The deposits of the Romanian subsidiary of bank of Cyprus will be moved to Marfin Romania,which is a bank registered in Romania and under the supervision of the Romanian Central Bank. The Cypriot Central Bank on Thursday (April 25 ) approved the transfer of deposits between the two banks. Initially, the Bank of Cyprus in Romania should have re-opened to the public after three weeks of closure, but the deadline was extended by one day, to address all the details of bringing the deposits under Romanian law. The deal also includes a takeover of loans for small and medium enterprises and of liquidities, to offset the deposits.
Marfin Bank is a subsidiary of Popular Bank of Cyprus,which will re-capitalize the Romanian bank by EUR 20 million. The difference between the local subsidiaries of Bank of Cyprus and of Marfin is that the latter was registered as a local bank and its deposits are guaranteed by the local laws, while Bank of Cyprus was only a subsidiary of a foreign bank, thus compliant to Cypriot law. After the crisis in Cyprus started and a proposal was made to tax bank deposits, sending worries to the Cypriot banking system and to deposit holders, Bank of Cyprus tried to find a solution for its subsidiaries abroad which served foreign customers, but which were governed by its internal laws. Romania guarantees all deposits under the EUR 100,000 threshold per deponent.
The over 1,000 people who have deposits at Bank of Cyprus Romania will have access to their deposits starting next week. More than half of the EUR 90 million deposits from Bank of Cyprus Romania were offset by liquidities, and the rest by loans, which were also transferred to Marfin Bank. According to Mediafax quoting bank sources, the deal and the choice of loans to be transferred were ironed out by bank employees from the banks which wished – but failed – to take over Bank of Cyprus Romania – Banca Transilvania and Raiffeisen Bank – and who had already had access to the bank’s data room. They selected the loans which had a good debt service ratio.
The Cyprus Central Bank previously rejected offers – reportedly worth less than EUR 100 million – submitted by Romanian lenders Banca Transilvania and Raiffeisen Bank Romania for the takeover of the Romanian subsidiary of Bank of Cyprus. The two offers submitted by Banca Transilvania and Raiffeisen Bank Romania were deemed too low in comparison to the target value for Bank of Cyprus Romania assigned by the committee in charge of restructuring the banking system in Cyprus.
Bank of Cyprus’ assets for its Romanian subsidiary are around EUR 450 million, out of which EUR 350 million are loans. One of the largest loans granted in Romania is the EUR 100 million lent to the company which owns the JW Marriott building, which is due for repayment in 2017. Real estate financing makes up over half of the remaining loans on the balance sheet.
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 recently said the two Cypriot banks in Romania only have 1.3 percent of the banking assets in the country.