Europe Economy

We’ve ‘terminated’ our Greece exposure: Cyprus Finance Minister

Over the last two years, the Cypriot banking sector has "terminated" its exposure to the Greek market, reducing contagion risk if Greece were to default on its debts, the finance minister of Cyprus has told CNBC.

Although the two countries both border the Mediterranean Sea, are lumbered with heavy debts and have close historical ties, Cyprus is "following its own track," Harris Georgiades said.

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"There isn't an issue of exposure (to Greece)," Georgiades told CNBC from the International Monetary Fund's "Spring Meeting" in Washington D.C. over the weekend.

"There was one until two years ago when our banking sector, the Cypriot banking sector, was very exposed to the Greek market, but that was terminated two years ago. So, there isn't any link beyond the normal array of commercial and economic ties which exist between all members of the euro zone."

Greek-owned bank subsidiaries in Cyprus are essentially operating as Cypriot banks, Georgiades said, and are "fully capitalised with a comfortable liquidity position," supervised by both the Cyprus Central Bank and the European Central Bank.

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"We feel very comfortable and we think that their presence actually is very beneficial for our banking sector," Georgiades told CNBC.

Cyprus was hit hard by the Greek debt crisis, which saw Greek sovereign debt written down in 2011 and yields on Greek bonds reach nearly 40 percent in 2012.

A number of large Cypriot banks had significant exposure to Greece and Cyprus's second-largest bank, Laiki Bank, was closed two years ago, with the bulk of deposits moved into a bad bank. This was in exchange for the European Union signing off on a 10 billion euro ($10.8 billion) bailout package.

As markets await the outcome of further talks between Greece and its international creditors, Georgiades said he "did not want to discuss the possibility of the Greek situation turning for the worse."

"I want to be optimistic that we shall be able to find a resolution. Greece has made good progress during the last few years. This has to be acknowledged. I do not even want to speculate or to discuss the possibility of a negative outcome," he told CNBC.

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