The Cyprus Central Bank recently rejected the offers submitted by Romanian lenders Banca Transilvania and Raiffeisen Bank Romania for the takeover of the Romanian subsidiary of Bank of Cyprus. The Cypriot central bank is currently looking for alternatives to transfer the deposits of bank of Cyprus' Romanian subsidiary, which are governed by the Cypriot law. Deposits are now under EUR 100 million, according to Mediafax, quoting sources on the local market. The two offers submitted by Banca Transilvania and Raiffeisen Bank Romania were deemed too low compared to what had been evaluated by the committee to restructure the banking system in Cyprus.

Bank of Cyprus' assets for its Romanian subsidiary stay at some EUR 450 million, out of which EUR 350 million are loans. One of the largest loans given in Romania is the EUR 100 million to the company which owns the JW Marriott building, which is due in 2017. Real estate financing makes up over half of the remaining loans on the balance sheet.

The Romanian subsidiary of Bank of Cyprus was closed down in the beginning of April, first for one week, then for two more, to start negotiations for takeover. The next deadline for opening is April 23. The bank's ATMs have been available for withdrawals and so far, EUR 3 million has been withdrawn, according to Mediafax.

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.

editor@romania-insider.com