8 ms·

“My bank account's got robbed by European Commission. Over 700k is lost.”

135 points by heelhook 14y ago

cinquemb 14y ago
I wonder if the FDIC can cover US deposits with leverage of 371:1… :P
- niggler 14y ago
  The unlimited FDIC protection ended December 31 2012. It's back to the 250K
  - cinquemb 14y ago
    Correct, and since MF global showed us where deposits lie on the totem pole compared to derivative exposure, i'm quite excited to see whats next when [insert bank here] needs to meet its margin calls :P
Samuel_Michon 14y ago
Comment #7 in that thread says it all: “So you trusted a small tax haven island with your money. The plan failed. Your next step: trusting even smaller tax haven island with your money. Pure logic.”
- qdog 14y ago
  Yeah...funny thing is blaming the EU. The banks were lending out the money on what turned out to be bad assets, not sure there's any cure for that where deposits don't get wrecked. Iceland before, Cyprus now, not sure what they think will happen to Carribean banks in the long run. Bitcoin might be an ok solution for people who don't care about earning interest, but if you still want the interest you have to deal with a lending institution.
  - natermer 14y ago
    Most banks have 'negative interest'. Not only because the interest rates they offer for savings and checking accounts no where near is able to keep up with real inflation (which means you lose money by saving, from the get-go), but they charge as many service fees as they feel they can get away with.
  - cinquemb 14y ago
    even funnier thing is thinking that these haircuts are gonna do much… the template according to troika is to do more of the same :D granted the only future i see in bitcoins is in actual business transactions and not earnings interests,which with typical fiat are subject to the whims of ZIRP and central m̶a̶n̶i̶p̶u̶l̶a̶t̶i̶o̶n̶ planning :D (which [number of business transactions with bitcoins for goods or services] has gone up these couple of years if you look beyond the hype) and the fact that it would be pretty hard for .gov reallocate funds in a .dat :P
    - qdog 14y ago
      You would lend out your bitcoins at interest, just like you do with any other currency. Unless you want to be a direct lender, you'd still use a bank. Maybe the EU's policies led to the propagation of all the bad assets, but Cypriot banks were offering a higher interest to attract deposits. You can't get that higher interest without investing in somewhat riskier assets. Even assuming the EU policy is terrible (I am no expert on the EU and want no part of that argument, btw), the problem with the Cyprus banks was poor controls and risk management, which was by design to attract deposits. Pretty simple, unless you had a very good reason (tax avoidance, money laundering, interest rate), parking money in the Cyprus banking system was a very bad idea. So either the person with 700k was avoiding taxes, laundering money, enjoying a higher than normal interest rate, or being foolish with their money. I have no idea which it was, but if I personally had to oversee such a sum, I wouldn't be parking it in such a risky place.
      - cinquemb 14y ago
        Lending is one thing, storing your wealth in a currency under ZIRP is another. I'm lucky that I at least get dividends on my savings being with a local credit union. And only half of their banking system consisted of foreign deposits (not to mention most of those deposits were able to leave the country via loopholes). Where does that leave the individuals and small business native to cyprus? Is it such a horrid idea of storing your money in your own country? And since the ECB is calling cyprus the template, where does this leave the next country that needs to be bailed out (which will happen again[1 bailout in 2010,1 bailout in 2011, 2 bailouts in 2012, 1 so far in 2013; this is starting to look like Fibonacci's work :P]) will banking in portugal, italy, ireland, greece, and spain be a very bad idea for people who live there, or are they all banking in their home country for tax avoidance,money laundering and for ZIRP to negative interest rates on their savings?
- zwegner 14y ago
  The OP seems to imply later in the thread that the company is based in Cyprus: "I've already sold a part of my bitcoins to cover emergency needs. But I don't plan to recover my business in Cyprus. Instead, I'm moving to another country outside EU."
  - Samuel_Michon 14y ago
    In several comments he talks about Russians being victimized. He also states he'll be moving his company to a small Caribbean country, while he describes it as a “European medium size IT business”. So his company may be registered in Cyprus (and in the future, somewhere in the Caribbean), it's likely that that's not where the activity happens. (How large do you think the market for IT services is on Cyprus or on Caribbean islands? And if you had a medium size IT business, would you suddenly move all your employees to the other side of the globe, where you have no clients?)
    - gurvinder 14y ago
      So you seem to imply that all companies which are based on Silicon Valley have their clients in Valley?? Their are IT companies based in Cyprus which have clients all over Europe, and also Globally.
      - Samuel_Michon 14y ago
        Many companies in Silicon Valley are registered in Delaware or Nevada, but its offices and employees are somewhere near San Jose. I'm implying this medium sized IT company is registered in Cyprus, but it has its offices or employees elsewhere. How else can OP speak so casually about moving his company to the other side of the globe?
        gurvinder 14y ago
        No, He might not be Cypriot but he has his company based in Cyprus, that is why he is saying he will have to let go all his Cypriot employees.. When all your assets are taken away you don't have a choice but to run from that place and start somewhere else in hope it won't happen again. Like him many people have lost trust on EURO ZONE, and many businesses are trying to move out of the Euro Zone.
jbellis 14y ago
Looks to me more like 700k was blocked as part of the capital controls to prevent a bank run. The actual amount to be seized will be much smaller. Cold comfort, I know.
- SoftwareMaven 14y ago
  Doesn't sound like it[1]. It looks like it is 700k gone. 1. http://greece.greekreporter.com/2013/03/27/cyprus-finance-minister-uninsured-laiki-depositors-could-face-80-haircut/ http://greece.greekreporter.com/2013/03/27/cyprus-finance-mi...
  - jbellis 14y ago
    Oops, you're right, this is CPB. He's screwed.
- kyllo 14y ago
  It appears that they are actually having a bank run, but they limited daily withdrawals to 300 Euros per person. The banks have been closed since the 16th and just reopened today with these new restrictions. Cyprus is in a state of financial emergency. http://metro.co.uk/2013/03/28/gallery-people-line-up-outside-laiki-bank-branch-in-limassol-cyprus-28-march-2013-3564164/ http://metro.co.uk/2013/03/28/gallery-people-line-up-outside...
niggler 14y ago
This fellow is using Laiki bank, and the Cyprus Finance Minister said that they would be seeing an 80% haircut. Relevant: https://twitter.com/finansakrobat/status/316813023639646208 https://twitter.com/finansakrobat/status/316813023639646208
- gurvinder 14y ago
  Not 80% haircut. You will get only 100k Euros which is insured, rest is all gone. Bank is being dissolved.
- uvdiv 14y ago
  Cyprus's finance minister said Tuesday that large deposit holders at Cyprus Popular Bank PCL (CPB.CP), the island's second biggest lender, could face losses of as much as 80% on their deposits as the government moves to wind down its operations. Speaking in a television interview with state broadcaster RIC, Michalis Sarris indicated that it could also take years before those depositors see any of their money returned. "Realistically, very little will be returned," Mr. Sarris said. http://www.foxbusiness.com/news/2013/03/26/cyprus-finance-minister-uninsured-laiki-depositors-could-face-80-haircut/ http://www.foxbusiness.com/news/2013/03/26/cyprus-finance-mi...
deleted 14y ago
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Samuel_Michon 14y ago
Apparently he didn't read up on deposit insurance. In most EU countries, anything over Euro 100,000 is not safe. http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country
- hackerboos 14y ago
  Other than convenience why wouldn't you open several bank accounts?
pliny 14y ago
>I'm not Russian oligarch, but just European medium size IT business I fail to see the difference, honestly. The OP, by running a business within a society where many services essential to that business are provided by the government and paid for by the citizens and businesses within that society, profited directly from other people's taxes - but refused to contribute. I feel about as bad for him as I do for any of the other gangsters, Russian or otherwise.
- natermer 14y ago
