Cyprus crisis: Moscow will not bail out Russian savers

A Laiki bank branch in Nicosia, 29 Mar 13 For years Cypriot banks have attracted Russian investors with competitive rates

The Russian government says it will not compensate Russian savers who have lost money in the Cyprus banking crisis.

Russians are believed to have billions of euros in Cypriot accounts and deposits above 100,000 euros (£84,300; $128,200) in the two biggest banks could be reduced by as much as 60%.

Such losses would be "a great shame", First Deputy PM Igor Shuvalov said, "but the Russian government won't take any action in that situation".

Cyprus now restricts cash withdrawals.

A 10bn-euro bailout from the EU and IMF - required to keep the debt-laden Cypriot economy afloat - will only be granted if Cyprus itself raises 5.8bn euros, most of which looks likely to come from depositors with more than 100,000 euros in Bank of Cyprus and Laiki (Popular Bank).

'Haircut' for depositors

Laiki, the second largest bank, is being wound up and folded into Bank of Cyprus, the biggest bank.

Speaking on the Russian state TV channel Rossiya 1, Mr Shuvalov said Russian money in Cyprus included some that had been taxed and some that had not.

He said the Russian government would still look at cases where there were "serious losses, involving companies in which the Russian state is a shareholder". That review would take place in Russia, and "for this it would certainly not be necessary to help the Republic of Cyprus", he said.

Cyprus capital controls

  • Daily withdrawals limited to 300 euros
  • Cashing of cheques banned
  • Those travelling abroad can take no more than 1,000 euros out of the country
  • Payments and/or transfers outside Cyprus via debit and or credit cards permitted up to 5,000 euros per month
  • Businesses able to carry out transactions up to 5,000 euros per day
  • Special committee to review commercial transactions between 5,000 and 200,000 euros and approve all those over 200,000 euros on a case-by-case basis
  • No termination of fixed-term deposit accounts before maturity

Many of the large-scale foreign investors in Cyprus are Russian - and in many cases they have taken advantage of the island's status as an offshore tax haven. Some politicians have accused Cyprus of acting as a hub for Russian money-laundering - an allegation rejected by Cypriot officials.

After years of large-scale capital flight from Russia there is now a Kremlin drive to repatriate Russian money. The government has introduced tighter monitoring of foreign bank accounts held by Russian state employees.

Bank of Cyprus depositors with more than 100,000 euros could lose up to 60% of their savings as part of the bailout, officials say.

The central bank says 37.5% of holdings over 100,000 euros will become shares.

Up to 22.5% will go into a fund attracting no interest and may be subject to further write-offs.

The other 40% will attract interest - but this will not be paid unless the bank performs well.

The fear is that once the unprecedented capital controls - which are in place for an indefinite time - are lifted, the wealthiest will rush to move their deposits abroad, the BBC's Mark Lowen reports from Nicosia.

Cyprus has become the first eurozone member country to bring in capital controls to prevent a torrent of money leaving the island and credit institutions collapsing.

Cypriot President Nicos Anastasiades has said the financial situation has been "contained" following the deal.

He has also stressed that Cyprus has no intention of leaving the euro, stressing that "in no way will we experiment with the future of our country".

More on This Story

More Europe stories

RSS

Features & Analysis

Elsewhere on the BBC

  • BBC CultureBest of 2014

    BBC Culture weighs in on the ten most important blockbusters of the year

Programmes

  • HoverboardClick Watch

    Testing the hoverboard's magnetic levitation - but will it ever replace the bicycle?

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.