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Government to support banks in financial crisis

The Council of Ministers has approved three draft bills designed to shore up the banks that are heavily exposed to Greek government bonds and to establish an independent financial stability fund.

YESTERDAY, the Cyprus Cabinet approved three draft bills concerning financial stability and the management of the financial crisis, in the light of developments in the Eurozone.

After the Cabinet meeting, government spokesman Stephanos Stephanou said that based on recent developments and in case of a financial crisis there should be immediate action to ensure financial stability.

He added that the three bills approved by the Council of Ministers offer the necessary institutional and legal framework enabling Cyprus to intervene and back the financial system, should the necessity arise.

The first bill will allow the government to step in and bolster a bank’s liquidity if required.

The second bill would create a fund to help stabilise the banking system.

The banks’ heavy exposure to Greek sovereign debt, estimated at some €4.2 billions and with a high risk of default, has been cited as a concern by credit ratings agencies which have downgraded the Island’s sovereign ratings in the past few months.

The third bill extends the existing special tax for credit institutions.

The three draft bills will require parliamentary approval.

Readers' comments

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  • Costas Apacket says:

    This is a panic move by the Cypriot Government who now realise that, despite continually rubbishing the credit rating agencies, what they have been saying about the Cypriot economy has been true all along.

    Another example of the futility of continually trying to pair the island with Greece and actually expecting them to care about Cyprus. What a joke.

    When are the ECB, IMF and the credit rating agencies going to get their teeth into the Cypriot Bank’s dodgy habit of double lending mortgages/loans on the same plots of land/properties?

  • out of the frying pan into the fire says:

    I don’t see any problem. All the Cyprus government has to do without any effort is to encourage developers, lawyers etc to come to the UK. Once here they give out all their rubbish to the unknowing British public, to buy a property in Cyprus where the law is based on British law. (yea right)

    The developer takes a deposit, the lawyer enduring power of attorney and between them they rob us of every penny and when we ask questions – you are insulting me I will sue you. The British government will do nothing the EU much the same. Cyprus ends up with all our money we are broke, they are rich. What banking problem?

    On a serious note if the UK government is to re view our terms of remaining in the EU, we want fair play or compensation via British courts. Shouldn’t be too hard to put that into our new terms of remaining in the EU. They need us more than we need them .

  • Cyprus Lover says:

    Isn’t it strange how when their “Friends” need a legal remedy the powers to be find the inclination to bring in legislation so quickly.

  • dave says:

    Where do they intend to get the funding from? They are already in debt. Perhaps now they will speed up the Title Deeds. They will also increase the Council Tax which is supposed to decrease next year. 2009 €200, 2010 €300, this year €454 euro – 2012 supposed to drop by €200 when we become a Municipality – I bet!! In 2004 my water was CYP50 a year now €180 my electric was CYP80 per two months now it is €350 euro – double. A gas cylinder was CYP4 now €13, petrol CYP2 a gallon, now €5.

    What is your Council tax and where do you live???

    I live in Ayia Thekla also called Beverly Hills not because of its position but because we pay the highest rates in the area.

    Dave.

  • Adrian Wright says:

    It’s a pity that the government couldn’t move as fast to sort out the title deeds as they have to help the banks.!!

  • Costas Apacket says:

    It will be interesting how the recently agreed 50% ‘hair cut’ will affect the Cypriot Banks now.

    It’s time to get the tin hat out I think.

  • dimitri says:

    Sure up the banks? with what funds? Christofias off-loaded a lot of the islands gold reserves, they have passed new laws (as old law was discriminatory in favour of males only and thus against EU law) in support of helping offspring of Cypriots whose mother was a refugee as a result of the 1974 invasion, this help is with housing, but the criteria to get granted this relief well was lacking so even if you had millions to your name you would still be awarded this ‘relief’ there is no targeted social policy, govt now and in the past threw money away, the married couples gift! what is that about?you get married they give you a one off gift of about 150 Euro per person, why?, low income families would get subsidised vacations to local hotels, again another gift….again how about that money being targeted at more important things like getting food on the table and being able to pay elect and water…give em luncheon vouchers for all I care…..I know of a case of one single unemployed mother with 3 children who visits a small local supermarket and she buys cigarettes for herself and crisps as meals for her children! to save money government has to stop this approach of throwing money away.

  • Andrew says:

    The government should step up to the table and underwrite all developers debt and then proceed with the immediate issue of Title Deeds. Start by dealing with the problems in your own back yard!

  • Costas Apacket says:

    The fan is rotating ever faster now, just waiting for the inevitable to be spread around.

  • Denis O'Hare says:

    Hi Nigel,

    It is a lot more than €4.2 billion, according to the CEO of Marfin Laiki! He also says that the Cypriot banks could not survive a haircut of over 50% on their Greek debt.

    Please see this link Cyprus Banks Can Take 50% Greece Debt Haircut, Not More

    In an article in today’s Cyprus Mail “Cabinet looks to shore up banks in a crisis” it states ‘In the case of a total buy out, this intervention would turn banks into the hands of the public’.

    Looks like the toxic developer debt might very well pass to the Government/taxpayer sooner than we think!

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