  The people running the government, which uses the taxes to secure loans that they have no intention on paying back, in order to prop up a failing economy that is failing because of the rules and regulations that are setup to maximize the illigit profit for said people running government.. those are the real gangsters. Most large state governments amount to little more then just legalized mafias. Ran by political and family dynasties serving the purposes of whoever is capable of providing them the most money and power. IMHO, paying as little taxes as possible is a moral imperative.
- mkdir 14y ago
  I'm not sure why, but natermer's past several posts are all dead. He wrote: > The people running the government, which uses the taxes to secure loans that they have no intention on paying back, in order to prop up a failing economy that is failing because of the rules and regulations that are setup to maximize the illigit profit for said people running government.. those are the real gangsters. > Most large state governments amount to little more then just legalized mafias. Ran by political and family dynasties serving the purposes of whoever is capable of providing them the most money and power. > IMHO, paying as little taxes as possible is a moral imperative.
  - pliny 14y ago
    I don't know what country OP lives in specifically, but what you quoted is wrong for the majority of European countries, who are neither tyrannical nor are they run by 'political and family dynasties'. Perhaps whoever you quoted was making a good case for not cooperating (taxes or otherwise) with tyrannical governments, but the situation in most European countries is that the government is democratic, progressive, and operates in the interests of it's citizens more than it does in the interests of the politicians themselves. The OP, unfortunately, doesn't get a choice of operating within a system where he benefits greatly from other people's effort and also paying taxes OR doing neither, he only gets to choose whether to contribute to a system that profits him massively or not. While choosing not to contribute, which is what OP did, is not technically stealing, it's ethically equivalent - I present as rationale the Kantian argument - if nobody paid taxes it is obvious that (within European countries) everybody would be worse off than if everybody paid taxes, therefore it is unethical for a single person to not pay taxes.
rayiner 14y ago
Yes, blame Angela Merkel and not the bank executives at your bank that loaded up on Greek debt while Greece was careening towards insolvency. I appreciate the PR nightmare here for the E.C. People are going to be madder at the E.C. for wiping out depositors at this unviable bank than they would have if the E.C. just let the whole Cypriot banking sector collapse and let everyone lose their money. See: http://online.wsj.com/article/SB10001424127887323501004578386762342123182.html http://online.wsj.com/article/SB1000142412788732350100457838...
- cynicalkane 14y ago
  Blaming evil banks and profligate creditors while tightening the money supply wasn't a particularly fruitful thing to do the last time there was a global economic crisis, and a whole lot of modern macro was about not repeating that mistake. Then the world goes around and repeats the same offenses, and the public once again buys the easy, moralistic stories. Bleh. The fact of the matter is that the Eurozone is a bad idea, a lot of economists said it was a bad idea, and now they're seeing their predictions come true. For each European financial disaster it's easy to blame some convenient cause, but eventually you have to ask: what is it about the Eurozone that is so good at precipitating financial crises? As banks collapsed and massive financial contagion in America was uncovered, did anyone in 2007-08 (besides a small number of monetary-inclined economists) think the very Euro would be threatened again, and again, and again, as America lurched along in limp but definite recovery? To paraphrase Bill Clinton: it's the money, stupid. The Eurozone is structured to suck the money out of peripheral economies in times of crisis, which then seize up like an engine starved of oil. The best banking system in the world cannot survive if all its money disappears. Cyprus does not have the best banking system in the world, so I guess they're worse off.
  - frozenport 14y ago
    The Eurozone is structured to suck the money out of peripheral economies in times of crisis It seems like Greece is doing much of the sucking, much to the chagrin of their stern German neighbors. I don't see the Euro as structurally deficient, I really think this problem is a due to Greek culture in the early 2000s being incompatible with the EU. Remember that Cyprus is a very small country, being half the size of Pittsburgh. I think many people forget why the Euro exists. It exists to grow trade and foster connections between European countries, and it serves to level them and their societies. This is a social agenda. If Greece stays in the Euro their culture will have changed for the better.
wladimir 14y ago
AFAIK that's already more than was lost in any of the bitcoin heists...
nateabele 14y ago
One possible upshot of this is that maybe people will actually start paying attention to how their home banks are capitalized. What's their reserve ratio? What are their major investments? Have those investments been rated by independent agencies? Schemes like the FDIC (which, as mentioned in a previous comment, can change the rules at any time) only serve to dumb us down and encourage bad behavior; firstly by lulling depositors into a false sense of security, and secondly by eliminating the incentive to be prudent and appropriately risk-averse.
- deleted 14y ago
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- bayesianhorse 14y ago
  People don't actually need to pay attention to that. Most banks in the European Union are already watched and have regulations up their collective funnels to avoid exactly these kinds of problems. The only mitigation strategy neccessary is to split your cash assets in multiple accounts... And of course, if you partake in a well-functioning state, which protects your rights against all sorts of problems, educates your workforce, regulates your food and healthcare, you might consider the taxes a bargain.
aaron695 14y ago
Putting money in an uninsured bank is an investment the same stocks or property. If the asset you invest in fails you lose your money. Don't see how this is the European Commission robbing anyone. I thought (But could be wrong) without the bailout all the money would be lost. Isn't this them giving someone who's lost it all 20% of their money back?
- brigade 14y ago
  €100,000 was insured. If you want to go along that line of thinking, then he currently has access to less than 4% of the uninsured money.
  - gurvinder 14y ago
    As far as I understood , no part of uninsured money will be left for him. Insurance is for Euro 100k, and he has a Dollar Account, that is why he will get only $128k based on the exchange rate.
    - Xylakant 14y ago
      The funds are currently marked as frozen. I presume that they're still figuring out the exact percentage for the haircut, so the only assets he can use is anything up to the insured amount.
      - gurvinder 14y ago
        No the decision has been already made, Laikie is being dissolved, so there won't be any haircut. You will get only Euro 100k http://www.cyprus-mail.com/cyprus/details-euimf-bailout- http://www.cyprus-mail.com/cyprus/details-euimf-bailout- agreement-cyprus/20130325 "Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework."
- gurvinder 14y ago
  So where you suggest people should keep their money if the only insurance they can get for their deposit is Euro 100k ? Matresses? Safes? Bailout or no bailout, all money in Laikie is lost except what was insured. Some interesting points 1) Laikie bank also had a loan of 9 Billion from ECB, that won't be written off , even though depositor's money is written off. That loan will be transferred to Bank of Cyprus. 2) Out of this 9 Billion half was used by Greek branches which are not effected as sold to a greek bank, even then Bank of Cyprus will have to pay full 9 Billion. 3) If you had a mortgage with same bank for 300k , and had 300k Deposit, only Deposit will be reduced to 100k , but you will still owe the bank 300k loan, as they are transferring all good loans to Bank of Cyprus. I can go on with more points to prove that its unfair politics just to give a message to Rich Russians to send their money to Germany instead of keeping it in Cyprus. After the crisis, German banks are trying to put full page Ads in Cypriot newspapers both in English and Russian saying that their money will be safer in Germany!!!
wmt 14y ago
What is the poster suggesting? EC should've stayed out and let the banks go bankrupt? Oh I know, they should've just covered all the tax haven banks losses.
- gurvinder 14y ago
  EC should have treated Cyprus in same manner they treat other countries which are part of Euro Zone. If they can bail out Greece without a haircut which actually caused crisis in Cyprus, why do this against Cyprus? Also it might be a tax haven for others , but for Cypriots its their country. And this haircut is applied to everybody who has deposits in the Cypriot branches of Laikie bank but Same bank has branches in Greece and people with deposits in Greek branches won't suffer.
