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Roundup: Bank of Cyprus closes shady chapter by disposing off Russian Uniastrum subsidiary

Xinhua, September 29, 2015 Adjust font size:

Bank of Cyprus (BOC), the only bank in the world to recapitalize by converting depositors money into equity, closed a shady chapter by completing the sale of its Russian Uniastrum subsidiary.

The bank said in an emailed statement on Monday that it has finalized the sale of the Uniastrum subsidiary, which it acquired in late 2008 for 371 million euros (about 416 million U.S. dollars), for a mere 7 million euros.

Yet, the bank hailed the sale of Uniastrum as a "milestone in its deleveraging and de-risking strategy."

"The (BOC) group has eliminated future potential risks relating to its Russian banking operations, including any liquidity risks," the statement said.

The bank's statement said the 7 million euros "nominal price" is for the selling of its 80 percent share in Uniastum Bank LLC, its 80 percent share in Uniastrum's subsidiary Leasing Company Uniastrum LLC and some loan openings in Russia.

The buyer is Artem Avetisyan, main shareholder in the Bank Regional Credit of Russia.

The acquisition of Uniastrum is part of a broad criminal probe into the massive collapse of the financial sector early in 2013, when Cyprus was pulled back from the brink of an economic meltdown in a 10-billion-euro bailout by the Eurogroup and the International Monetary Fund (IMF).

The bailout included the bail-in of Bank of Cyprus, the largest lender of the eastern Mediterranean island and the merging with its main competitor, Cyprus Popular Bank, known as Laiki, on the insistence of the IMF.

Laiki was subsequently wound down by international lenders, having drawn over billion in Emergency Liquidity Assistance from the European Central Bank.

Authorities investigate allegations that 50 million euros were given in bribes to two Cypriots and three Russians to grease the deal.

A report by financial forensic Alvarez and Marshal found no evidence of corruption, but expressed misgivings in the advisability of the Uniastrum purchase.

Parallel to the criminal investigation, a parliamentary watchdog committee is conducting its own probe into the affair.

Its chairman has said the committee simply cannot stand back and not investigate a deal which has cost the Cypriot economy up to 1 billion euros.

BOC's statement said the sale "will allow the bank to de-risk its balance sheet by approximately 600 million euros and allows the release of risk weighted assets of approximately 550 million euros."

It added that the deal had a positive impact of about 30 basis points on the common equity tier 1 capital ratio.

Operations in Russia generated a 299 million euros loss for Bank of Cyprus in 2014, including a after tax loss of 261 million euros.

Bank of Cyprus said it will maintain its presence in Russia with its own representative offices in Moscow and St. Petersburg. (1 euro = 1.12 U.S. dollars) Endit