Our View:  RCB Bank did the responsible thing

The closing of RCB bank was announced by the bank itself on Thursday, ending speculation about its future that was fuelled by Tuesday’s announcement of the sale of a performing loan portfolio worth €565 million to Hellenic Bank.

In the end, the closure, which was decided on Monday night by the European Central Bank’s (ECB) Single Supervisory Mechanism, was managed smoothly by the authorities, preventing shocks to the Cyprus banking sector and ensuring RCB’s depositors would not lose any money.

The sale of the loan portfolio ensured that RCB would have the liquidity to cover all its obligations to depositors. Assurances to this effect were given by both RCB and ECB in separate announcements issued on Thursday, that referred to the “full repayment of all depositors.”

This smooth closure of the bank was made possible by the full cooperation of RCB with the banking supervisory authorities both in Nicosia and Brussels, which was why the ECB referred to the RCB’s “decision to voluntarily phase out its banking operations.”

There had been warnings for the bank, as there was an outflow of deposits after Russia’s invasion of Ukraine and while this was manageable there was no guarantee it would remain so.

Much of RCB’s business depended on the Russian market while the escalation of the war and broadening of sanctions increased the uncertainty about its future. A bigger outflow of deposits would have brought in the Single Resolution Mechanism, and this would have put depositors’ money at risk.

RCB did the responsible thing, under the circumstances, in deciding to cooperate with the SSM and voluntarily phase out its banking operations. In Thursday’s statement it said: “Although RCB has been, and remains abundant in liquidity and capital, the ongoing and extremely volatile geopolitical situation requires it to transform and adopt a new strategy – phasing out banking operations, while at the same time ensuring that the best interests of its clients are secured.”

There is no doubt that the bank acted with the best interests of its clients in mind taking timely decisions that prevented it from being placed under resolution, that would have put people’s deposits at risk and shaken Cyprus’ banking sector.

The mess that we experienced in 2013 was avoided, because RCB’s management showed a commendable sense of responsibility, working closely with the supervisory authorities to ensure the bank’s closure would be go as smoothly as possible and depositors would not lose any money.