November 28, 2020

Cyprus Bank’s Bailout Hands Ownership to Russian Plutocrats

But the Russians, though badly bruised, are now in a position to get something that has previously eluded even Moscow’s most audacious oligarchs: control of a so-called systemic financial institution in the European Union.

“They wanted to throw out the Russians but in the end, they delivered our main bank to the Russians,” said the Cypriot president, Nicos Anastasiades, in a June interview.

The March bailout hammered bank creditors and depositors in an early test of what has since become the official European Union policy of “bailing-in” banks. The policy is intended to force creditors and depositors to pay for a bank’s mistakes and to spare taxpayers from picking up the entire bill.

The strategy, however, has generated unintended consequences in the case of Cyprus. The exercise was meant to banish what Germany and other Northern European nations viewed as dirty Russian money from Cyprus’s bloated banks. Instead, it has pulled Russia even deeper into Europe’s financial system by giving its plutocrats majority ownership, at least on paper, of the Bank of Cyprus, the country’s oldest, biggest and most important financial institution.

“Whoever controls the Bank of Cyprus controls the island,” said Andreas Marangos, a Limassol lawyer whose clients include many Russians.

The biggest single chunk of shares — around 18 percent — is supposed to go to depositors who lost money in Cyprus’s now-defunct Laiki Bank, but this stake is likely to be controlled by Cyprus’s central bank. As a result of a forced conversion of Bank of Cyprus deposits into shares, however, a diverse and so far unorganized group of depositors, most of them Russians, will end up with a controlling stake.

Whether they want such a bank is another matter. Owning the Bank of Cyprus, which has been saddled with $11.7 billion in liabilities racked up by Laiki Bank, “is like owning cancer,” said Irakli Bukhashvili, the head of a financial services company serving Russians here in Limassol, the business capital of Cyprus.

Despite its wobbly condition, the Bank of Cyprus still holds a uniquely influential position in the economic and political affairs of a sun-swept nation that sits on potentially large reserves of natural gas and straddles strategic fault lines between East and West.

President Anastasiades, in a June letter to the European Central Bank that pleaded for help to keep the Bank of Cyprus afloat, described it as a “mega-systemic bank” that, if it failed, could bring down the entire Cypriot economy. With 5,700 employees and around half of all the island’s deposits, it dwarfs its rivals and reaches into every corner of the country through a vast network of branches, which now also includes the former offices of Laiki Bank.

Moscow, though furious over the billions lost by Russians in Cypriot banks, still sees Cyprus as a prize worth courting. The Russian government has pushed for access for its military aircraft to an air base in Paphos and for its warships to Cypriot ports.

When Cyprus first appealed for help from the so-called troika of international creditors — the European Commission, the International Monetary Fund and the European Central Bank — the main problem was Laiki, the country’s second-biggest bank and one that was already effectively insolvent. Instead of just throwing Cyprus a financial lifeline, as it had done with Ireland after a banking crisis that led the government to guarantee all the banks, the troika demanded that Laiki and the Bank of Cyprus share the burden of any rescue deal.

Depositors with large accounts in Laiki Bank were initially left with just 100,000 euros each, about $130,000, and the rest of their money was confiscated as the bank shut down. Those with more than 100,000 euros in the Bank of Cyprus lost access to 90 percent of their cash, although they have since been promised future access to some of their frozen funds. But, under final terms announced on July 30 by the Central Bank of Cyprus, large depositors in the Bank of Cyprus will have 47.5 percent of their money forcibly converted into shares, up from 37.5 percent in an original plan.

Dimitris Bounias contributed reporting from Nicosia, and Andrew E. Kramer from Moscow.

Article source: http://www.nytimes.com/2013/08/22/world/europe/russians-still-ride-high-in-cyprus-after-bailout.html?partner=rss&emc=rss

Canada Is in No Hurry to Sell Its Chrysler Shares to Fiat

Last week, Fiat said that it would buy the United States government’s remaining holding in Chrysler. When completed, the transaction will give Fiat majority ownership of Chrysler, which emerged from bankruptcy about two years ago after receiving emergency financial assistance from the governments of the United States and Canada.

But after a meeting with Sergio Marchionne, the chief executive of both Chrysler and Fiat, Jim Flaherty, the finance minister, said that Canada would let the divestment process in the United States unfold before making any decision about its holdings.

“We’ve never believed the government of Canada should be in the automotive business,” Mr. Flaherty said at a news conference in Toronto. “But we have to look out for good value for Canadian taxpayers.”

After providing about 2.9 billion Canadian dollars in emergency loans, the government of Canada and the province of Ontario still hold a combined total of about 1.7 percent of Chrysler’s shares. Unlike the arrangement in the United States, neither Chrysler nor Fiat has any way to force the Canadian governments to divest.

The American process, which involves 6 percent of Chrysler’s shares, will establish a value for the company’s stock. If it is not to Mr. Flaherty’s liking, Canada can wait until Fiat has an initial public offering for Chrysler, or even later, to sell.

Mr. Flaherty, who met with Mr. Marchionne in Toronto to publicly signal Chrysler’s repayment of the 1.7 billion Canadian dollars in loans made through a federal export financing agency, did not indicate what price Canada might accept. Given that the government does not anticipate that Chrysler will pay back the remaining 1.2 billion Canadian dollars, it presumably hopes to recover at least some of that through the share sale.

“We will look at whatever is proposed and consider that,” Mr. Flaherty said.

It is unclear what the province of Ontario, which covered about one-third of the Canadian loans, plans to do with its shares.

Darcy McNeill, a spokesman for Dwight Duncan, the provincial minister of finance, said that it was “not appropriate” for the provincial government to comment at this time.

Article source: http://feeds.nytimes.com/click.phdo?i=5eee6378e32e7bb0b5364dd0803cd506