Cyprus Bank Gets Cash Infusion From Video-Game Company
Comment of the Day

November 07 2013

Commentary by Eoin Treacy

Cyprus Bank Gets Cash Infusion From Video-Game Company

This article by Ilya Khrennikov for Bloomberg may be of interest to subscribers. Here is a section
Vedomosti, a Russian business publication, reported the gamemaker probably had funds in the bank that got frozen and needed to buy into the bank to be able to withdraw them. Accounts in Cyprus were frozen in March to stop bank runs when euro-area finance ministers decided to tax deposits to raise money to aid in a rescue plan. Others with money trapped in Cypriot banks have taken similar steps to recover deposits: In September, several Russians were elected to the Bank of Cyprus board, where capital controls blocked accounts.

Eoin Treacy's view As previously mentioned, while the ECB has taken on a number of additional responsibilities, its primary mandate is to control inflation. In practical terms, this has often been seen as equivalent to maintaining an inflation rate below 2%. With deflationary pressures still evident, not least because of the focus on fiscal restraint insisted upon by creditor nations, the potential for an ECB rate cut began to be priced in as soon as inflation data disappointed two weeks ago.

Against this background, a number of troubled assets on the periphery of the Eurozone continue to trade a significant discounts to their enterprise value. Cyprus, for example, continues to labour under the constrictions imposed by the collapse of its banking sector. Since trading in Bank of Cyprus has been suspended the four day surge in the island's stock market is being driven by the rally in Hellenic Bank's shares. While this may only be a technical rally based on the manoeuvring of the bank's creditors, it does suggest that a floor has been found and that instruments will now trade on their individual merits.

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