Cyprus News Agency: News in English, 11-05-31

Cyprus News Agency: News in English Directory - Previous Article - Next Article

From: The Cyprus News Agency at <http://www.cyna.org.cy>

CONTENTS

[01] FITCH - ECONOMY - DOWNGRADING

[02] CYPRUS - EU - ASYLUM

[03] OIL ROUTES - EUROPE

[04] CYPRUS - CHINA - CONFERENCES

[01] FITCH - ECONOMY - DOWNGRADING

``Fitch Ratings has downgraded the Republic of Cyprus`s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to `A-` from `AA-` and removed them from Rating Watch Negative. The Outlook on the Long-term IDRs is Negative,`` a press release issued Tuesday by Fitch notes.

Chris Pryce, Director in Fitch`s Sovereign Group said ``the downgrade reflects the severity of the crisis in neighbouring Greece and the risk this poses for the Cypriot banking system and consequently the public finances of Cyprus.``

According to the release, Cyprus is a small economy with a large banking system equivalent in terms of assets to approximately nine times its GDP.

``Exposure to Greece is a significant source of vulnerability that has intensified with successive downgrades of the Greek sovereign since January 2011, when Fitch put Cyprus on Rating Watch Negative citing fiscal and financial sector risks``, the release adds.

Fitch estimates that this exposure ``includes almost EUR14bn of Greek sovereign bonds and an estimated EUR5bn of Greek bank bonds. In addition, Cypriot-owned banks have lent through their substantial networks in Greece significant amounts to Greek companies and households.``

The agency believes that these banks 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.

It adds that in this scenario the cost of recapitalising the banks to a tier one capital ratio of 10% would be of the order of EUR2bn (11% of GDP), only part of which might have to be met by the state.

``However, in a more severe stress test, where a Greek sovereign default was associated with significant deterioration in asset quality such that non-performing loans rose to 25%, Fitch estimates that the cost of recapitalising the banks could rise to 25% of GDP, necessitating more extensive sovereign support``, the release notes.

Fitch also believes that the Cypriot government would be willing and able to provide effective support to Cypriot banks in a stress test of this magnitude, as at 61% of GDP Cypriot general government debt is not high by euro area standards.

``However, the cost of providing financial sector support could materially alter the government`s debt profile in a manner that would be negative for the sovereign ratings``, the release adds, noting that ``Fitch does not rule out additional funding pressures arising for banks, including subsidiaries of Greek banks.``

Furthermore, the agency believes that the European Central Bank would provide liquidity support in such an environment, thereby preserving financial stability in Cyprus.

``Fitch says developments in Greece will continue to have an important bearing on Cyprus`s ratings, underlining the importance of sound public finances and a robust, well-capitalised banking system``, the release concludes.

[02] CYPRUS - EU - ASYLUM

Sylikiotis, who was speaking during an event organised within the framework of the European programme Awareness in Cyprus: Refugees concern us, said that as long as the EU does not have in place a common asylum system, it does not have in real terms a Common European Asylum Policy.

The joint efforts of EU Mediterranean states on this issue are aimed towards that direction, he noted, adding that right now times are critical for the regions of North Africa and the Middle East and that is why all Mediterranean countries have been intensifying their consultations.

Speaking on the situation in Cyprus, Sylikiotis said that today there are around 2500 recognised refugees, including people who apply for asylum status, adding that applications are examined at a fast pace and numbers are decreasing.

[03] OIL ROUTES - EUROPE

He noted that Cyprus follows its own hydrocarbon exploration programme within its Exclusive Economic Zone and has already conducted an Offshore Licensing Round in 2007, which resulted in the granting of one Hydrocarbon Exploration License.

``Exploration activities are well underway, with the continuous appraisal of offshore prospects. According to the relevant schedule, an exploratory drilling in one of the offshore exploration blocks will take place by the end of this year. Depending on the outcome of the findings from this exploratory drilling, options including the transfer of natural gas via a subsea pipeline and the potential for a liquefaction unit in Cyprus, will be evaluated,`` he added.

Paschalides said that in an effort to diversify its energy sources, enhance security of its energy supply, reduce CO2 emissions in the power sector and end its energy isolation, Cyprus has decided to introduce natural gas into its energy mix.

[04] CYPRUS - CHINA - CONFERENCES

One of the conferences was organised by the Cyprus Investment Promotion Agency (CIPA) and sponsored by Marfin Laiki Bank, and the other was organised by the Cyprus Chamber of Commerce and Industry (CCCI).

According to a press release issued by Marfin Laiki Bank, the CIPA conference took place in Beijing on May 26 and Shanghai Pudong on May 30, with an aim to promote Cyprus as an attractive investment destination, with emphasis on large-scale development projects and international operations.

The CCCI conference took place in Shanghai on May 30 with an aim to present the advantages of Cyprus and an international service centre, with emphasis on the taxation environment, the banking system and ship management.

Cyprus News Agency: News in English Directory - Previous Article - Next Article