Bank runs, bank holiday & 10pct bailout tax on deposits in Cyprus

mmerlinn

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I have no idea why though. The amount of money involved is peanuts in the grand scheme of things.
It's not the money. It's who controls the Eastern Mediterranean. Russia has coveted Cyprus for decades, and fought several wars with that endpoint in mind. Europe has Cyprus by the balls and won't let go for the same reason. In the end Europe will retain control for several reasons.

Germany attacks Russia – run for the hills
 

ancona

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Each passing hour, and with each Cypriot withdraw of cash from ATM's across the island, the banks needs grow. On Tuesday, it goes exponential. The EU knows that there is no stopping the flow of money and the whole idea of confiscation only served to kill all faith in the monetary union. This test balloon was a terrible idea and may well have been the straw to break the EU camels back.

I wonder who had the genius idea in the first place? "Hey, I know what we could do, let's just expropriate all the cash deposits. They're mostly Russian anyway, I don't think they'll mind". "After all, it's in the interests of the people, right"?

On what planet did someone think this was a good idea?
 
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pmbug

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A lot happened over the weekend (or so it seems).

Best I can tell, a deal* is being forced upon the Cypriot people (they don't get a vote on the matter apparently) that will include theft on deposits greater than 100K Euros.

...
Dr. Paul Craig Roberts: “The reason that the EU is redefining depositors in banks as lenders is so their deposit is seen as an investment and is subject to risk in the same way as the banks. So if a depositor is reclassified as a lender, it means they cannot expect to receive back the full value of their deposits in case the bank experiences difficulties.”

Eric King: “This attempt to redefine the nature of bank deposits, isn’t this being done so that the governments can engage in outright theft of bank deposits?”

Dr. Paul Craig Roberts: “They don’t want to call it theft. But they do want to make the depositors have their capital at risk as an investor would. Of course it comes down to theft, given the traditional nature of a depositor. But they are trying to get around that so that the cost can be imposed on depositors. So, yes, it is theft.”
...
http://kingworldnews.com/kingworldn...Roberts_-_Cyprus_May_Dwarf_2008_Collapse.html


*the deal as reported by Reuters:
Cyprus clinched a last-ditch deal with international lenders on Monday for a 10 billion euro ($13 billion) bailout that will shut down its second largest bank and inflict heavy losses on uninsured depositors.

Following is the detail of the deal in a statement from euro zone finance ministers.

1. 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.

2. Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time.

3. The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take 9 billion Euros of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalization has been effected, and may subsequently be subject to appropriate conditions.

4. The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules.

5. BoC will be recapitalized through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders.

6. The conversion will be such that a capital ratio of 9 % is secured by the end of the program.

7. All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation.

8. The program money (up to 10 billion Euros) will not be used to recapitalize Laiki and Bank of Cyprus.
http://www.reuters.com/article/2013/03/25/us-eurozone-cyprus-text-idUSBRE92O02920130325
 

pmbug

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Bloomberg reports:
Cyprus agreed to the outlines of an international bailout, paving the way for 10 billion euros ($13 billion) of emergency loans and eliminating the threat of default.

The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area.

“It’s in best interest of the Cyprus people and the European Union,” Cyprus President Nicos Anastasiades told reporters.
...
Deposits below the EU deposit-guarantee ceiling of 100,000 euros will be protected, and a loss of no more than 40 percent will be imposed on uninsured depositors at the Bank of Cyprus, two EU officials said. Uninsured depositors at Cyprus Popular would largely be wiped out, two other officials said.
...
http://www.bloomberg.com/news/2013-...entative-deal-to-avert-default-euro-exit.html
 

pmbug

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Depositors in the Bank of Cyprus, the biggest bank on the island, will reportedly lose 30 percent on their holdings above 100,000 euros, the chairman of the Cypriot parliamentary finance committee said on Monday.

"I haven't heard a formal announcement about the haircut, but this is the figure I heard," Irish radio quotes Nicholas Papadopoulos as saying.
...
"The result is a fair one for everybody involved,” German Finance Minister Wolfgang Schaeuble told a news conference after the 11th-hour talks ended with a deal.

"I think it's a good one" and it will "serve as a basis for negotiations with the troika" of international creditors, he stressed.

