Bank of Cyprus turmoil no bearing on UK operations

Bank of Cyprus has clarified that the taxation on large depositors and closure of branches in Cyprus has no bearing on its UK commercial lending operations.

Previously there had been concerns raised over the detrimental effects of the announcements as the Bank is a commercial lender in the UK property market.

Bank of Cyprus however, a patron of the National Association of Commercial Finance Brokers (NACFB), has reassured UK depositors that they will not suffer a tax bailout levy.

Yet British people who live in Cyprus will face taxation on all deposits over and above €100,000, after a deal was reached late last night to bankroll the Cypriote bailout.

Depositors will be compensated with equity in the bank with a full recapitalisation of Bank of Cyprus being instated.

A representative of the bank told B&C: “Bank of Cyprus UK is self-funded and does not rely on support from our parent in Cyprus or the interbank market for liquidity. We are fully authorised and regulated in the UK by the Financial Services Authority.”

Bank of Cyprus UK is a subsidiary of the Cypriote bank; it acts as a separate legal entity and therefore must abide by UK rules and regulations.

This means that savings with the bank of up to £85,000 are protected by the UK’s Financial Services Compensation Scheme (FSCS) which will block the Cypriot Government taxing large deposits on overseas accounts.

The UK arm of the bank current have 50,000 deposit accounts and approximately 6,000 loan accounts, with most customers predominately small and owner-managed businesses.

The same fate cannot be said for the country’s second biggest bank, Laiki Bank, which will be shut down and all deposits of less than €100,000 (£85,000) moved to the restructured Bank of Cyprus.

Under the bailout's terms, the international creditors – European Central Bank, European Commission and International Monetary Fund, collectively known as the Troika - have reached a deal which will provide €10 billion (£8.7 billion) in crucial financing.

In order to receive the bailout, it was previously suggested that all residents pay a one-off tax levy of up to 9.9 per cent, however after public outage the notion failed to receive just one vote in parliament.

The bank’s representative added: “As a ring-fenced business here in the UK, our activities are not directly exposed to events in Cyprus and all our eligible depositors are protected under the UK’s Financial Services Compensation Scheme to the value of £85,000.

“Our customers are reassured by this and indeed we continue to experience positive levels of deposit retention and investment”.