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Are Immoral Monks To Blame For Cyprus' Woes?

|Includes: Global X MSCI Greece ETF (GREK)

Cyprus has recently been in the headlines as another European country on the verge of capsizing, due in part to Greece's economic woes. This Wednesday, Moody's downgraded Cyprus's credit rating two notches, well into junk territory. There have also been reports that Cyprus will receive a substantial loan from Russia to spur its ailing banking industry.

Cyrus Popular Bank, the main culprit behind Cyprus's banking woes, was formerly private and named the Marfin Popular Bank. It was led by a Greek businessman named Andreas Vgenopoulos, who also owned the Marfin Investment Group. Vgenopoulos then had Marfin undertake large-scale lending to finance the purchase of MIG shares and other Greek stocks, except this time Marfin Bank had the backing of the Cyprus government, which had no idea of the illicit activities. One of the more memorable schemes in the Reuters report detailed how monks in the Vatopedi monastery received 109 million euros in loans from the Marfin bank to invest in Greek assets and substantial shares in MIG. Then when Greece went down, Marfin Popular Bank also tanked, leading to a government takeover and realization of the huge exposure of Marfin Popular Bank to risky investments due to the bank's significant stakes in Marfin Investment Group

Read the full report by Reuters here.