Cyprus banks expect boost from min reserve cut

Cypriot commercial banks expect to boost their overseas operations following a decision by the Cyprus Central Bank to ease the minimum liquidity reserve requirement in foreign currencies, officials said.
In a directive circulated last week, the Central Bank cut the reserve requirement in foreign currencies to 70 percent from 75 percent of total foreign deposits.
Bank of Cyprus (BOC.CY), the island's largest lender, said the directive came at an opportune time.
"At a time where gaining additional liquidity in international markets is close to impossible, this is a positive development," said Yiannis Kypri, group chief general manager.
"The benefit of this move by the Central Bank is that it releases additional liquidity in foreign exchange which can be used for our expansion abroad, mainly in Russia, Romania and Ukraine," Kypri told Reuters.
The directive is expected to release just over 550 million euros of liquidity into the market from Cyprus' three largest domestic banks.
It would allow them to lend the equivalent of 30 percent of their total foreign currency deposits compared with 25 percent previously.
Commercial banks on the island had been calling for a reduction in the minimum liquidity reserve requirement for a number of years but say the new 70 percent value remained conservative.
"This is a positive step forward but it is not that substantial, the levels are still extremely restrictive, especially when compared to the equivalent value for the euro," said Andri Kaplani, manager treasury in Marfin Popular Bank (CPBC.CY) in Nicosia.
At present the minimum reserve liquidity requirement in euros is 20 percent. The Central Bank cut that requirement from 25 percent in June.