The sale of the Romanian subsidiary of Bank of Cyprus, which has been recently closed down for one week, will bring the deposits under Romanian law, according to Romanian Central Bank (BNR) governor's adviser Adrian Vasilescu. The week long closure was negotiated last week by BNR and the Central Bank in Cyprus.

According to current regulations, deposits created with Bank of Cyprus fall under Cypriot legislation, and they are protected and guaranteed by the Cypriot state, while a takeover would place deposits under guarantees in Romania.

“We will find out in the upcoming days whether there is interest or not. I think there is and that a good buyer will be found,” said Vasilescu. He added that the one week closure of the bank did not take BNR by surprise, and that the good relationship and the positive negotiations between BNR and the Cypriot Central Bank helped reach the decision to suspend activity for a limited period of time, which is a measure to protect the bank's clients. Bank of Cyprus clients can withdraw money from the bank's ATMs during this period.

Bank of Cyprus only holds 0.7 percent of the banking assets in Romania. As it is a subsidiary of a European Union bank, deposits are guaranteed via the guarantee scheme in its home country, Cyprus. Romania's Central Bank Governor Mugur Isarescu last week said the two Cypriot banks in Romania only have 1.3 percent of the banking assets in the country.

Cyprus has been going through troubles recently. It managed to reach an agreement with the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF) on the terms of a bailout for the country.

Under the terms agreed, holders of uninsured deposits over EUR 100,000 in the two “problem” banks stand to suffer considerable losses. One of the banks, the Laiki Bank, will be closed down. In return, Cyprus will get a EUR 10 billion bailout, which will stop the banks collapsing and keep the tiny island state in the eurozone. The agreement came right before the ECB deadline, which threatened to stop funding the Cypriot banks if a deal had not been made.

The agreement will keep Cyprus in the eurozone, but at considerable cost. Analysts predict years of recession as the country is essentially forced to scrap its primary industry – offshore banking. “It's not that we won a battle, but we really have avoided a disastrous exit from the eurozone,” said Cypriot Finance Minister Michalis Sarris at a press conference after the deal was struck.

The new agreement came after the Cypriot Government tried to pass a law enforcing a tax on all bank deposits, but the new law was not approved by the Parliament.

editor@romania-insider.com