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Cyprus parliament delays vote on deposit levy to Monday
- jstalin 14y agoIt's bald-faced confiscation of individuals' savings in order to bail out mismanaged banks.
- airesQ 14y agoIf the Cyprus government, EU, FMI and ECB were to do nothing it is almost certain that the depositors would see much less than 90 cents on the euro. The depositors are being rescued here. They trusted their money to banks that went on to make loans to the Greek government. The Greek government defaulted. A significant portion of the depositors money is gone. Nobody is confiscating anything. International institutions are helping Cyprus, by covering part of the losses. Unfortunately there is nobody willing to pay the amount necessary to make the depositors full again. One might argue that this is bad, and that the EU/IMF/ECB should make the depositors full, without an haircut, but that is another story.
- Game_Ender 14y agoWhat about the bond holders though? If the banks go under they lose their money as well, it seems to reason they should be taking a hit as well, not just the depositors.
- justincormack 14y agoThere are no more than a few hundred million in bonds. The banks were funded by deposits not bonds. The junior bonds probably will be wiped out but the amounts are tiny and there are no details released yet.
- aristus 14y agoThat does change things. Debt restructuring is a bit like musical chairs. If there was truly no group left to haircut, to avoid default this had to be done. On the other hand, that €10B euro could have come from somewhere outside the country, especially since it was the forced Greek bond haircut that caused the crisis. I find it hard to believe that northern Europe isn't taking advantage of this crisis to increase their influence.
- justincormack 14y agoIt could have been a gift not a loan. But Europe is not willing to do this, partly as it would set a precedent, partly as half the depositors in Cyprus were not Europeans, partly for other reasons...
- justincormack 14y agoApparently more than that EUR 1.7bn, which is enough to make a difference to the depositors. What seniority these are I do not know.
- Karunamon 14y agoMaybe this is a terrifically ignorant comment, but it seems like the government mismanages their finances, as a result, they want the everyman to throw away 10% of their bank deposits? WTF?
- aristus 14y agoThe banks, not the govt. But the bailout as structured tends to conflate the two, which is part of the problem. Also it directly hurts retirees in country while protecting rich foreigners (eg, holders of Cypriot bank bonds). It's WTF from start to finish, a pretty shocking abuse of power by the rich northern EU countries. Fairness and good governance have nothing to do with it.
- bitcartel 14y agoThe UK will compensate some of its expats: "But I can tell you that for people serving in our military, people serving our government out in Cyprus – because we have military bases there – we are going to compensate anyone who is affected by this bank tax. People who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax." http://www.guardian.co.uk/world/2013/mar/17/cyprus-savings-levy-uk-compensate http://www.guardian.co.uk/world/2013/mar/17/cyprus-savings-l...
- Lazare 14y agoWhen a bank goes under, normally losses would hit the bond holders first, and only after that would depositors start to lose funds on amounts over €100k. Any amounts under €100k would be perfectly safe due to deposit insurance which is ultimately backstopped by the central bank via its ability to print money. Cyprus banks are short about €16B that the Cyprus government does not have. They went to the EU/IMF and got €10B, leaving a €6B hole. In the normal course of events, the bondholders would lose everything (not significant for Cyprus banks; they're financed by deposits), accounts with over €100k would lose around 30% of the amount over €100k, and all other depositors would lose nothing. Instead, the bond holders lose nothing, the depositors with over €100k lose only 9.9%, and the retirees and Cypriots with less than €100k in their accounts lose 6.75%. In other words, ordinary savers are having their life savings confiscated in order to protect bondholders and Russian mobsters. And, again, these savers are citizens of a EU country and Eurozone member who have been promised deposit insurance by their national government with the implicit promise that this would be backstopped by the EU, IMF, ECB. But their interests, it seems, are less important than the interests of the Russian oligarchs; after all we can't have them losing a significant amount of their uninsured deposits....
