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ECB warns Latvia against taking in Russian money fleeing Cyprus

Mario Draghi, the head of ECB.
 NICOSIA, March 26 (LETA--REUTERS) - European Central Bank (ECB) officials have contacted Latvia, another European Union country that has received large Russian deposits, to warn authorities against taking in Russian money fleeing Cyprus, two sources familiar with the contacts said. Nevertheless Prime Minister Valdis Dombrovskis (Unity) cannot confirm that the European Central Bank has warned Latvia against taking in Russian money flowing away from Cyprus.

"It was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus," a eurozone central banker said.
As new President Nicos Anastasiades hesitated over an EU bailout that has wrecked Cyprus's offshore financial haven status, money was oozing out of his country's closed banks.
In banknotes at cash machines and exceptional transfers for "humanitarian supplies", large amounts of euros fled the east Mediterranean island before and after Cypriot lawmakers stunned Europe by rejecting a levy on all bank deposits.

EU negotiators knew something was wrong when the Central Bank of Cyprus requested more banknotes from the European Central Bank than the withdrawals it was reporting to Frankfurt implied were needed, an EU source familiar with the process said. "The amount the Cypriots mentioned... on a daily basis was much less than it was in reality," the source said.

Nevertheless Prime Minister Valdis Dombrovskis (Unity) cannot confirm that the European Central Bank has warned Latvia against taking in Russian money flowing away from Cyprus.

Dombrovskis emphasizes that he does not have such information and he has also discussed the matter with Finance Minister Andris Vilks (Unity).

The prime minister points out that the Bank of Latvia and the Finance Ministry are explaining the European Commission and the European Central Bank the differences between Latvia and Cyprus. The financial sector plays a much greater role in Cyprus than in Latvia. Latvia cannot be considered a financial center to the same extent as Cyprus or Ireland, adds the premier.

Commenting non-resident deposits at Latvian banks, Dombrovskis reminds that Latvian banks face much stricter capital adequacy and liquidity requirements in the non-resident sector. He does not predict a considerable influx of non-resident money from Cyprus.

leta.lv
26-03-2013
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