  - bayesianhorse 14y ago
    Cypriots had continously higher interest rates on their deposits than other Europeans. The small levy wouldn't even have eaten up these profits which are essentially due to tax havenry and unsound business practices on a country wide scale. No pity there... Even if the 7% levy was all hard-earned money instead of too high interest rate profits, this would have hardly bankrupted more than a few depositors which were in dire straits already.
    - gurvinder 14y ago
      7% levy was proposed on all accounts, and it was illegal to put levy on insured deposits, and it was asked to put this levy on all banks even if they are solvent. Can you quote what high interest rates are you talking about on deposits? And what about interest rates on Current Accounts? Business usually pay money to have these accounts. Cyprus also has higher interest rates on mortgages, and most Cypriots have mortgages, so they are not actually having any profits because of "so-called" high rates. If European Union is so concerned about Tax-Haven issues, why didn't they come clean and ask Cyprus to raise tax rates as they did in 2004 when Cyprus joined European Union, And what about Luxembourg, isn't it where Apple is registered for saving taxes ??
  - 14y ago
nekojima 14y ago
It appears this is a current/chequing/checking account rather than the savings/deposit accounts that were originally reported to be subject to the special tax and which pay the ridiculous levels of interest (10%+). The impact on local business is already being felt, both consumption & payment of supplies & salaries (and soon tax remittance), and imports will suffer significantly in the coming days and weeks too. Exports may well be paid for and the funds remain outside of Cyprus, further creating problems for the economy, as it goes almost all-cash and tax is evaded too. Credit card balances can not be paid off for now either. It will be interesting to see how Russian mobsters (and various shades of business people) react to having millions/billions taken from them. I'd not want to be a Cypriot politician or banker having to say no to these guys.
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HNLogInShit 14y ago
Your bank account's WHAT got robbed?
InclinedPlane 14y ago
It's your fault for using such a bad bank. Just use paypal instead. /s
Samuel_Michon 14y ago
By the by, doesn't that bank logo look kind of familiar? Engadget's logo was inspired by the RSS logo, but this one doesn't even try to be original. http://i.imgur.com/WKZEMiQ.png http://i.imgur.com/WKZEMiQ.png
- pbhjpbhj 14y ago
  It's not an especially unique form http://www.gnsegroup.com/images/logo/TelemedLogo02_News.jpg http://www.gnsegroup.com/images/logo/TelemedLogo02_News.jpg. Do you think Engadget did it first?
JumpCrisscross 14y ago
When you deposit money in a bank you become a protected senior creditor, but creditor nonetheleas, to the bank. The government insures the first €100 000 or $250 000 against losses, but that guarantee is only as good as the government. Jeroen Dijsselbloem, president of the eurogroup, told the FT as the bailout was announced: “If we want to have a healthy, sound financial sector, the only way is to say: ‘Look, where you take the risks, you must deal with them, and if you can’t deal with them you shouldn’t have taken them on and the consequence might be that it is end of story.' That’s an approach that I think we, now that we are out of the heat of the crisis, should consequently take." [1] If you want a dollar asset as close to risk free as possible, buy Treasuries. If you are afraid of inflation buy inflation-protected Treasuries, TIPS. Not Bitcoins? No, not Bitcoins. The purchasing power of your savings has a higher probability of being retained when backed by the full faith and credit of the U.S. government than a cryptocurrency. This may very well change, but it is not the case today, particularly if you pay your bills and buy your food in dollars. Speculate in Bitcoins, use them to transact if you must, and perhaps participate them as a form of activism, but do not convince yourself that you are George Sorosing the global financial system. [1] http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144feabdc0.html#axzz2OWQybIgY http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144...
- cinquemb 14y ago
  so you must also think highly #DieselBoom and his templates? :P
- adventured 14y ago
  No, don't buy treasuries. Getting back inflation destroyed dollars is not risk free, in fact you're getting defrauded because you're not actually getting your money back at all. A quick check on what dollars will buy (the true judge of the value of a currency), spanning 10, 20, 30, 50, 100 years tells you everything you need to know about the destruction your capital will suffer while yielding almost nothing to offset the devaluation. And now the Fed is working harder than ever before to abuse the global reserve FRN standard. Now is the absolute worst time possible to buy treasuries. The era of cheap money is coming to a close with a frantic flailing about of currency devaluations, binge stimulus, bailouts, and robberies. Anybody that claims hyper cheap money lasts forever, is selling a pipedream (which may be accompanied with the words: it's different this time).
Shenglong 14y ago
Background and summary (forgive me if some details need correcting): Cyprus is a tiny country with a GDP not much higher than Tim Hortons. Yet, it had something like 150 billion in private funds stored in two of its banks: the Bank of Cyprus and Lakie. Why? Because the majority of the funds (I am generalizing) belongs/belonged to Russians who took advantage of the people on the conversion out of communism (dirty money). As North Americans have Swiss bank accounts, the Russians have Cyprus. Obviously, other people have their money in here too. Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece. As a result, the banks lost a ton of money, and are on the verge of making the country insolvent. The IMF said the government needed to come up with a large amount of money. At first they tried to pass a bill that would skim 10% off all Cyprus bank accounts that had over 10k Euros. There was unimaginable outrage, because as you can guess, that affects a good portion of the population. In response, they changed the bill to only affect those with over 100k Euros. Interestingly, this time, mostly the Russian dirty money was affected, and there was not as much public outrage (stealing stolen money). As a result, now 30% of all bank accounts over 100k Euros are being seized. All the North Americans probably don't realize why this is such a big deal. In North America, we have money in companies, hedge funds, etc. In Europe, from what I've been told, banks are the major (almost exclusive) depository. Thus, you can imagine that this is a much bigger deal.
- pliny 14y ago
  >because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece What a responsible investment strategy. 'What should we invest all this Russian gangster money in?' 'Well, I like goat cheese.'
  - anigbrowl 14y ago
    I suppose you think they should have sunk it all into aqueducts and amphitheaters.
- fakeer 14y ago
mbreese 14y ago
So, the system worked and he gets to keep €100K? Because his bank is insolvent and that is the amount of money that was insured? I'm not saying this doesn't suck for him and his company, but €100K is better than €0.
- fsniper 14y ago
  Keeps €100K but can not withdraws or transfers €300 daily.
  - trhtrsh 14y ago
    That's effectively a 1 year freeze.
radicaldreamer 14y ago
I'm not sure why people think investing above the insured deposit ceiling in a badly rated bank is risk free. If you have that much cash, you certainly can do (or pay someone to do) some due diligence and store your assets in a safer way.
- gregsq 14y ago
  Very true I think. When the banks started to fold in the UK I split my cash into units of up to £35000 each into different banks. The guarantee was per institution, not individual. It certainly made more sense to me to fit within the guarantee limits, though there was no absolute guarantee that even those limits would hold.
  - ansgri 14y ago
    Is the EU EUR100k guarantee per person and not institution?
    - ptaipale 14y ago
      Per person depositing in an institution. On European level, it would be futile to try to limit it to EUR100k per person, for many reasons, for instance because lots of people can have multiple identities -- expect perhaps in the Big Brother societies in the northern EU countries, where you can actually do a census by saying SELECT COUNT(id) FROM population WHERE alive=1; Moreover, how would you treat accounts that are not owned by a person, but e.g. companies?
skrebbel 14y ago
Oh boohoo. The OP appears to forget that without the European Commission, all of his money would be lost. It's like getting mad at the guy who chainsaws you out of the car that you folded around a tree because he sawed your car into two pieces.