- TillE 14y agoIt sounds like they can't get the votes to approve it, which makes sense. It's gotta be political suicide. Either way the banks are going to be destroyed.
- bradleyjg 14y agoThese banks were paying 9+ percent interest on some accounts. If it sounds too good to be true, it probably is.
- mjn 14y agoSame happened with the Icelandic banks: in mid-2000, I knew several Americans who rather ill-advisedly created accounts with forex brokers just to get ~8% interest on ISK, a currency and economy they otherwise knew nothing about. Seems to have been common, because the Icelandic banks had large deposit inflows up until the crisis hit.
- kyriakos 14y agoas a Cypriot who will lose part of his money I believe voting for this measure is the best of the two options even though both are bad for us.
- deleted 14y ago[deleted]
- ctdonath 14y agoWhat's the other option? In the USA, taking 7+% of everyone's savings on short notice would initiate a civil war. Can't imagine how another alternative would be worse.
- MoreMoschops 14y agoWhat would the two sides be? One side is presumably every citizen, but that leaves no citizens on the other side. Sounds more like a revolution.
- justincormack 14y agoThe other option is taking more than 7%. The suggestion was a 40% currency devaluation. Although no one really knows what would happen in detail.
- rdtsc 14y agoSo that is they prefer to instead skim a little bit off the top slowly through inflation. In the end it doesn't matter, but it just prevents people from revolting.
- jpdoctor 14y agobjornsing's blog post is a good read, and gets it right imho. http://conscienceofanentrepreneur.blogspot.se/2013/03/whats-wrong-with-cyprus-bailout.html http://conscienceofanentrepreneur.blogspot.se/2013/03/whats-...
- kyriakos 14y agolets not forget that Cyprus has recently discovered natural gas and possibly oil in its exclusive economic zone expected to be exploited in the next few years. call it conspiracy theories but a weakened Cyprus is easier to manage..
- omgyeah 14y agoNo, dude. Let's call it pure coincidence. Once in a billions.
- opminion 14y agoWhy good financial management is not a competitive factor amongst banks? As in: bank with us because we are financially sound (instead of: because we pay higher interest, or whatever). It's not happening yet.
- untog 14y agoThere's no reason it couldn't be. Within the US there are public figures available stating which banks have been the best and which have been the worst in the last few years. There is nothing to stop customers banking on this basis. They still don't, perhaps largely because the government insures up to $1xx,xxx in deposits (I forget the number) so a lot of people are covered no matter what happens to their bank.
- akama 14y agoI believe in the US the government insures up to $250,00.
- kyriakos 14y agoDeposits in Cyprus and the whole eurozone are covered by 100000 euro insurance per account. The problem in the particular case though is that Cyprus Central Bank in case the banks close down will be required to pay depositors a total of 30 billion euro which it doesn't have.
- opminion 14y agoSo, silly idea here: would reducing the government guarantee improve anything?
- mjn 14y agoRather than recapitulating the same discussion of the general issue, might be better to consolidate it in this other story that's been on the front page longer: https://news.ycombinator.com/item?id=5387228 https://news.ycombinator.com/item?id=5387228
- yk 14y agoSo the Greek bonds get a haircut and in the process the Cyprus banks are thrown under the bus. At the same time Germany, the Netherlands and Finland enjoy the capital influx of insurances and some fonds, who are regulated such that they can only invest in the Eurozone. These capital influx creates a nice boom, low unemployment and ensures the reelection of the idiots who did throw Greece under the bus in the first place. This crisis would be so funny, if it would occur on any continent I don't live on.
- pasiaj 14y agoWho do you think threw Greece under the bus?
- deleted 14y ago[deleted]
- yk 14y agoFor example Germany. ( I am not sufficiently knowledgeable on the interior politics of the other eurozone members to assert with any confidence that they were purely motivated by their chance of reelection. )
- rosser 14y agoI'm asking out of complete naïveté in matters of global finance, but what's to stop Cyprus from pulling an Iceland?