EU sanctions could impact handful of Cyprus-based Russian investment firms

Despite being sufficiently capitalised at present, a handful of large Russian investment firms operating in Cyprus may face risks relating to EU-imposed sanctions on their parent companies in Russia, Cyprus Securities and Exchange Commission (CySEC) chairwoman Demetra Kalogirou has said.

Reporting on the CySEC’s achievements and overall performance during 2014, as well as its priorities for 2015, Kalogirou said that potential risks include cases where the parent company of a Cyprus-listed subsidiary are included in the EU’s sanctions list.

In case the subsidiaries require additional funding, parent companies will be unable to provide it, Kalogirou said. “In Cyprus, these investment firms are five or six, but they are large,” she added.

However, Kalogirou noted for the moment such funding is not required, since their capital adequacy ranges from 16 to 20%, adding that this was the reason why they were able to cope with the recent Swiss-franc crisis without capital shortfalls.

The CySEC boss also said that the CySEC’s involvement in resolving the issue of bondholders of the Bank of Cyprus and now-defunct Laiki Bank is being examined.

Kalogirou said the Commission has considered involving the Financial Ombudsman’s office for claims up to €175,000.

“There have been many who invested small amounts in capital securities,” she said, adding that 80% of bondholders invested up to €100,000.

The issue relates to bank-issued convertible enhanced capital securities (CESC) bought by private investors, the value of which was effectively wiped out following the restructuring and recapitalisation of BoC and Laiki.

Kalogirou said that private bondholders, who invested an estimated €300 million to €400 million, may take up their claims with the Financial Ombudsman’s office, on an individual basis. She noted that the ombudsman has committed to taking the issue to his board and come back with a response.

In case the response is positive, bondholders will have the option of making their claims through the Financial Ombudsman’s office, so that legal fees are avoided.

Kalogirou also described the CySEC’s achievements in 2014 with regard to oversight and administrative fines.

She said a total €8.2 million of fines were imposed throughout the year, of which only €350,000 has been paid.

“We have sued anyone who has not paid the imposed fine,” she said. “Just because they have challenged our decisions in court does not suspend their obligation to pay the fine.”

Source: Cyprus Mail