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Cypriot Forex Brokers Divert Money to Latvia and Romania, Seek to Poach Troubled Bank Staff

We haven't looked at how the Forex brokers engulfed in the Cypriot financial crisis are doing for quite some time, but a report by the Forex Magnates indicating diversion of client funds from the ill-fated island, shifted our attention back to this hotspot. 

Regardless of claims by FX brokers that it's all business as usual, information from the Forex Magnates shows that many companies have taken steps to redirect funds from existing accounts in Cypriot banks to non-Cypriot destinations and have stopped transferring money to Cyprus-based banks, opting for institutions elsewhere instead. The move is a response to a stringent haircut expected to be imposed on deposits exceeding EUR 100,000 in the Bank of Cyprus Group (BOC) and the Cyprus Popular Bank Public Co Ltd (“Laiki Bank”). As you perhaps remember this levy could eat some 40-50% of the deposits: ouch!

Funds Go to Latvia and Romania

Latvia and Romania have turned out to be particularly attractive places to shield client funds from the Cypriot disaster. Both countries are not in the Eurozone, hence providing a safe haven from the troubles related to the common currency. At the same time, the two countries are part of the European Union, and the business climate there offers sufficient ease for financial operations.
In addition, Latvia enjoyed a credit rating boost to Baa2 by Moody's, beefing up its safe haven status further. By the way, the country is also benefiting from a stable forex industry, which involves the participation of local banks and not only brokers.
However, the diversion of money exiting Cyprus to Latvia may be hampered due to the nation's plans to join the single-currency area. Officials from the European Central Bank are said to have piled up pressure on Latvia not to accept Russian money from Cyprus. As expected, the going gets tough.
Latvia and Romania are not the only haven destinations for the money of the Forex brokers' clients: some companies have opted to redirect funds to top-tier banks in developed economies like France, Germany and the UK.

Hiring Troubled Banks' Employees

Believe it or not, it's the Forex and binary options brokers that could help some of the employees of Laiki and BOC find their new jobs. Yes, these companies are eager to poach staff from the troubled banks, an intention openly voiced by Banc de Binary, for example. 
The trouble is that the majority of Laiki and BOC staff still do not know what's going to happen with their jobs yet. Each bank has about 2,500 employees and analysts put the expected job losses at each company at around 1,500. A portion of Laiki's staff is set to be diverted to BOC, but the bank is already overstaffed, so vast jobs trimming is looming there too.
This is not the single problem for the banks' employees: many of them claim to have been forced to buy shares in the banks and to have purchased those with loans that are now outstanding. In addition, the future of pension funds is uncertain: rumor has it that parts of these would be transferred from Laiki to BOC, and that a part will be converted in BOC shares. These, however, would hardly cost anything if a run on funds happens when the bank reopens.
On the brighter side, bank employees with good English command and solid education (especially the education obtained abroad) are set to find their new jobs at FX brokers easily. And the forex sector in Cyprus is large – according to data from recruitment expert Global Recruitment Solutions (GRS), the sector accounted for one in three of the company's job placement in 2012. 
May be the future of Cyprus's financial sector is not so dull, after all, and we should always look at bright side of life.
TAGS: cyprus  forex trading  forex brokers  binary options  banc de binary  laiki bank  bank of cyprus  haircut  deposits  latvia  romania  staff  hiring  poaching 
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