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Sucks to be Cyprus

The Watcher

TRIBE Member
BBC News - Cyprus bailout: Deal reached in Eurogroup talks

Cyprus bailout: Deal reached in Eurogroup talks

"I'm very concerned... for our children, for the future," one Cypriot told the BBC's Tim Willcox

Eurozone finance ministers have agreed a 10bn-euro bailout deal for Cyprus to prevent its banking system collapsing and keep the country in the eurozone.

Laiki (Popular) Bank - the country's second-biggest - will be wound down and deposit-holders with more than 100,000 euros ($130,000; £85,000) will face big losses.

However, all deposits under 100,000 euros will be "fully guaranteed".

Officials warn the island faces a deep recession with many businesses to shut.

Bondholders and those with deposits of more than 100,000 euros face significant losses; perhaps 40% or more”

The European Central Bank had set a deadline of Monday for the deal, which came a week after the Cypriot parliament rejected a proposed bank levy on small and large deposits.

The new deal will not be put to a vote in the Cyprus parliament.

IMF head Christine Lagarde said the bailout deal agreed was "a comprehensive and credible plan" to help restore trust in the banking system.

Cypriot Finance Minister Michalis Sarris said he believed the possibility of bankruptcy had been averted.

There may be some relief that smaller savings no longer face a 6.7% levy, but Cypriot citizens may over time end up feeling more than 6.7% poorer as a result of this so-called bailout”

"It's not that we won a battle, but we really have avoided a disastrous exit from the eurozone," he said.

There will be relief in Cyprus that small depositors have been protected, but the deal comes at a heavy price, BBC correspondents say.

The chairman of the Cypriot parliament's finance committee, Nicholas Papadopolous, said the agreement made "no economic sense".

"We are heading for a deep recession, high unemployment. They wanted to send a message that the Cypriot economy ought to be destroyed, and they've succeeded in a large part - they've destroyed our banking sector," he told the BBC.

EU Commissioner for Economic Affairs Olli Rehn conceded that the "depth of the financial crisis in Cyprus means that the near future will be difficult for the country and its people".

IMF chief Christine Lagarde: "We believe that this will form a durable and fully financed solution"
Financial markets in Asia and Europe rose in early trading on news of the agreement.

Russian President Vladimir Putin has told his government to look at restructuring a 2.5bn-euro loan extended to Cyprus in 2011.

The BBC's Steve Rosenberg in Moscow says suspicion has been growing in Russia that Europe is using the banking crisis to target Russian money in Cyprus.

To qualify for 10bn-euro bailout, Cyprus must raise 5.8bn euros
Its biggest bank - Bank of Cyprus - to be restructured
Second biggest bank - Laiki - to be wound up and split into a "good" and "bad" bank Accounts holding under 100,000 euros will be protected in both banks
Deposits of more than 100,000 in Bank of Cyprus are frozen for now
Level at which funds on big deposits will be taxed is still to be set
The deal came after hours of tense negotiations between Cypriot President Nicos Anastasiades and the "troika" of EU, European Central Bank and IMF leaders.

Under the agreement all deposits of less than 100,000 euros will be secured.

Laiki will be split into "good" and "bad" banks, with its good assets eventually merged into Bank of Cyprus.

The percentage to be levied on large deposits in the Bank of Cyprus - the island's biggest lender - will be resolved in the coming weeks, the president of the Eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, told a press conference overnight in Brussels.

Cyprus government spokesman Christos Stylianides told state radio the level could be set at "around 30%".

Banks in Cyprus have been closed since last Monday while politicians and officials tried to work out how to raise 5.8bn euros to qualify for the bailout. Many businesses are only taking payment in cash.

On Sunday, Bank of Cyprus further limited cash machine withdrawals to 120 euros a day.

With queues growing outside cash machines across the island, Laiki also lowered its daily limit to 100 euros, Cyprus News Agency reported. The bank's previous limit had been 260 euros per day.

The details of the reopening of Cyprus's banks are to be discussed on Monday.

German pressure
A week ago, the Cypriot parliament rejected a planned bank levy that would have taken 6.75% from small savers and 9.9% from larger investors. The proposal caused widespread anger among ordinary savers.

In response, the European Central Bank (ECB) had said it would cut off funds to Cyprus's banks by Monday unless a new deal was reached.

There is concern on the Mediterranean island that a levy on large-scale foreign investors, many of whom are Russian, will damage its financial sector.

Correspondents say Germany has pushed hard for a levy on investors who have benefited from high interest rates in recent years, rejecting a Cypriot plan to use money from pension funds.

A Cypriot attempt to secure Russian help was unsuccessful.
Alex D. from TRIBE on Utility Room

Bernnie Federko

TRIBE Member
The important thing here is, all that off shore money me and my billionaire gang had stashed there is getting taxed. Sucks, man. Naw mean?
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TRIBE Member
Did they go ahead with the 25% tax on bank accounts of $100,000 or more?

If so, it boggles my mind why they didn't implement a graduated rate.

edit: just read article. lol 30% wtf.


TRIBE Member
Cyprus is an offshore tax haven which is particularly popular with wealthy Russians. The Germans, in particular, were apprehensive about bailing out Cyprus' banking system since it would effectively amount to protecting a large amount of Russian mob assets.
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TRIBE Member
Canada Discusses Forced Depositor Bail-In Procedures for "Too Big To Fail" Banks in 2013 Budget

Inquiring minds in Canada managed to slog through a massive 433 page budget proposal and discovered Depositor Haircut Bail-In Provisions For Systemically Important Banks.

Sure enough. Right on page 145 (PDF page 155) of the Canada Economic Action Plan for 2013 We see ...

"The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail- in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants."

In case you are unfamiliar with bank parlance, deposits are not "assets" they are "liabilities". A plan that would turn "certain bank liabilities" into regulatory capital is a plan to confiscate deposits.

As noted in Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand? I believe guarantees on deposits are inherently fraudulent. But at least the Reserve bank of New Zealand is upfrnot about the situation. Canada is not.

Mike "Mish" Shedlock
Mish's Global Economic Trend Analysis

Read more at Mish's Global Economic Trend Analysis


TRIBE Member
no, 'certain bank liabilities' means certain bank liabilities. The passage you quoted does not specify what those will be. Unless deposits are explicitly referenced somewhere in there, or discussed in relevant surrounding circumstances, I'm not sure you can make that assumption.

I certainly can't rule out deposits, but common sense makes me think that the passage would be referring to classes of bondholders.


TRIBE Member
WHat a great headline in the 2nd youtube!

Unthinkable over here "Wealthy hit hardest in American bank bailout"
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