Cyprus is on alert watching the Greek story about the possibility of bankruptcy and the imposition of controls on the movement of capital. Despite the fact that the economic connection between Cyprus and Greece has decreased after the sale of the Cypriot stores in Greece in March 2013, however the side effects of any Grexit can not but affect Cyprus. It is recalled that the Cypriot banking system went bankrupt due to the significant investments of Cypriot banks in Greek bonds.
After the "haircut" (PSI) of Greek bonds in 2012, all Cypriot banks found themselves with negative capital. The Bank of Cyprus, the Hellenic and the Cooperative Central Bank, no longer have an exhibition in Greece, nor do they hold Greek bonds in their books, to be afraid of developments. This, however, does not mean that there will be no side effects and vibrations in Cyprus from any "accidents" that will occur on Greek soil. The state, the Central Bank, as well as the banks could not but prepare for a possible bankruptcy of Greece and the imposition of controls on the movement of capital and everyone is on alert. The Central Bank is said to be doing exercises on paper, following a pan-European plan prepared by the European Central Bank, taking into account all the possibilities. According to information, the credit institutions, Bank of Cyprus, Hellenic and Cooperative Central, have prepared plans on how to deal with any negative contingencies. In fact, the preparations that are being made are both for a possible credit event that may occur in Greece and in the capital controls scenario (control over the movement of funds) or in a Grexit. What the bankers from Cyprus are saying is that they want to preserve financial stability from any involvement in the Greek negotiations. As bank executives reported, even if the extreme scenario for Greece runs, there should be no bank holiday in Cyprus. The consequences in Cyprus of a Greek accident will be transferred mainly from the Greek subsidiary banks, Piraeus (Cyprus), Alpha Bank Cyprus, Eurobank Cyprus, National (Cyprus) operating in the market. It is noted that Greek credit institutions are considered Cypriot legal entities, which are supervised by the Central Bank, have sufficient liquidity and regulatory capital. However, the fact that the parent groups are located in Greece raises concerns. According to information, the subsidiaries of the Greek banking institutions have entered a complete "quarantine", in order to minimize the effects on the national banking system in case of a Greek "accident". The Central Bank in consultation with the European Supervisory Mechanism of the ECB obliged the subsidiaries of Greek banks to zero their exposure to Greek risk (bonds, deposits in Greek banks, lending, etc.), in order to isolate them and minimize the risk. crisis in case the government's negotiations with European partners do not lead to a positive result. Despite the isolation of risk, the concerns and concerns of the Central Bank are the psychological consequences of a "Greek accident" on the subsidiaries of Greek banks. The subsidiaries of Greek banks with significant market share, emphasize to their customers that they are supervised by the Central Bank comply with all indicators set by the Supervisory Authority. Stability is everything
A concern for the management of Greek banks is the risk of "de-Hellenization" of subsidiaries not only in Cyprus, but also in any countries that have a presence in case of unrest. The branches of the Cypriot banks in Greece changed their ownership status, passed to the control of the Piraeus group, in one weekend, in order to preserve the stability of the domestic banking system, after the decisions of the Eurogroup. Bank executives emphasize that Greek banks are fully creditworthy, and there is no question of transferring their subsidiaries. However, in a situation of prolonged turmoil, some countries could make unorthodox moves to ensure their country's financial stability.Turmoil in bond markets
The positive climate in the bond markets, on which Cyprus is betting on the refinancing of the € 2 billion debt that expires in the next two years and on the exit from the memorandum, risks being overturned by the uncertainty created by the disagreement between Greece and creditors. The ten-year Cypriot bond (expiring in 2020) reached 4%, returning to the levels it was in April before clearing the course of the insolvency framework. Bond yields in other countries in the region returned to November 2014 levels, before the market began to discount the quantitative easing of the ECB.Trapped businessmen
The fact that the side effects of the Greek uncertainty are intensifying every day, through about 100 Cypriot companies that have trade relations with the country, cannot be ignored. Greece is by far the most important trading partner of Cyprus. It holds the first place both as a country of origin of Cypriot imports and as a destination of Cypriot exports. In 2014, the value of Greek exports to Cyprus increased, according to the Statistical Service, by 7,8% compared to 2013. The messages given by the business world raise concerns for the next day as liquidity conditions in Greece is suffocating and business is done under difficult conditions. The bankers are monitoring the situation in the cases of businessmen who have exposures in Greece and especially in the cases where the loan has been made from Cyprus.Critical dates that judge the future
June 22: A summit of EU leaders in Brussels will be preceded by a meeting of the EurogroupJune 30: It is a crucial deadline, as the four-month extension of the current loan agreement and the deadline for the payment of the consolidated installments to the IMF, amounting to 1,53 billion euros, expire. The creditors could agree on a third extension but without additional funding Greece could not pay the IMF. In total, Greece will have to repay during 2015 a capital of 18,3 billion and interest of 4 billion.July 1: If the bailout ends and Greece does not repay the IMF - but the ECB decides that emergency funding to Greek banks can continue - Greece will enter uncharted waters, as Mario Draghi recently noted. With an economy crippled by capital controls, a government without liquidity and a banking system that rejoices in mechanical support, Greece will enter a process of economic suffocation.July 10: Refinancing € 2 billion in government bondsJuly 14: Repayment of € 84 million in Japanese loans
July 17: Payment of interest on € 71 three-year bond sold by Greece in 2014
July 20: Two bonds worth 3,5 billion euros are maturing. The bonds have been held by the ECB since 2010, when it attempted to stabilize eurozone bond markets. Even if Athens can repay the 1,5 billion-euro tranche to the IMF in June even without an agreement, no one believes it will be able to make that payment without an aid package.
August 7-14: Refinancing € 2,4 billion of two installments of government bonds
August 20: Repayment of € 3,2 billion in bonds held by the ECBSource: FILELEFTHEROS