- SODaniel 14y ago
  Not to mention that it seems like in this case the person in question may be whining about untaxed funds that he skimmed of his company. Oh no, I am being robbed of money that wasn't mine!!
- bobsy 14y ago
  If anything he should be angry at his accountant. I assume he has one if he has 800k. How many wake up calls does someone need. In the UK when banks were failing, before there was a solution the Government said they would guarantee the first £50k of savers. It might have then gone up to £100k. My parents who have a fairly large sum of money hired a decent accountant to mitigate a large portion of the risk. Spreading their money between a fairly large number of bank accounts. You then look at when Iceland banks failed. Lots of people lost money. The Cyprus banking sector size was ridiculous. It was 7x Cyprus GDP. If the sector failed it was fairly obvious Cyprus would be unable to save it. You have no idea what the terms would be of a bailout or if a small country like Cyprus would get one.. So back to my main point. Get a decent accountant. Understand where your money is going.
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Guthur 14y ago
It amazes me how many people mention tax evasion, and other excuses for apportioning of liability. The liability should lie with the people who bought the Cypriot/Greek debt in the first place. They are the ones that in essence lent the money to these two tiny countries when it was obvious it was out of control and would blow up. But where is the incentive not too when the liability is offloaded to people who had no part in the debt transaction; either the citizens or other third parties. To me these risk balances are way out of whack and are just asking for the irresponsible fiscal activities we are seeing.
- Paradigma11 14y ago
  the cypriot banks bought the greece dept, that is the problem.
  - Guthur 14y ago
    And the Greeks bought the Cypriot debt maybe; humour attempt. This doesn't really change my assertions, the Cypriot debt holders should take the hit first, let the pain filter through the whole rotten trail.
bayesianhorse 14y ago
Basically, someone deposited his money in a tax haven, with patently risky banks. Then the banks went into trouble. The European Union tries to help them avoid total loss, and now that same someone blames the EU for the partial loss. Total loss was the alternative to the bailout...
jcr 14y ago
In one sense, this submission really is politics and I feel bad about up-voting it, since politics are against the HN site guidelines. In another sense, this is also about tech, specifically, bitcoin. The desperate people in Cypress may turn towards alternative currencies as a way to escape their situation. I know there are a lot of folks around here who vocally support bitcoin or other alternative currencies. For me the idea is very interesting, but the reality makes me nervous. There are one of two possibilities; either (1) I know bitcoin well enough to never trust it, or (2) I don't know bitcoin well enough to make an informed decision. I'm still betting on the latter. ;-) None the less, there's a lot of negative bitcoin news that never makes the front page of HN, and I wonder why. The most recent was: https://news.ycombinator.com/item?id=5459304 https://news.ycombinator.com/item?id=5459304 http://www.youtube.com/watch?v=7fvSYT7vhQY http://www.youtube.com/watch?v=7fvSYT7vhQY The worst part of the above could the sensationalism, but in my opinion, it's my inability to verify the veracity of the claims. Are they just muckraking to (successfully) cause "Fear, Uncertainty, and Doubt" (FUD)? --Sadly, stuff like this makes us already skeptical and squeamish folks even more nervous about it. Market manipulation is a very real problem in all markets, so even if the above is entirely true, it's merely one instance of graft against bitcoin, when there are countless instances of corruption in all the other markets.
oellegaard 14y ago
While I would probably have the same reaction if I was living in Cyprus, important points are missing here. The way I understand it: Cyprus failed to control their economy and required the help from the European Union. In order to lent them a crazy amount of money, they wanted some guarantee. They could not provide anything, so their government had to use the peoples money to pay for the governments previously bad judgement about not saving up for bad times.
danmaz74 14y ago
So, you deposit your money in a bank with very high interest rates - very high because they invest in risky Greek bonds. If everything goes well, you keep the interests. If the risky investment of the bank goes bust, we (EU citizens) should pay you the risk, even beyond the insured 100k. Is that correct?
- im3w1l 14y ago
  >ZERO INTEREST! >I've already explained that it's CURRENT ACCOUNT (transactional account). >Not bank paid to me, but I was paying annual fee to the bank in order to maintain this account and debit card. >Current accounts are usually not affected even if bank goes bankrupt. Upon liquidation, current account holders are paid first, as money on this type of account cannot be gambled by bank. It's most liquid assets, like cash.
  - danmaz74 14y ago
    It's VERY hard for me to believe that anybody would keep a balance close to a million euro in a bank with zero interest. Even I get a small interest on my current account...
dgregd 14y ago
Could someone please tell me, who is going to make money during this fuss?
jgeerts 14y ago
This is just undermining the bank system. There is no reason big enough to do something like this and it appals me that some people are saying that he had it coming. A part of it is 'dirty' and that argument is being used to validate the confiscation of working people's money and company's money which the EU's economy is based upon. The fact that they announced this before taking a decision is just beyond stupid, any normal thinking human being knows that it's a bad approach given that they want to prevent a bank run. People in other countries are fearing that the same procedure will happen to them. This has a way bigger impact than just some companies and some rich people and some bad russians, they are just harming the image of banks in whole Europe. Next to that fact, OP has a medium sized business, people work there, wages can't be paid, this has a major influence on companies all over Europe and everyone who works there. OP put his money in Cyprus because it was profitable, is that a bad thing? You have to choose paths that are most profitable for your company and he didn't put it in some obscure market, it was backed by a bank, we generally trust banks. Now they want to prevent a bank run, this is just a ticking timebomb. Whenever the 300 euro/day rule doesn't apply anymore, there will be a bank run. No money will be going into the bank anytime soon. They are going to regret this.
- sbank 14y ago
  Thanks for speaking up against those in this thread who virtually blame this guy for the wrongdoing of others around him.
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ptaipale 14y ago
The OP does not seem to understand that the bank account was not robbed by European Commission, it was just lost because it was a bad investment. He put money in a bank that failed. Presumably, he made the investment for reasons of convenience of operating the capital in Cyprus, but also because the particular bank he chose was paying high interest rates. It was paying high interest rates because everyone knew the risk was high. The risk materialised. Who is surprised? EU helps a bit but is not prepared to compensate him for losses; this is not a fault of the European Commission. I'm a bit short of sympathy because of this blaming of Merkel, Rehn et al. They're not perfect, but they are not culpable for this loss. Cyprus has had tax as percentage of GDP at below 40 %. Northern Europe is closer to 50 %. If you had wanted buffers provided by the state, you should have collected taxes to do so. Alternatively, you could have stayed out of the euro, and then the government could just print money and rescue the banks. Of course, outside the euro you wouldn't have been such a great haven for grey and black Russian money.
calleskonto 14y ago
The EU has nothing to do with it it's cyprus that can't keep it's economy afloat. If i got to decide the EU should have let your contry go bankrupt fall in to civil war, but hey we decided to lend you money to stop that. But yes blame the very people that helped you from loosing all your money. That seems like a good idea....
edwinjm 14y ago
The alternative is that the bank goes bankrupt and you lose everything. Be glad.
vvllddrr 14y ago
I don't really see how the EC is robbing when it's actually lending Eur 10bln. Without the loan, all banks would have collapsed and you'd have lost the first 100K as well. The initial proposal was to only tax a percentage of the saved amount. That was rejected by the cypriotic people/govt.
jacquesm 14y ago
If and when those banks reopen there will be a bankrun and they will both go bust. It's only a matter of time.

