Island Nation Cyprus

Cyprus has been a member state of the European Union since 2004

I was recently reading about Cyprus and its possible bankruptcy, and I couldn't decide if this was the case of a failed business strategy and leadership, negligence, false hope or sheer greed.

This is my understanding of the trail of events.

• Pre 2008 Euro zone, the Central Bank of Cyprus only allowed banks use up to 30% of their foreign deposits to support local lending.

• 2008: Cyprus adopts the Euro while ignoring warnings over consequences of the lending boom

• When Cyprus joined the single European currency, Greek and other euro area deposits were reclassified as domestic markets leading to more lending.

• Bank loans expanded almost 32 percent in 2008 as newly gained Euro zone status made Cyprus an attractive destination for banking and business.

•  But Cyprus banks maintained an usual position of funding almost all their lending from deposits, did not depend on capital markets or invest in complex financial products.

• Outdated bank regulations facilitated risk taking offered low-tax and as much as 70% higher deposit rates than their counterparts in Italy, Spain or Germany according to figures from Unicredit.

• 2011 Cypriot banks are exposed to Greek government bonds which must be written down by approximately 50% of their value in line with private sector agreement in October.
• Cypriot banks are exposed to non- performing Greek private sector loans Greek NPL. According to Moody, up to 20% of all Greek private sector loans may be classified as non-performing in the next 18 months.

• 2012 Given the perilous state of the Cypriot economy, Cypriot banks look for outside investment to bring in new money into the bank.

• 2013 Cyprus has  been told it must raise 5.8 billion euros (7.5 billion dollars) in order to secure 10 billion euros in rescue loans from other European countries that use the single currency as well as from the IMF.

How does the Island nation of Cypriot come up with the required money (5.8 billion Euros) to qualify for a bailout package, we have to watch closely ..............JCGold.