EBRD signs €5m trade facility with Cyprus’s Turkish Bank

The European Bank of Reconstruction and Development (EBRD) said it agreed to extend a €5m trade facility to the Turkish Bank Ltd, a lender established in 1901 as Nicosia Savings Box, a decision likely to anger the opponents of reconciliation with Turkish Cypriots.

“Through the facility, the EBRD will issue guarantees in favour of international commercial banks covering the political and commercial payment risk of the transactions undertaken by Turkish Bank,” EBRD said in a statement on its website. “In addition, Turkish Bank will benefit from the EBRD’s award-winning technical cooperation projects in trade finance”.

“The Trade Facilitation Programme (TFP) is an excellent tool that will help increase our foreign trade and economic growth,” said Hakan Bortecene, chairman of Turkish Bank, one of the Turkish Cypriot lenders licenced by and maintaining a minimum reserves account at the Central Bank of Cyprus. “We are proud of the confidence shown in us and we look forward to deepening our relation(ship) with the EBRD to benefit from our partner’s extensive know-how and experience”.

Turkish Bank operates a network of 20 branches in Cyprus and has operations in Turkey and the UK with its units TurkishBank A.S. and TurkishBank UK Ltd, with an asset size of $1.1bn (€1bn) and equity totalling $180m, according to its website. The bank has no operations in the government controlled areas since 1974.

EBRD, a bank set up following the end of the Cold War to assist economies in transition, pledged a total of €700m for programmes in Cyprus in 2014. As part of the TFP operations, which started in the summer of 2015, the London-based bank signed agreements worth €90m with Cyprus’s Eurobank, Hellenic Bank and Bank of Cyprus. EBRD maintains a 5.4 per cent stake in Hellenic and 5 per cent in Bank of Cyprus.

“The EBRD’s TFP currently includes 96 partner banks in 26 countries where the EBRD invests, with limits exceeding €1.5bn in total and more than 800 confirming banks worldwide,” EBRD said. “So far, the TFP has supported a large range of international and intra-regional trade transactions, among them the export of construction services, the import of industrial equipment and electrical devices as well as the import of capital goods, construction equipment, vehicles, household products, food and electrical goods”.

As part of the TFP, the EBRD provides a e-Learning training programme and its graduates from Cyprus were among the top 25 individuals who completed the online Trade Finance e-Learning training in 2016.

“This is a very important step to widen and deepen our engagement in Cyprus,” said Lucyna Stańczak-Wuczyńska, EBRD financial institutions director. “The TFP facility will enable Turkish Bank to provide better trade finance services to exporters, distributors of imported goods and importers among the Turkish Cypriot community. Through the TFP line, Turkish Bank will have the opportunity to boost intra-regional trade and will contribute to the development of trade links between Cyprus and other countries where the EBRD invests”.

Stańczak-Wuczyńska added that trade may help strengthen growth and job creation in local economies.

The agreement is likely to cause political controversy in Cyprus. Already Diko, a party which practically opposes reconciliation with Turkish Cypriots, has criticised the government for not doing enough to prevent EBRD, which is scheduled to hold its annual general meeting (AGM) in Cyprus between May 9 and 11, from holding some of its events in the Turkish-occupied part of Nicosia.

Diko said “serious questions emerge from the government’s decision to approve occupied Cyprus as a venue for the EBRD’s AGM” arguing that the it may lead to a downgrade of the Republic of Cyprus.

“Isn’t the government concerned about the publicity that the pseudo-state will receive?” the party said in a statement on its website. “Isn’t the government concerned that financial players or officials from Turkey are likely to participate in the events and that it is likely for them to enter into the Republic of Cyprus through illegal entrances?”.

According to the AGM’s programme emailed to media a week ago, EBRD will hold most of its events in Filoxenia Conference Centre in the Republic, events related to the civil society programme at the Home of Cooperation, in the buffer zone, and some unspecified events at Merit Hotel in the northern part of Nicosia.