135 points by heelhook 14y ago

cinquemb 14y ago

I wonder if the FDIC can cover US deposits with leverage of 371:1… :P

niggler 14y ago
The unlimited FDIC protection ended December 31 2012. It's back to the 250K
- cinquemb 14y ago
  Correct, and since MF global showed us where deposits lie on the totem pole compared to derivative exposure, i'm quite excited to see whats next when [insert bank here] needs to meet its margin calls :P

Samuel_Michon 14y ago

Comment #7 in that thread says it all: “So you trusted a small tax haven island with your money. The plan failed. Your next step: trusting even smaller tax haven island with your money. Pure logic.”

qdog 14y ago
Yeah...funny thing is blaming the EU. The banks were lending out the money on what turned out to be bad assets, not sure there's any cure for that where deposits don't get wrecked. Iceland before, Cyprus now, not sure what they think will happen to Carribean banks in the long run. Bitcoin might be an ok solution for people who don't care about earning interest, but if you still want the interest you have to deal with a lending institution.
- natermer 14y ago
  Most banks have 'negative interest'. Not only because the interest rates they offer for savings and checking accounts no where near is able to keep up with real inflation (which means you lose money by saving, from the get-go), but they charge as many service fees as they feel they can get away with.
- cinquemb 14y ago
  even funnier thing is thinking that these haircuts are gonna do much… the template according to troika is to do more of the same :D granted the only future i see in bitcoins is in actual business transactions and not earnings interests,which with typical fiat are subject to the whims of ZIRP and central m̶a̶n̶i̶p̶u̶l̶a̶t̶i̶o̶n̶ planning :D (which [number of business transactions with bitcoins for goods or services] has gone up these couple of years if you look beyond the hype) and the fact that it would be pretty hard for .gov reallocate funds in a .dat :P
  - qdog 14y ago
    You would lend out your bitcoins at interest, just like you do with any other currency. Unless you want to be a direct lender, you'd still use a bank. Maybe the EU's policies led to the propagation of all the bad assets, but Cypriot banks were offering a higher interest to attract deposits. You can't get that higher interest without investing in somewhat riskier assets. Even assuming the EU policy is terrible (I am no expert on the EU and want no part of that argument, btw), the problem with the Cyprus banks was poor controls and risk management, which was by design to attract deposits. Pretty simple, unless you had a very good reason (tax avoidance, money laundering, interest rate), parking money in the Cyprus banking system was a very bad idea. So either the person with 700k was avoiding taxes, laundering money, enjoying a higher than normal interest rate, or being foolish with their money. I have no idea which it was, but if I personally had to oversee such a sum, I wouldn't be parking it in such a risky place.
    - cinquemb 14y ago
      Lending is one thing, storing your wealth in a currency under ZIRP is another. I'm lucky that I at least get dividends on my savings being with a local credit union. And only half of their banking system consisted of foreign deposits (not to mention most of those deposits were able to leave the country via loopholes). Where does that leave the individuals and small business native to cyprus? Is it such a horrid idea of storing your money in your own country? And since the ECB is calling cyprus the template, where does this leave the next country that needs to be bailed out (which will happen again[1 bailout in 2010,1 bailout in 2011, 2 bailouts in 2012, 1 so far in 2013; this is starting to look like Fibonacci's work :P]) will banking in portugal, italy, ireland, greece, and spain be a very bad idea for people who live there, or are they all banking in their home country for tax avoidance,money laundering and for ZIRP to negative interest rates on their savings?
zwegner 14y ago
The OP seems to imply later in the thread that the company is based in Cyprus: "I've already sold a part of my bitcoins to cover emergency needs. But I don't plan to recover my business in Cyprus. Instead, I'm moving to another country outside EU."
- Samuel_Michon 14y ago
  In several comments he talks about Russians being victimized. He also states he'll be moving his company to a small Caribbean country, while he describes it as a “European medium size IT business”. So his company may be registered in Cyprus (and in the future, somewhere in the Caribbean), it's likely that that's not where the activity happens. (How large do you think the market for IT services is on Cyprus or on Caribbean islands? And if you had a medium size IT business, would you suddenly move all your employees to the other side of the globe, where you have no clients?)
  - gurvinder 14y ago
    So you seem to imply that all companies which are based on Silicon Valley have their clients in Valley?? Their are IT companies based in Cyprus which have clients all over Europe, and also Globally.
    - Samuel_Michon 14y ago
      Many companies in Silicon Valley are registered in Delaware or Nevada, but its offices and employees are somewhere near San Jose. I'm implying this medium sized IT company is registered in Cyprus, but it has its offices or employees elsewhere. How else can OP speak so casually about moving his company to the other side of the globe?
      - gurvinder 14y ago
        No, He might not be Cypriot but he has his company based in Cyprus, that is why he is saying he will have to let go all his Cypriot employees.. When all your assets are taken away you don't have a choice but to run from that place and start somewhere else in hope it won't happen again. Like him many people have lost trust on EURO ZONE, and many businesses are trying to move out of the Euro Zone.

jbellis 14y ago

Looks to me more like 700k was blocked as part of the capital controls to prevent a bank run. The actual amount to be seized will be much smaller. Cold comfort, I know.

SoftwareMaven 14y ago
Doesn't sound like it[1]. It looks like it is 700k gone. 1. http://greece.greekreporter.com/2013/03/27/cyprus-finance-minister-uninsured-laiki-depositors-could-face-80-haircut/ http://greece.greekreporter.com/2013/03/27/cyprus-finance-mi...
- jbellis 14y ago
  Oops, you're right, this is CPB. He's screwed.
kyllo 14y ago
It appears that they are actually having a bank run, but they limited daily withdrawals to 300 Euros per person. The banks have been closed since the 16th and just reopened today with these new restrictions. Cyprus is in a state of financial emergency. http://metro.co.uk/2013/03/28/gallery-people-line-up-outside-laiki-bank-branch-in-limassol-cyprus-28-march-2013-3564164/ http://metro.co.uk/2013/03/28/gallery-people-line-up-outside...

niggler 14y ago

This fellow is using Laiki bank, and the Cyprus Finance Minister said that they would be seeing an 80% haircut. Relevant: https://twitter.com/finansakrobat/status/316813023639646208 https://twitter.com/finansakrobat/status/316813023639646208

gurvinder 14y ago
Not 80% haircut. You will get only 100k Euros which is insured, rest is all gone. Bank is being dissolved.
uvdiv 14y ago
Cyprus's finance minister said Tuesday that large deposit holders at Cyprus Popular Bank PCL (CPB.CP), the island's second biggest lender, could face losses of as much as 80% on their deposits as the government moves to wind down its operations. Speaking in a television interview with state broadcaster RIC, Michalis Sarris indicated that it could also take years before those depositors see any of their money returned. "Realistically, very little will be returned," Mr. Sarris said. http://www.foxbusiness.com/news/2013/03/26/cyprus-finance-minister-uninsured-laiki-depositors-could-face-80-haircut/ http://www.foxbusiness.com/news/2013/03/26/cyprus-finance-mi...

