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REPORT: Russian Banks Have $40 Billion At Risk In Cyprus

A forgotten angle of the story - Russian banks.

Russian banks have loaned Cyprus-based Russian companies $40 billion, in addition to Russian citizens holding $26 billion in Cypriot deposits, a figure greater than the total GDP of Cyprus.  Al Jazeera reports from Moscow.



Further reading:

S&P Downgrades Cyprus’ Long-term Rating to ‘CCC’

Nigel Farage urges Brits to withdraw their money from Spanish banks

Cypriot banks on brink in Icelandic flashback | Reuters


Along with the aggressive expansion in Greece, which helped Cyprus' banks to double the size of their loan books to around 72 billion euros in the last six years, Cyprus' banking sector has ballooned on the back of inflows of Russian money, which first started to arrive following the collapse of the Soviet Union in 1991.

The banking sector is now roughly eight times the size of the economy compared to 10 times for Iceland and over four times for Ireland before their crises.  High interest rates, low taxes -- in particular a double taxation treaty with Russia -- and a shared Orthodox faith were all factors behind the influx of Russian money and people, which has seen the city of Limassol, the island's financial center, become known as "Lima grad".

Overall, deposits grew by nearly two thirds over a six year period to the end of 2012, according to data from the central bank in Cyprus.  One Russian bank, Alfa Bank, estimates that $70 billion of illegal capital flight from Russia in the past two decades may have found its way to Cyprus.  Cyprus was the largest recipient of Russian direct investment in 2011, totalling $121.6 billion out of $362 billion, according to Russian central bank data.

Despite Cyprus' banks exposure to Greece, deposits stayed largely stable last year, partly due to the belief that savers would not be hit and partly due to the high interest rates.  In the past ten days, however, as rumors first surfaced about a hit on savers, an estimated 2 billion euros has been withdrawn by Russian depositors.

A depositor in Cyprus who put their money in the bank for rolling periods of less than a year would have been paid interest of almost 13 percent since the Greek crisis first erupted compared to just over three percent in German banks, according to Reuters calculations based on ECB data.



How Money fled Cyprus as president fumbled bailout - Reuters

(Reuters) - As new President Nicos Anastasiades hesitated over an EU bailout that has wrecked Cyprus's offshore financial haven status, money was oozing out of his country's closed banks.

In banknotes at cash machines and exceptional transfers for "humanitarian supplies", large amounts of euros fled the east Mediterranean island before and after Cypriot lawmakers stunned Europe by rejecting a levy on all bank deposits.

EU negotiators knew something was wrong when the Central Bank of Cyprus requested more banknotes from the European Central Bank than the withdrawals it was reporting to Frankfurt implied were needed, an EU source familiar with the process said.  "The amount the Cypriots mentioned... on a daily basis was much less than it was in reality," the source said.



Update - Latest from Moscow

Russia Furious: "The Stealing Of What Has Already Been Stolen Continues"

(Reuters) - Russia signaled on Monday it would backstop the European Union's bailout of Cyprus despite anger that the weekend rescue deal would impose heavy losses on uninsured depositors, many of them Russian.  President Vladimir Putin ordered his government to negotiate the restructuring of a bailout loan it granted to Cyprus in 2011 - having rejected Nicosia's request for easier terms in crisis talks last week.

Prime Minister Dmitry Medvedev - who ranks below Putin in the ruling hierarchy - earlier criticized the bailout deal that will inflict heavy losses on uninsured deposits of over 100,000 euros at the two main Cypriot banks.

"The stealing of what has already been stolen continues," Medvedev was quoted by news agencies as telling a meeting of government officials.



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Reader Comments (8)

Cyprus Orders All Banks to Remain Closed Until Thursday

Mar 25, 2013 at 10:06 PM | Registered CommenterDailyBail
DB You have mentioned in the past about when you think things may get interesting here in the states. Essentially when foreign banks don't want to purchase our debt anymore. Lets say foreign banks start to fall apart and take depositors money as they have in Cypress. With our banks having heavy exposure in European debt, couldn't that jump start a vicious run on the banks here and abroad. Also would it not be advisable to start thinking of shorting the European or US economy?
Mar 25, 2013 at 10:54 PM | Unregistered CommenterSKINFLINT
DB You have mentioned in the past about when you think things may get interesting here in the states. Essentially when foreign banks don't want to purchase our debt anymore.


Actually I said when the Fed and foreign governments stop purchasing our debt, when interest rates start to spike, etc. But I get your point. As for bank runs, they won't happen in the U.S. because of the FDIC, at least not until things really get bad. Think about the Fall of 2008 -- Lehman had failed, AIG, fannie, freddie, bear stearns, money market funds were in trouble, the dow had fallen 5,000 points in 6 months and still there was absolutely no move toward a run on the banks in the U.S.

Not even a whiff.

Europe is different. We will see capital flight out of at-risk countries and at-risk banks. But I don't think things will get out of hand. The ECB and the Fed will work to mitigate any short-term liquidity concerns.
Mar 25, 2013 at 11:03 PM | Registered CommenterDailyBail
Mar 26, 2013 at 8:04 AM | Unregistered CommenterSKINFLINT
VIDEO - Russian Tycoon Punches Fellow Billionaire On Live TV

Mar 26, 2013 at 9:35 AM | Registered CommenterDailyBail
Inside a Russian Billionaire's $300 Million Yacht

Mar 26, 2013 at 9:36 AM | Registered CommenterDailyBail
82% of the new Soviet government, after 1917, was so-called “Jews” (Ashkenazi – Khazar). They arrived in Russia, from Germany (with Lenin), and from New York (with Trotsky), among other places. The First Edition of Robert Wilton’s book: The Last Days of the Romanovs, originally published in French, as “Les Derniers Jours des Romanofs” contains the lists of government appointees. What scares me is: What if the Rothschild/Zionists, and all their dual-Israeli-US “citizens” are the vanguard, for the same thing in the U.S.? DHS and other US government agencies have been buying an awful lot of ammo. Why? In addition to Wilton’s book, be sure to read Arthur Koestler’s book: The Thirteenth Tribe. Peace. You can find both of the above-mentioned books for FREE download, at http://www.archive.org
Mar 26, 2013 at 11:46 AM | Unregistered CommenterAon

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