The Bank of Cyprus has announced that it will almost certainly need a bailout form the EU.
The tiny country has (not surprisingly) flown under the radar, but it’s a mess, with its entire cabinet having just resigned amid a deepening economic crisis and a downgrade form the ratings agencies.
The country is very much collateral damage from Greece, as their economies are quite intertwined.
This from Cyprus Property News gives some numbers about the country’s Greek exposure
Roughly one third of the banking system’s assets are booked as Greek exposure, including that of Greek subsidiaries based in Cyprus. This exposure includes almost €14 billion of Greek sovereign bonds and an estimated €5 billion of Greek bank bonds. In addition, Cypriot-owned banks have lent through their substantial networks in Greece significant amounts to Greek companies and households.
Most Greek-related exposure is held by three major Cypriot banks: Bank of Cyprus, Marfin Popular Bank and Hellenic Bank. These “are relatively well placed to absorb the impact of a sovereign debt crisis in Greece that entailed an assumed 50% haircut to face value of Greek government bonds,” Fitch said.
The country’s total GDP is small, just $22 billion.