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Samuel_Michon 14y ago

Apparently he didn't read up on deposit insurance. In most EU countries, anything over Euro 100,000 is not safe. http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country

hackerboos 14y ago
Other than convenience why wouldn't you open several bank accounts?

pliny 14y ago

>I'm not Russian oligarch, but just European medium size IT business I fail to see the difference, honestly. The OP, by running a business within a society where many services essential to that business are provided by the government and paid for by the citizens and businesses within that society, profited directly from other people's taxes - but refused to contribute. I feel about as bad for him as I do for any of the other gangsters, Russian or otherwise.

natermer 14y ago
The people running the government, which uses the taxes to secure loans that they have no intention on paying back, in order to prop up a failing economy that is failing because of the rules and regulations that are setup to maximize the illigit profit for said people running government.. those are the real gangsters. Most large state governments amount to little more then just legalized mafias. Ran by political and family dynasties serving the purposes of whoever is capable of providing them the most money and power. IMHO, paying as little taxes as possible is a moral imperative.
mkdir 14y ago
I'm not sure why, but natermer's past several posts are all dead. He wrote: > The people running the government, which uses the taxes to secure loans that they have no intention on paying back, in order to prop up a failing economy that is failing because of the rules and regulations that are setup to maximize the illigit profit for said people running government.. those are the real gangsters. > Most large state governments amount to little more then just legalized mafias. Ran by political and family dynasties serving the purposes of whoever is capable of providing them the most money and power. > IMHO, paying as little taxes as possible is a moral imperative.
- pliny 14y ago
  I don't know what country OP lives in specifically, but what you quoted is wrong for the majority of European countries, who are neither tyrannical nor are they run by 'political and family dynasties'. Perhaps whoever you quoted was making a good case for not cooperating (taxes or otherwise) with tyrannical governments, but the situation in most European countries is that the government is democratic, progressive, and operates in the interests of it's citizens more than it does in the interests of the politicians themselves. The OP, unfortunately, doesn't get a choice of operating within a system where he benefits greatly from other people's effort and also paying taxes OR doing neither, he only gets to choose whether to contribute to a system that profits him massively or not. While choosing not to contribute, which is what OP did, is not technically stealing, it's ethically equivalent - I present as rationale the Kantian argument - if nobody paid taxes it is obvious that (within European countries) everybody would be worse off than if everybody paid taxes, therefore it is unethical for a single person to not pay taxes.

rayiner 14y ago

Yes, blame Angela Merkel and not the bank executives at your bank that loaded up on Greek debt while Greece was careening towards insolvency. I appreciate the PR nightmare here for the E.C. People are going to be madder at the E.C. for wiping out depositors at this unviable bank than they would have if the E.C. just let the whole Cypriot banking sector collapse and let everyone lose their money. See: http://online.wsj.com/article/SB10001424127887323501004578386762342123182.html http://online.wsj.com/article/SB1000142412788732350100457838...

cynicalkane 14y ago
Blaming evil banks and profligate creditors while tightening the money supply wasn't a particularly fruitful thing to do the last time there was a global economic crisis, and a whole lot of modern macro was about not repeating that mistake. Then the world goes around and repeats the same offenses, and the public once again buys the easy, moralistic stories. Bleh. The fact of the matter is that the Eurozone is a bad idea, a lot of economists said it was a bad idea, and now they're seeing their predictions come true. For each European financial disaster it's easy to blame some convenient cause, but eventually you have to ask: what is it about the Eurozone that is so good at precipitating financial crises? As banks collapsed and massive financial contagion in America was uncovered, did anyone in 2007-08 (besides a small number of monetary-inclined economists) think the very Euro would be threatened again, and again, and again, as America lurched along in limp but definite recovery? To paraphrase Bill Clinton: it's the money, stupid. The Eurozone is structured to suck the money out of peripheral economies in times of crisis, which then seize up like an engine starved of oil. The best banking system in the world cannot survive if all its money disappears. Cyprus does not have the best banking system in the world, so I guess they're worse off.
- frozenport 14y ago
  The Eurozone is structured to suck the money out of peripheral economies in times of crisis It seems like Greece is doing much of the sucking, much to the chagrin of their stern German neighbors. I don't see the Euro as structurally deficient, I really think this problem is a due to Greek culture in the early 2000s being incompatible with the EU. Remember that Cyprus is a very small country, being half the size of Pittsburgh. I think many people forget why the Euro exists. It exists to grow trade and foster connections between European countries, and it serves to level them and their societies. This is a social agenda. If Greece stays in the Euro their culture will have changed for the better.

wladimir 14y ago

AFAIK that's already more than was lost in any of the bitcoin heists...

nateabele 14y ago

One possible upshot of this is that maybe people will actually start paying attention to how their home banks are capitalized. What's their reserve ratio? What are their major investments? Have those investments been rated by independent agencies? Schemes like the FDIC (which, as mentioned in a previous comment, can change the rules at any time) only serve to dumb us down and encourage bad behavior; firstly by lulling depositors into a false sense of security, and secondly by eliminating the incentive to be prudent and appropriately risk-averse.

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bayesianhorse 14y ago
People don't actually need to pay attention to that. Most banks in the European Union are already watched and have regulations up their collective funnels to avoid exactly these kinds of problems. The only mitigation strategy neccessary is to split your cash assets in multiple accounts... And of course, if you partake in a well-functioning state, which protects your rights against all sorts of problems, educates your workforce, regulates your food and healthcare, you might consider the taxes a bargain.

aaron695 14y ago

Putting money in an uninsured bank is an investment the same stocks or property. If the asset you invest in fails you lose your money. Don't see how this is the European Commission robbing anyone. I thought (But could be wrong) without the bailout all the money would be lost. Isn't this them giving someone who's lost it all 20% of their money back?

brigade 14y ago
€100,000 was insured. If you want to go along that line of thinking, then he currently has access to less than 4% of the uninsured money.
- gurvinder 14y ago
  As far as I understood , no part of uninsured money will be left for him. Insurance is for Euro 100k, and he has a Dollar Account, that is why he will get only $128k based on the exchange rate.
  - Xylakant 14y ago
    The funds are currently marked as frozen. I presume that they're still figuring out the exact percentage for the haircut, so the only assets he can use is anything up to the insured amount.
    - gurvinder 14y ago
      No the decision has been already made, Laikie is being dissolved, so there won't be any haircut. You will get only Euro 100k http://www.cyprus-mail.com/cyprus/details-euimf-bailout- http://www.cyprus-mail.com/cyprus/details-euimf-bailout- agreement-cyprus/20130325 "Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework."
gurvinder 14y ago
So where you suggest people should keep their money if the only insurance they can get for their deposit is Euro 100k ? Matresses? Safes? Bailout or no bailout, all money in Laikie is lost except what was insured. Some interesting points 1) Laikie bank also had a loan of 9 Billion from ECB, that won't be written off , even though depositor's money is written off. That loan will be transferred to Bank of Cyprus. 2) Out of this 9 Billion half was used by Greek branches which are not effected as sold to a greek bank, even then Bank of Cyprus will have to pay full 9 Billion. 3) If you had a mortgage with same bank for 300k , and had 300k Deposit, only Deposit will be reduced to 100k , but you will still owe the bank 300k loan, as they are transferring all good loans to Bank of Cyprus. I can go on with more points to prove that its unfair politics just to give a message to Rich Russians to send their money to Germany instead of keeping it in Cyprus. After the crisis, German banks are trying to put full page Ads in Cypriot newspapers both in English and Russian saying that their money will be safer in Germany!!!

wmt 14y ago

What is the poster suggesting? EC should've stayed out and let the banks go bankrupt? Oh I know, they should've just covered all the tax haven banks losses.

