Monday 29 April 2013

Cyprus: Not So Much A Haircut ...

How much would you like off?
Under a headline 'Bank of Cyprus Executes Depositor Bail-In', the DTel gives us the ghastly numbers.
  • 37.5% of deposits over €100k converted to equity
  • a further 22.5% held in reserve 
  • yet a further 30% frozen
(The core phrase there seems highly apposite, doesn't it ?   '...Cyprus Executes Depositor ...')

Now then, you Scotties, how about independence and joining the Euro ?

I was also interested to read a couple of weeks ago that Germany's 'Council of Wise Men' have declared that deposits are all too easily spirited away (and depositors are all too often German); so that the next rescue should be based on property levies.  They've noticed that when property holdings are taken into account, Germans are by no means the wealthiest folk in Europe.

That's all well and good on paper, O Wise Ones, but (a) you'll need to mark those property values to market quite carefully; and (b) who has the liquid assets to pay property levies on the required scale ?  And if they do, pray where do they keep them ?

ND

20 comments:

Timbo614 said...

So, errm, 37.5 + 22.5 + 30 = 90%

The Cypriots (with over 100K) are left with only eyebrows and if lucky some nose hair :(

Some "rescue".

Kynon said...

I very quickly came to the same numbers as Timbo - that's not so much a haircut as a decapitation!

CityUnslicker said...

Cypriots? you say Timbo. let me share some small insight.

If you lived in Cyprus then you knew what was being discussed for more than 2 months.

You bank manager would have been advising you what to do.

However, if your money had an interesting life story then perhaps it could not be transferred to the London Branch of Laiki - or even to Bank of Nigeria or Bank of Mauritius.

Sad then that the large monies left in the Banks are in effect too toxic to move and so are more or less confiscated.

Don't think for a second that his was not all thought through behind the scenes. it's whay the Russians even backed off...

dearieme said...

If Scotland votes for independence and then the politicians try to join the EU and the Euorozone, I hope someone takes the buggers to court on the grounds that that ain't independence.

john in cheshire said...

But surely, they're not stealing this money, they're exchanging it for some shiny beads.

Timbo614 said...

@CU "You[sic] bank manager would have been advising you what to do"

I'm talking about ordinary people - like those that insist they don't understand even pension fund unit prices versus how many units they have, in addition to having no idea what it's invested in. High Finance for them is choosing between a B.S. cash account or ISA and then looking for the best interest rate on a comparison site. They don't understand that inflation gives them a haircut annually and QE another and the Taxman yet another. They get absolutely NO advise from anyone!!

These are the people that will get guillotined!

Blue Eyes said...

The EU-wide deposit guarantee regime guarantees deposits up to €100,000. End of story. If you have double that, then you are stupid to have it with one institution. Remember when Icesave went tits up? That's what happened. All those jokers who had their life savings in Isle of Man accounts to avoid £12 a month of tax found that the Isle of Man doesn't have a deposit guarantee scheme. Whoops!

I agree with CU. "Cypriots" had plenty of time to take their money out in cash via the ATM or via the London branch.

I feel a bit sorry for Granny (although oldies are supposed to keep their cash under the mattress aren't they?!) but this is a much better scheme than the one first suggested which would have hit ordinary savers who had been under the impression that there was a protection scheme for under €100k.

Off topic but has anyone tried to take more than £500 out of a UK bank recently? It's more complicated than it should be.

andrew said...

I would just like to take this opportunity to thank the people who decided we should not join the Euro.

I wold also like to ask not where did all the money come from, but where did it go?

I have the feeling it was never there really.

Is money actually an equity that is loosely linked to the value of real and unreal things?

In which case the youth of today are not as dumb as I think. It seems to be instinctively clear to them that fame is a valuable negotiable currency.

Some famous economist said that money is a primitive form of memory - which links in with young people's attitudes.

Perhaps current events are a societal dementia effect and we are forgetting money rather than losing it.

Now, where are my teeth.

Anonymous said...

Property tax is, was and always will be the only way to go.

Problem is the great and good are up to their armpits in property and they make the laws... so dont hold your breath.

CityUnslicker said...

Timbo - I doubt in Cyrus there are too many of them with these kinds of savings.

Anyway they will get hit becuase the next bailout of Cyprus (and let's face it one if never enough...) will be to nationalise the pension savings where I agree Granny is screwed.

And perchance there is a lesson for us in the real world, as BE alludes to, it does not work to try and ignore financial decisions and then try and blame the Government. It's your money, the rules are sort of there, if you fail to take care of it then the lesson here, as always, is that the Government will.

Timbo614 said...

