MOSCOW--Russia's largest banks said Thursday their clients'
exposure to losses in Cyprus so far appears modest, while there
were few other signs of immediate fallout for Russian business,
executives and analysts said.
The Kremlin's angry public attacks last week on the planned tax
on bank deposits in a tax haven long favored by Russians led many
observers to suspect Russians' exposure to Cyprus's troubled banks
was substantial. Estimates ran as high as 20 billion euros in
Russian money said to be at risk.
But as Cyprus's banks re-opened Thursday after a two-week forced
holiday, the immediate impact appeared to be limited.
"Up to now we haven't seen any issues with any of our customers
due to Cyprus issue, and we're pretty sure that any direct or
indirect influence is very minimal or doesn't exist at all," said
Alexander Morozov, deputy chairman at OAO Sberbank (SBRCY,
SBER.RS), by far Russia's largest bank.
Yuri Soloviev, deputy CEO at No. 2 bank VTB Group (VTBR.RS),
said its Cypriot subsidiary and those of other Russian bankers are
"sound" and will not suffer from the restructuring of the island's
banking system.
Mikhail Fridman, chairman of Alfa Group, which owns a large bank
as well as retail and telecoms companies, said the group's exposure
is "at the most a couple of million dollars."
"We have very insignificant sums there. We never used any
Cypriot banks, we just held some transit accounts, money for small
administrative expenses on Cyprus," he said.
There was no immediate indication of any major Russian exposure
to Cyprus Popular Bank (CPB.CP) and Bank of Cyprus (BOCY.CP), the
two institutions that faced the worst losses.
Analysts said the capital controls that affect the entire
banking system could have more impact on Russia, which depends
heavily on Cyprus as a conduit for investment.
"Previously a lot of money was transferred back and forth via
off-shores. Now it is possible that less money will return to
Russia and capital inflows may suffer," said Eugene Tarzimanov at
Moody's in Moscow.
"As capital restrictions...adopted in Cyprus to avoid massive
fund outflows from banks after they open, funds of Russian banks
could be frozen for a prolonged period. It may cause some problems
with liquidity among a row of banks, which are likely to be solved
with the help of the central bank of the finance ministry,"
analysts at Raiffeisen said.
Government officials said this week the crisis could boost
capital outflows from Russia temporarily.
The controls could be "inconveniences" for VTB's clients there,
he said. Clients who used the bank's subsidiary in Cyprus for
trading operations may leave the island for other offshore zones in
Europe.
Mr. Soloviev, whose VTB owns Russian Commercial Bank on Cyprus
was opened to "business as usual Thursday" and didn't face any
queues of customers willing to take out their money.
Mr. Soloviev said that while some customers had approached VTB's
Cypriot bank with what he called "creative" ideas for bypassing the
restrictions on transactions over the last two weeks, the bank
refused. We are "law abiding and we don't break the letter and the
spirit of capital controls," he said. Analysts and bankers suggest
that Russian trading and mid-sized companies may face some
difficulties, but so far there no signs of any large suffering.
Russia's First Deputy Prime Minister said earlier this week that
the government has not received any signals that any of the
corporations is in a tough situation in connection with the fact
that money is frozen at the moment."We haven't received any calls
form companies to assist them in connection with the situation,"
business ombudsman Boris Titov said, adding that although many
companies kept securities on Cyprus, they rarely trusted Cyprus
banks with cash.
However, Russian businessmen are unlikely to suffer much as they
prefer keeping their funds in other banks, said Andrei Krylov, who
runs construction firms and travel agencies both in Russia and
Cyprus.
"I have many acquaintances who have their money frozen," Mr.
Krylov said. "We have some particular losses, mostly because we
can't increase our turnover at the moment. But even given all that
we don't have any particular problems, we keep on working on
confidential relations."
Some mid-sized businesses did suffer however, as they kept some
money for day-to-day operations in Cyprus. Among them were a small
Moscow publishing house specializing in intellectual non-fiction,
and a small company managing hospitals in Russia's regions. None of
these companies wanted their names to be mentioned.
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