It will help "stabilize the situation in Cyprus and help Cyprus back onto a path of sustainable consolidation. I think the solution can help win back lost confidence for and in Cyprus," he said.

"It is the best path possible even if it isn't an easy one."

Russia doesn’t appear so optimistic. "I think they continue stealing what's already been stolen. We need to understand what this story will finally lead to," Russian Prime Minister Dmitry Medvedev commented on the move during a meeting with his aides on Monday.
...
http://rt.com/business/bank-cyprus-cut-30-percent-deposits-789/
 

pmbug

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There is Russian blood in the streets (figuratively), and Euro bankers are looking to "buy":
For Fedor Mikhin the deluge of overseas phone calls began on Wednesday, just five days after the EU first proposed the ill-fated tax levy on Cypriot depositors.

There were the two Andorran bankers who called offering to open bank accounts for the Cyprus-based businessman in the Pyrenees, and then Mr Mikhin's Swiss bank, which announced it would be sending representatives to Limassol to poach Russian clients on Tuesday, the day Cyprus is due to reopen its banks for the first time in over a week.

While last week saw dozens of well-heeled Russians and their representatives fly down to Cyprus to check on bank accounts and confer furiously with Cypriot officials, they are being closely followed by another wave of visitors: the European bankers who hope Cyprus' loss will be their gain.

One Cypriot lawyer with Russian clients said he had already been approached by half-a-dozen European banks in locales ranging from Latvia to Switzerland to Germany, some of them promising they could open new bank accounts for his clients in under an hour.

In Limassol, a lawyer for a Russian oligarch described receiving a call from the tycoon's Swiss bank, which offered to open bank accounts for all the oligarch's Cyprus-based employees as a favour, as well as emails from a dozen local Cypriot consulting firms imploring him to use their services when opening new accounts abroad.
...
http://gata.org/node/12385
 

pmbug

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Stealing money from depositors in offshore havens appears to be such good business that Russia is now thinking about jumping into it with up to $323B investment:
While some Russian businesses are feeling the pinch in Cyprus, Prime Minister Medvedev has voiced the idea of offshore zones in Russia at a regular meeting of the government, where a state project to develop Russia's Far East was discussed.

"If there is so much fuss going on, may be we should think of creating a kind of zone of our own in the Far East. We have bunch of good places there -- Sakhalin, the Kuril islands," Medvedev said, referring to the ongoing economic turmoil in Cyprus.

Speaking about the project, Medvedev called the budget for it as "unprecedentedly big" -- more than $323 billion. The money will be mostly spent on transport infrastructure in the two remote regions.

In offshore zones non-residential companies are treated to a number of privileged rules and undergo light registration, licensing and taxation. The Bahamas and British Virgin islands are among such zones and local officials pay little interest in the activities of international companies. Dmitry Medvedev hopes, some of the money, parked there, would "move" to a Russian offshore region, if created.
...
http://rt.com/business/russia-offshore-medvedev-601/

"If you build it, he the suckers will come."

Edit: Bwahahahaa....

...
Speaking after the meeting, First Deputy Prime Minister Igor Shuvalov said losses to Russian investors in Cyprus were not yet clear.
...
"What is happening is a good signal to those who plan to move their capital to ... Russian banks," he was quoted as saying. "We have very stable banks."
...
http://www.reuters.com/article/2013/03/25/us-eurozone-cyprus-russia-idUSBRE92O09D20130325

* note the description of bank customers as "Russian investors" and not "Russian bank customers". The shift mentioned in the KWN article mentioned in post #124 above is already evident.
 
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bushi

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Dr. Paul Craig Roberts: “The reason that the EU is redefining depositors in banks as lenders is so their deposit is seen as an investment and is subject to risk in the same way as the banks. So if a depositor is reclassified as a lender, it means they cannot expect to receive back the full value of their deposits in case the bank experiences difficulties.”

Eric King: “This attempt to redefine the nature of bank deposits, isn’t this being done so that the governments can engage in outright theft of bank deposits?”

