Cyprus parliament delays vote on deposit levy to Monday

Post by opminion » Mon, Mar 18, 2013, 1:08 AM UTC

untog wrote: post #18

opminion wrote: post #14

Why good financial management is not a competitive factor amongst banks? As in: bank with us because we are financially sound (instead of: because we pay higher interest, or whatever). It's not happening yet.

There's no reason it couldn't be. Within the US there are public figures available stating which banks have been the best and which have been the worst in the last few years. There is nothing to stop customers banking on this basis. They still don't, perhaps largely because the government insures up to $1xx,xxx in deposits (I forget the number) so a lot of people are covered no matter what happens to their bank.

So, silly idea here: would reducing the government guarantee improve anything?

Post by Lazare » Mon, Mar 18, 2013, 7:34 AM UTC

aristus wrote: post #3

Karunamon wrote: post #2

Maybe this is a terrifically ignorant comment, but it seems like the government mismanages their finances, as a result, they want the everyman to throw away 10% of their bank deposits? WTF?

The banks, not the govt. But the bailout as structured tends to conflate the two, which is part of the problem. Also it directly hurts retirees in country while protecting rich foreigners (eg, holders of Cypriot bank bonds). It's WTF from start to finish, a pretty shocking abuse of power by the rich northern EU countries. Fairness and good governance have nothing to do with it.

When a bank goes under, normally losses would hit the bond holders first, and only after that would depositors start to lose funds on amounts over €100k. Any amounts under €100k would be perfectly safe due to deposit insurance which is ultimately backstopped by the central bank via its ability to print money.

Cyprus banks are short about €16B that the Cyprus government does not have. They went to the EU/IMF and got €10B, leaving a €6B hole. In the normal course of events, the bondholders would lose everything (not significant for Cyprus banks; they're financed by deposits), accounts with over €100k would lose around 30% of the amount over €100k, and all other depositors would lose nothing.

Instead, the bond holders lose nothing, the depositors with over €100k lose only 9.9%, and the retirees and Cypriots with less than €100k in their accounts lose 6.75%.

In other words, ordinary savers are having their life savings confiscated in order to protect bondholders and Russian mobsters.

And, again, these savers are citizens of a EU country and Eurozone member who have been promised deposit insurance by their national government with the implicit promise that this would be backstopped by the EU, IMF, ECB. But their interests, it seems, are less important than the interests of the Russian oligarchs; after all we can't have them losing a significant amount of their uninsured deposits....

Re: Cyprus parliament delays vote on deposit levy to Monday

Re: Cyprus parliament delays vote on deposit levy to Monday