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.


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.

Comments: Be the first to add a comment

add a comment | go to forum thread