ECB’s Orphanides: “Cyprus taking right steps to manage crisis”

Cyprus is taking all the necessary steps to manage the difficult situation faced by its financial system, Central Bank Governor Athanasios Orphanides said on Tuesday.
Cypriot banks' heavy exposure to Greek sovereign debt, seen at high risk of default, has been cited as a concern by credit ratings agencies which have downgraded the island's sovereign ratings in the past few months.
"The financial system in Cyprus is facing difficulties at the moment, as is widely happening in the euro zone," Orphanides, a member of the ECB's governing council, told reporters.
"But necessary actions are being taken by the central bank, the finance ministry and all relevant bodies to manage the situation."
The government announced last week it has prepared legislation to aid its banks in the event of a crisis and to create a financial stability fund.
A draft financial crisis management bill, which requires approval from parliament, would allow the government to bolster a bank's liquidity if required, and a second bill would create a fund to help stabilise the banking system.
"Because the suitable action is taken, there is no reason for concern for depositors or the public in general," Orphanides told reporters after MPs started debating the bill.
Standard & Poor's cut Cyprus' long-term credit rating by a notch to BBB last week, citing the banking system's exposure to sovereign Greek debt.
The ratings agency estimates the exposure of local banks to total Greek debt to be around 165% of national output, and the cost of injecting new capital into them could hit 10% of gross domestic product.