Russian and other pre-bail-in outflows and ELA

I missed this article (via Ekathimeri) by the great Reuters' Cyprus investigative team that gives real (company-by-company) detail on the way Russian and other money was withdrawn from Cyprus in the months and days before the first bail-in.


In January and February 2013 €2.6bn was withdrawn and in the first two weeks of March another €3.6bn flew the coop. That's €6.6bn in total in two-and-a-half months and equivalent to 37 per cent of GDP.


I was particularly struck by this comment


Deposits that did flow out of the country had to be funded by emergency liquidity assistance from the European Central Bank, according to analysts. In effect, the ECB was paying for depositors, many of them Russian, to remove money from Cyprus before those depositors could be compelled to contribute to the international rescue of the island.


This isn't strictly the case as ELA is a national central bank liability and the cost was born by Cyprus's commercial banks - particularly Laiki - through higher interest charges on ELA than other ECB-backed refinancing tools.


In the cold light of day its hardly a stunning conclusion but it is a reminder of how fickle money in smart hands left Cyprus in the lurch and piled up the bail-in costs on those uninsured deposits with either nowhere else to go or without the nous to get out.


(It's worth remembering Laiki and Bank of Cyprus accounted for the vast majority of accounts in Cyprus and retail bank customers are notoriously slow to change accounts - even in the UK where there is more choice Brits switch accounts on average every 26 years).


It is surprising that some big domestic and international players didn't get out despite the very clear warning signs.


For example, two of Russia's biggest companies revealed in April the amounts of money they had frozen in Cypriot banks.


OAO Sovcomflot, Russia's biggest shipping group (revenue $1.4bn) has $25.8 million frozen in Laiki Bank.


And Russian auto maker AvtoVAZ has $20.5 million frozen in Cypriot banks—about 40% of the company's 2012 profit.

(WSJ Paris and Alpert 15 April 2013)


Curiously there does not appear to be a euro-for-euro correlation between deposit money withdrawn from the banking system (€6.6bn in first three months 2013) and the increase in ELA (red line in graph below) which 'only' rose by €2bn between December 2012 and March 2013.  This is not apparently due to a lag in the CBC statistics as the April 2013 'Other Claims in Euro area credit institutions' is slightly less than the March total.

Source: CBC Monthly balance sheet at
Source: CBC Monthly balance sheet at

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