Dr. Paul Craig Roberts: “They don’t want to call it theft. But they do want to make the depositors have their capital at risk as an investor would. Of course it comes down to theft, given the traditional nature of a depositor. But they are trying to get around that so that the cost can be imposed on depositors. So, yes, it is theft.”
http://kingworldnews.com/kingworldn...Roberts_-_Cyprus_May_Dwarf_2008_Collapse.html
Things in bold above, are *NOT* true, in the current state of banking industry, as far as I know. Read the fine prints in your banking account contract. Once you deposit the money, IT IS NOT YOUR MONEY ANYMORE, you are effectively a lender to the bank. How do you guys think otherwise, banks would be able to loan this money further, if it belongs to someone else, not them? IT is only one of the (many) missconceptions, that people in today's world ASSUME are true, but in reality, it is not true. Of course, nobody will be shouting from the rooftops, that it is the case, and try to make people aware of it, but I think, that in case of Cyprus, SHTF, and that just comes into spotlight - but it is (long) the case, not some ad-hoc "redefining". You are not depositing your moneyu in the bank, you are lending it to the bank, and bank has a contractual obligation to pay it back to you, at some stage, on request - but it is not YOUR money, technically.

I am not saying that it is right, I am simply saying, it is the case.

Bottom line?

buy physical :rotflmbo:
 

ancona

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I agree with Bushi. Get your cash in to a safe place and do not let accounts exceed the quantities that are insured by the FDIC. Then, work out how to get out completely from this predatory system.
 

pmbug

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Agree with you bushi, but Joe Sixpack doesn't understand that, IMO. It's good to highlight the issue and educate peeps.
 

pmbug

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Not sure when this letter/email was dated, but ...
Hey fam! Things are getting pretty crazy over here in Cyprus. I don’t know if you guys have been watching the news or seen things online, but Cyprus is on the verge of economic collapse.
...
As it stands now, nowhere in Cyprus accepts credit or debit cards anymore for fear of not being paid, it is CASH ONLY. Businesses have stopped functioning because they cannot pay employees OR pay for the stock they receive because the banks are closed. If the banks remain closed, the economy will be destroyed and STOP COMPLETELY. Looting, robberies and theft are already on the rise. If the banks open now, there will be a massive run on the bank, and the banks will FAIL loosing all of its deposits, also causing an economic crash. ...
http://www.silverdoctors.com/a-letter-from-cyprus-economy-shutting-down-going-cash-only/
 

ancona

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I think Cyprus is already regretting their decision to steal depositors money. The public will react and do so swiftly. The banks will collapse immediately upon reopening, if indeed they ever reopen. It doesn't matter if they limit withdraws to 100 euro per day, because eventually the people will drain the banks at that rate. It may take longer, but it will happen. I further suspect that there will be scandals involving government officials being allowed to move their money in large chunks, ahead of 'ordinary depositors'. the shit is only just beginning to hit the fan in Cyprus, and the blow by will land squarely in the faces of Spanish and Italian depositors faces.

It looks like we're 'gonna need more popcorn.
 

Unbeatable

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As it turns out, these same oligrachs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.
No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.
http://www.zerohedge.com/news/2013-...ready-quietly-withdrawn-all-their-cash-cyprus


I was wondering why the media keeps saying that the death of Boris Berezovsky removes a stumbling block to UK/Russian relations and that things should be a lot more positive from now on.

Meanwhile now I'm pretty sure a big part of the reason we will have better relations in future is because we let them get their money out of Cyprus last week.
 

pmbug

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http://www.zerohedge.com/news/2013-...ready-quietly-withdrawn-all-their-cash-cyprus

I was wondering why the media keeps saying that the death of Boris Berezovsky removes a stumbling block to UK/Russian relations and that things should be a lot more positive from now on.

Meanwhile now I'm pretty sure a big part of the reason we will have better relations in future is because we let them get their money out of Cyprus last week.
Back on March 18, ThomsonReuters published this "bail-in calculator":

http://graphics.thomsonreuters.com/BV/Cyprus.html

Slide the "tax on deposits under 100K Euros" to 0% and it shows a requisite tax/theft of 15.26% on accounts over that amount. Presumably, this would be applied evenly across the two banks in question.

News reports are saying that the theft from one bank (on accounts over 100K Euros) will be anywhere from 25% to 40%. And the theft from the other bank, which will be dissolved, will likely be 100% on accounts over 100K Euros. Assuming the total amount they are trying to steal didn't change, the numbers are indicating that the pool of available money in the >100K accounts shrunk considerably.
 
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