Well, I seem condemned to be defeated in my concern for these people and my outrage at what is happening to their country.

It won't be a country soon, it will be a shell(no pun intended) a zombie country maybe the first of many. It may actually be the second (Greece will be fairly zombiefied pretty soon too). Doomed to be forgotten playground for the E.U. and its Eurocrats by the simple power of an ineffectual (for Cyprus) money system.

None of the crisis is the fault of the ordinary citizen there. Yes they took advantage of prevailing conditions, who doesn't. :(


Blue Eyes said...

Timbo you are absolutely right for a lot of "ordinaryhardworkingpeople" it will be Hell, but you really think that any society has some kind of right to run itself really badly then expect "someone else" to pick up the tab?

What if Britain had done the same thing? Would we be crying into our Watneys saying it was all Zie Germans' fault? Or would we be saying "ahh, joining the Euro wasn't such a great idea"? I've said it before, but if Britain had joined the Euro Britain would have left the Euro by now. We all would have lost our savings too, but at least we'd be on the right path again by now.

Ed Moribund said...

...but you really think that any society has some kind of right to run itself really badly then expect "someone else" to pick up the tab?

Yes, I do.

hovis said...

BE: Did the Cypriots their country particularly badly? Their financial regs are far closer to ours (which ain't great but are better - if actually enforced) than the dubious rubbish in the majority of the EU.)

In the final analysis the Cypriot Banks were screwed by the EU maneouvrings of on Greek Debt - in essence to protect the ECB. They have been bent over a barrel and given less than tender treatment.

Is it not the ECB and the Germans epecially, who are expecting "someone else" to pick up the tab?

I cant be as confident as you that if we had joined the Euro that we would have left, (a good thing if it had happened as it would have broken it). But the majority of the corporate/political elite are pro EU. Even some parts of the City squeal when there is talk of withdrawl, hence Cameron can get away with the dross that spills from his mouth...

And with Lloyds/HBOS, RBS under effecive state control and subsidy for the last 5 years I'd contend that we have run things as badly - just we have a longer line of credit, so have got away with it for now.

Diogenes Sinope said...

@BE

"What if Britain had done the same thing?"

Would argue that we're suffering the same haircut by the inflation induced into the system by QE. It the matter of how you like it - hard/fast or slow/slower.

I'm off to boil a frog.

Blue Eyes said...

Well I think *not* having 27% unemployment is probably more enjoyable. *Not* having year after grinding year of sharp recession is probably more enjoyable. Slow and steady inflation can be built into retirement plans etc.. A sudden loss of absolutely everything cannot.

As for "what did the Cypriot voters do wrong?" well they chose to go into the Euro or supported their elite in pushing them into the Euro, closing off the fire escape in the process. See Iceland for a counter-factual. In Britain our system is robust enough to have caused us to have the debate and decide not to go in.

Ryan said...

"In the final analysis the Cypriot Banks were screwed by the EU maneouvrings of on Greek Debt - in essence to protect the ECB. They have been bent over a barrel and given less than tender treatment."

Well this was really bad, because the ECB told all institutions holding Greek debt they HAD to take a 50% loss, end of. So the Cypriot banks had to write down that loss right there and then. That really screwed them. When Argentina went bust a lot of institutions told then "you will pay - it's just a question of when" so much of the debt didn't have to be written down.

Basically the ECB really screwed the Cypriots. They don't seem to have taken into account the impact of forcing a write-down of the debt. The question is what is really happening in other Latin banks heavily invested in Greece? I'm sure they are desperately covering up the impact of the Greek write-downs, which is why the ECB seems to have lost interest in monitoring bank capitalisation.

All of it is bad news if you happen to be a business that was holding cash on deposit as working capital. There was a wedding planner in Cyprus with £250,000 on deposit for weddings paid in advance. Is there a loophole for that kind of deposit I wonder? Or are there a lot of young coules who will see their hopes for wedding with guaranteed sun dashed with all their savings lost.

James Higham said...

Meanwhile, Schaeuble gives Spain "budget leeway".

assurance info said...

""""""" Under a headline 'Bank of Cyprus Executes Depositor Bail-In', the DTel gives us the ghastly numbers.

37.5% of deposits over €100k converted to equity
a further 22.5% held in reserve
yet a further 30% frozen

(The core phrase there seems highly apposite, doesn't it ? '...Cyprus Executes Depositor ...') """"""

Agence communication said...

wonderful really this is very interesting "" That's all well and good on paper, O Wise Ones, but (a) you'll need to mark those property values to market quite carefully; and (b) who has the liquid assets to pay property levies on the required scale ? And if they do, pray where do they keep them ?

ND ""