gurvinder 14y ago
EC should have treated Cyprus in same manner they treat other countries which are part of Euro Zone. If they can bail out Greece without a haircut which actually caused crisis in Cyprus, why do this against Cyprus? Also it might be a tax haven for others , but for Cypriots its their country. And this haircut is applied to everybody who has deposits in the Cypriot branches of Laikie bank but Same bank has branches in Greece and people with deposits in Greek branches won't suffer.
- bayesianhorse 14y ago
  Cypriots had continously higher interest rates on their deposits than other Europeans. The small levy wouldn't even have eaten up these profits which are essentially due to tax havenry and unsound business practices on a country wide scale. No pity there... Even if the 7% levy was all hard-earned money instead of too high interest rate profits, this would have hardly bankrupted more than a few depositors which were in dire straits already.
  - gurvinder 14y ago
    7% levy was proposed on all accounts, and it was illegal to put levy on insured deposits, and it was asked to put this levy on all banks even if they are solvent. Can you quote what high interest rates are you talking about on deposits? And what about interest rates on Current Accounts? Business usually pay money to have these accounts. Cyprus also has higher interest rates on mortgages, and most Cypriots have mortgages, so they are not actually having any profits because of "so-called" high rates. If European Union is so concerned about Tax-Haven issues, why didn't they come clean and ask Cyprus to raise tax rates as they did in 2004 when Cyprus joined European Union, And what about Luxembourg, isn't it where Apple is registered for saving taxes ??
- 14y ago

nekojima 14y ago

It appears this is a current/chequing/checking account rather than the savings/deposit accounts that were originally reported to be subject to the special tax and which pay the ridiculous levels of interest (10%+). The impact on local business is already being felt, both consumption & payment of supplies & salaries (and soon tax remittance), and imports will suffer significantly in the coming days and weeks too. Exports may well be paid for and the funds remain outside of Cyprus, further creating problems for the economy, as it goes almost all-cash and tax is evaded too. Credit card balances can not be paid off for now either. It will be interesting to see how Russian mobsters (and various shades of business people) react to having millions/billions taken from them. I'd not want to be a Cypriot politician or banker having to say no to these guys.

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HNLogInShit 14y ago

Your bank account's WHAT got robbed?

InclinedPlane 14y ago

It's your fault for using such a bad bank. Just use paypal instead. /s

Samuel_Michon 14y ago

By the by, doesn't that bank logo look kind of familiar? Engadget's logo was inspired by the RSS logo, but this one doesn't even try to be original. http://i.imgur.com/WKZEMiQ.png http://i.imgur.com/WKZEMiQ.png

pbhjpbhj 14y ago
It's not an especially unique form http://www.gnsegroup.com/images/logo/TelemedLogo02_News.jpg http://www.gnsegroup.com/images/logo/TelemedLogo02_News.jpg. Do you think Engadget did it first?

JumpCrisscross 14y ago

When you deposit money in a bank you become a protected senior creditor, but creditor nonetheleas, to the bank. The government insures the first €100 000 or $250 000 against losses, but that guarantee is only as good as the government. Jeroen Dijsselbloem, president of the eurogroup, told the FT as the bailout was announced: “If we want to have a healthy, sound financial sector, the only way is to say: ‘Look, where you take the risks, you must deal with them, and if you can’t deal with them you shouldn’t have taken them on and the consequence might be that it is end of story.' That’s an approach that I think we, now that we are out of the heat of the crisis, should consequently take." [1] If you want a dollar asset as close to risk free as possible, buy Treasuries. If you are afraid of inflation buy inflation-protected Treasuries, TIPS. Not Bitcoins? No, not Bitcoins. The purchasing power of your savings has a higher probability of being retained when backed by the full faith and credit of the U.S. government than a cryptocurrency. This may very well change, but it is not the case today, particularly if you pay your bills and buy your food in dollars. Speculate in Bitcoins, use them to transact if you must, and perhaps participate them as a form of activism, but do not convince yourself that you are George Sorosing the global financial system. [1] http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144feabdc0.html#axzz2OWQybIgY http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144...

cinquemb 14y ago
so you must also think highly #DieselBoom and his templates? :P
adventured 14y ago
No, don't buy treasuries. Getting back inflation destroyed dollars is not risk free, in fact you're getting defrauded because you're not actually getting your money back at all. A quick check on what dollars will buy (the true judge of the value of a currency), spanning 10, 20, 30, 50, 100 years tells you everything you need to know about the destruction your capital will suffer while yielding almost nothing to offset the devaluation. And now the Fed is working harder than ever before to abuse the global reserve FRN standard. Now is the absolute worst time possible to buy treasuries. The era of cheap money is coming to a close with a frantic flailing about of currency devaluations, binge stimulus, bailouts, and robberies. Anybody that claims hyper cheap money lasts forever, is selling a pipedream (which may be accompanied with the words: it's different this time).

Shenglong 14y ago

Background and summary (forgive me if some details need correcting): Cyprus is a tiny country with a GDP not much higher than Tim Hortons. Yet, it had something like 150 billion in private funds stored in two of its banks: the Bank of Cyprus and Lakie. Why? Because the majority of the funds (I am generalizing) belongs/belonged to Russians who took advantage of the people on the conversion out of communism (dirty money). As North Americans have Swiss bank accounts, the Russians have Cyprus. Obviously, other people have their money in here too. Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece. As a result, the banks lost a ton of money, and are on the verge of making the country insolvent. The IMF said the government needed to come up with a large amount of money. At first they tried to pass a bill that would skim 10% off all Cyprus bank accounts that had over 10k Euros. There was unimaginable outrage, because as you can guess, that affects a good portion of the population. In response, they changed the bill to only affect those with over 100k Euros. Interestingly, this time, mostly the Russian dirty money was affected, and there was not as much public outrage (stealing stolen money). As a result, now 30% of all bank accounts over 100k Euros are being seized. All the North Americans probably don't realize why this is such a big deal. In North America, we have money in companies, hedge funds, etc. In Europe, from what I've been told, banks are the major (almost exclusive) depository. Thus, you can imagine that this is a much bigger deal.

pliny 14y ago
>because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece What a responsible investment strategy. 'What should we invest all this Russian gangster money in?' 'Well, I like goat cheese.'
- anigbrowl 14y ago
  I suppose you think they should have sunk it all into aqueducts and amphitheaters.
fakeer 14y ago

mbreese 14y ago

So, the system worked and he gets to keep €100K? Because his bank is insolvent and that is the amount of money that was insured? I'm not saying this doesn't suck for him and his company, but €100K is better than €0.

fsniper 14y ago
Keeps €100K but can not withdraws or transfers €300 daily.
- trhtrsh 14y ago
  That's effectively a 1 year freeze.

radicaldreamer 14y ago

I'm not sure why people think investing above the insured deposit ceiling in a badly rated bank is risk free. If you have that much cash, you certainly can do (or pay someone to do) some due diligence and store your assets in a safer way.

gregsq 14y ago
Very true I think. When the banks started to fold in the UK I split my cash into units of up to £35000 each into different banks. The guarantee was per institution, not individual. It certainly made more sense to me to fit within the guarantee limits, though there was no absolute guarantee that even those limits would hold.
- ansgri 14y ago
  Is the EU EUR100k guarantee per person and not institution?
  - ptaipale 14y ago
    Per person depositing in an institution. On European level, it would be futile to try to limit it to EUR100k per person, for many reasons, for instance because lots of people can have multiple identities -- expect perhaps in the Big Brother societies in the northern EU countries, where you can actually do a census by saying SELECT COUNT(id) FROM population WHERE alive=1; Moreover, how would you treat accounts that are not owned by a person, but e.g. companies?

skrebbel 14y ago

Oh boohoo. The OP appears to forget that without the European Commission, all of his money would be lost. It's like getting mad at the guy who chainsaws you out of the car that you folded around a tree because he sawed your car into two pieces.

