Banking system ‘unaffected’ by Russian sanctions

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Sanctions imposed on Russia following its invasion of Ukraine will not severely impact the island’s banking sector, as it is not exposed to the Russian economy, said Finance Minister Constantinos Petrides.

In comments to the Cyprus News Agency, Petrides said that the Russian Central bank currently has no reserves in Cyprus.

“EU sanctions on Russia’s banking system will not have a great effect on Cyprus, as it is one of the few countries whose financial system has no exposure to Russia,” Petrides said.

He added the Cypriot banking system “maintains one of the highest levels of capital adequacy and liquidity, and there is no reason for concern for any bank in Cyprus.

“Sanctions are not expected to affect the operation of any bank in the EU.”

On Sunday, the President of the European Commission, Ursula von der Leyen, announced a new set of sanctions against Russia, including excluding certain Russian banks from SWIFT, a platform for financial institutions to exchange information about global monetary transactions.

Von der Leyen said the move would disconnect these banks from the international financial system, affecting their ability to operate globally and blocking Russian exports and imports.

Asked about the impact of the war in Ukraine on the Cyprus economy, Petrides maintained it is still too early to re-evaluate macroeconomic projections for 2022.

“Undoubtedly, there will be an impact that we are currently trying to contain.”

He said the government has exhibited “fast reflexes”, taking steps to contain possible damage to the island’s tourism, looking into alternative destinations to make up for any losses from Russia.

Petrides argued that any macroeconomic impact from the war would depend on how long the conflict will last.

He argued the macroeconomic impact would also depend on the level of inflationary pressures brought on by the rising cost of energy and grain, which at the moment cannot be accurately predicted.

The Finance Minister assured that authorities are closely monitoring developments as they unfold.