Russian out of Cyprus

We’ve had a couple of holidays in Cyprus, in mid-summer when it is stiflingly hot. We stayed in a villa in the hills above Paphos. The routine was: get up late, have brunch, laze around while the sun was high, then head to the beach in late afternoon for relief. The first time we visited, in 1999, I was struck by the amount of Russian spoken on the beach and in town. With hindsight this was probably the vanguard of a surge in Russian connections with the island. This year it is estimated that over $30bn of deposits in Cyprus banks is from Russian sources. Russian depositors surely weren’t the only ones: there are thousands of UK expats on the island with money in local banks. The similarities with Iceland are quite striking: Icelandic banks were offering these great interest rates to foreigners to the extent that its bank assets grew to 12x GDP. We had many friends in the UK who were only too happy to put their cash with Icelandic banks, only to squeal like crazy when the banks were nationalised. Cyprus was doing the same thing and although the bank asset-GDP ratio only reached 7x, this is still pretty ballistic. Caveat emptor! South African bank assets are less than 1x GDP, for example. Bank failures have been around for a long time: the collapses in the US and England in the early 1800s are well documented. In short, we need banks but they will constantly come back to bite us – that’s leverage and no amount of regulation is likely to change it. The QSL is from the Cyprus Telecommunications Authority, a radio-telephone utility service in Nicosia, heard on 8mHz in London in 1995, using 3 kW.