BANK DEPOSITS of up to €50,000 will be government guaranteed for a period of one year in line with an EU decision taken yesterday 7th October 2008, Finance Minster Charilaos Stavrakis said.

As last Friday’s US$700 bailout failed to restore confidence in global financial markets for a second day, EU Finance Ministers (ECOFIN) met in Luxembourg to try and stave off the growing crisis.

“We agreed that we must be prepared to take appropriate action to support the banks and their depositors where appropriate and necessary,” said Stavrakis.

He said the agreement contained specific guidelines for member states to follow and any intervention would be temporary.

“Based on these guidelines, each member state shall take any measures necessary to preserve the stability of the financial system, either through diversion of liquidity from central banks, either by action to support banks or aid projects for the protection depositors,” Stavrakis said.

More specifically, ECOFIN agreed that all member states would, for an initial period of at least one year, provide deposit guarantee protection for individuals for an amount of at least €50,000.

“Cyprus welcomes this agreement and is ready to intervene forcefully if necessary to support and protect the banking system and depositors,” said Stavrakis.

In this context, he said, the government was closely monitoring developments in the financial sector in full cooperation and coordination with the supervisory authorities.

“I would like to stress once again that the Cyprus banking system remains healthy,’ said Stavrakis.

“In the remote event that any problem, within the parameters agreed, appears we will take immediate additional steps necessary to fully support both the system and depositors,” he added.

The minister’s statement in the afternoon came only hours after the Central Bank of Cyprus was forced to issue an announcement debunking a scaremongering report by AKEL deputy Stavros Evagoras.

The deputy said he had solid information that a subsidiary of a Greek bank in Cyprus was in immediate danger of collapse. He said he could not name names but called on the Association of Commercial Banks to clarify the situation.

Instead the Central Bank intervened saying: “All banks operating in Cyprus, including subsidiaries of Greek banks remain solid and secure and do not face any problems, and their liquidity is very satisfactory.”

Economists were inclined to agree with the Central Bank’s assessment.

“Even if you have definite information, what’s the point of saying this,” said analyst Stelios Platis.

Former President George Vassiliou, who is also an economist, told a news conference yesterday he had every confidence in Cypriot banks.

“There is absolutely no reason for concern for the health of the banking system as a result of the international crisis, and the effects on the economy will be relatively limited,” said Vassiliou.

Vassiliou was confident the government would take any steps necessary to protect the banking system, which in any case had not invested in what he termed the US “toxic products”.

“It is necessary for calm to prevail, and panic is not justified under any circumstances,” he added.

The former President said undoubtedly the world was facing an unprecedented financial crisis but he said unjustified panic could cause incalculable damage.

“The crisis will undoubtedly have some impact on the Cypriot economy but it will mainly affect the construction and tourism industries,” Vassiliou said.

Meanwhile the Cyprus Stock Exchange managed to limit its losses yesterday to less than one per cent, after a massive plunge of 8.6 per cent on Monday. The index closed at 1,900 points.

However two of the three main banks still ended in the red. Bank of Cyprus shaved off another 1.98 per cent to close at €4.94 while Hellenic Bank lost 1.78 per cent to end at €1.65. Marfin Laiki recovered some of Monday’s losses recouping a marginal 0.61 per cent to close at €3.26.

BOC increases interest margin

BANK of Cyprus (BoC) said yesterday it had increased its interest margin on old business loans by one per cent.

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