SODaniel 14y ago
Not to mention that it seems like in this case the person in question may be whining about untaxed funds that he skimmed of his company. Oh no, I am being robbed of money that wasn't mine!!
bobsy 14y ago
If anything he should be angry at his accountant. I assume he has one if he has 800k. How many wake up calls does someone need. In the UK when banks were failing, before there was a solution the Government said they would guarantee the first £50k of savers. It might have then gone up to £100k. My parents who have a fairly large sum of money hired a decent accountant to mitigate a large portion of the risk. Spreading their money between a fairly large number of bank accounts. You then look at when Iceland banks failed. Lots of people lost money. The Cyprus banking sector size was ridiculous. It was 7x Cyprus GDP. If the sector failed it was fairly obvious Cyprus would be unable to save it. You have no idea what the terms would be of a bailout or if a small country like Cyprus would get one.. So back to my main point. Get a decent accountant. Understand where your money is going.
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Guthur 14y ago

It amazes me how many people mention tax evasion, and other excuses for apportioning of liability. The liability should lie with the people who bought the Cypriot/Greek debt in the first place. They are the ones that in essence lent the money to these two tiny countries when it was obvious it was out of control and would blow up. But where is the incentive not too when the liability is offloaded to people who had no part in the debt transaction; either the citizens or other third parties. To me these risk balances are way out of whack and are just asking for the irresponsible fiscal activities we are seeing.

Paradigma11 14y ago
the cypriot banks bought the greece dept, that is the problem.
- Guthur 14y ago
  And the Greeks bought the Cypriot debt maybe; humour attempt. This doesn't really change my assertions, the Cypriot debt holders should take the hit first, let the pain filter through the whole rotten trail.

bayesianhorse 14y ago

Basically, someone deposited his money in a tax haven, with patently risky banks. Then the banks went into trouble. The European Union tries to help them avoid total loss, and now that same someone blames the EU for the partial loss. Total loss was the alternative to the bailout...

jcr 14y ago

In one sense, this submission really is politics and I feel bad about up-voting it, since politics are against the HN site guidelines. In another sense, this is also about tech, specifically, bitcoin. The desperate people in Cypress may turn towards alternative currencies as a way to escape their situation. I know there are a lot of folks around here who vocally support bitcoin or other alternative currencies. For me the idea is very interesting, but the reality makes me nervous. There are one of two possibilities; either (1) I know bitcoin well enough to never trust it, or (2) I don't know bitcoin well enough to make an informed decision. I'm still betting on the latter. ;-) None the less, there's a lot of negative bitcoin news that never makes the front page of HN, and I wonder why. The most recent was: https://news.ycombinator.com/item?id=5459304 https://news.ycombinator.com/item?id=5459304 http://www.youtube.com/watch?v=7fvSYT7vhQY http://www.youtube.com/watch?v=7fvSYT7vhQY The worst part of the above could the sensationalism, but in my opinion, it's my inability to verify the veracity of the claims. Are they just muckraking to (successfully) cause "Fear, Uncertainty, and Doubt" (FUD)? --Sadly, stuff like this makes us already skeptical and squeamish folks even more nervous about it. Market manipulation is a very real problem in all markets, so even if the above is entirely true, it's merely one instance of graft against bitcoin, when there are countless instances of corruption in all the other markets.

oellegaard 14y ago

While I would probably have the same reaction if I was living in Cyprus, important points are missing here. The way I understand it: Cyprus failed to control their economy and required the help from the European Union. In order to lent them a crazy amount of money, they wanted some guarantee. They could not provide anything, so their government had to use the peoples money to pay for the governments previously bad judgement about not saving up for bad times.

danmaz74 14y ago

So, you deposit your money in a bank with very high interest rates - very high because they invest in risky Greek bonds. If everything goes well, you keep the interests. If the risky investment of the bank goes bust, we (EU citizens) should pay you the risk, even beyond the insured 100k. Is that correct?

im3w1l 14y ago
>ZERO INTEREST! >I've already explained that it's CURRENT ACCOUNT (transactional account). >Not bank paid to me, but I was paying annual fee to the bank in order to maintain this account and debit card. >Current accounts are usually not affected even if bank goes bankrupt. Upon liquidation, current account holders are paid first, as money on this type of account cannot be gambled by bank. It's most liquid assets, like cash.
- danmaz74 14y ago
  It's VERY hard for me to believe that anybody would keep a balance close to a million euro in a bank with zero interest. Even I get a small interest on my current account...

dgregd 14y ago

Could someone please tell me, who is going to make money during this fuss?

jgeerts 14y ago

This is just undermining the bank system. There is no reason big enough to do something like this and it appals me that some people are saying that he had it coming. A part of it is 'dirty' and that argument is being used to validate the confiscation of working people's money and company's money which the EU's economy is based upon. The fact that they announced this before taking a decision is just beyond stupid, any normal thinking human being knows that it's a bad approach given that they want to prevent a bank run. People in other countries are fearing that the same procedure will happen to them. This has a way bigger impact than just some companies and some rich people and some bad russians, they are just harming the image of banks in whole Europe. Next to that fact, OP has a medium sized business, people work there, wages can't be paid, this has a major influence on companies all over Europe and everyone who works there. OP put his money in Cyprus because it was profitable, is that a bad thing? You have to choose paths that are most profitable for your company and he didn't put it in some obscure market, it was backed by a bank, we generally trust banks. Now they want to prevent a bank run, this is just a ticking timebomb. Whenever the 300 euro/day rule doesn't apply anymore, there will be a bank run. No money will be going into the bank anytime soon. They are going to regret this.

sbank 14y ago
Thanks for speaking up against those in this thread who virtually blame this guy for the wrongdoing of others around him.

deleted 14y ago

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ptaipale 14y ago

The OP does not seem to understand that the bank account was not robbed by European Commission, it was just lost because it was a bad investment. He put money in a bank that failed. Presumably, he made the investment for reasons of convenience of operating the capital in Cyprus, but also because the particular bank he chose was paying high interest rates. It was paying high interest rates because everyone knew the risk was high. The risk materialised. Who is surprised? EU helps a bit but is not prepared to compensate him for losses; this is not a fault of the European Commission. I'm a bit short of sympathy because of this blaming of Merkel, Rehn et al. They're not perfect, but they are not culpable for this loss. Cyprus has had tax as percentage of GDP at below 40 %. Northern Europe is closer to 50 %. If you had wanted buffers provided by the state, you should have collected taxes to do so. Alternatively, you could have stayed out of the euro, and then the government could just print money and rescue the banks. Of course, outside the euro you wouldn't have been such a great haven for grey and black Russian money.

calleskonto 14y ago

The EU has nothing to do with it it's cyprus that can't keep it's economy afloat. If i got to decide the EU should have let your contry go bankrupt fall in to civil war, but hey we decided to lend you money to stop that. But yes blame the very people that helped you from loosing all your money. That seems like a good idea....

edwinjm 14y ago

The alternative is that the bank goes bankrupt and you lose everything. Be glad.

vvllddrr 14y ago

I don't really see how the EC is robbing when it's actually lending Eur 10bln. Without the loan, all banks would have collapsed and you'd have lost the first 100K as well. The initial proposal was to only tax a percentage of the saved amount. That was rejected by the cypriotic people/govt.

jacquesm 14y ago

If and when those banks reopen there will be a bankrun and they will both go bust. It's only a matter of time.