled credit agreement, provision of another loan looks suspicious. Undoubtedly, the final decision is not made yet but it is likely that the Russian government will support the Cyprus banking system.

The reason for this are economic interests of influential Russian beneficiaries, owning bank accounts on Cyprus, growth of offshore business placement in whole. All this can be united by the term of the private interest.

From the governmental point of view the repeated granting of loan will provide strengthening of the Russian-Cypriot relations, increasing of financial stability of the Cyprus banking system due to capital inflow and preservation of the investment level of this jurisdiction. And also it should be noticed that the Russian banking system cooperates with Cyprus, for instance, the bank VTB has a profitable subsidiary Russian Commercial Bank.

On the basis: http://www.minfin.ru/ru/press/speech/

Julia Akhmetova ( Paralegal of Moscow office Company Honest & Bright )