Market Currents
The Eurogroup backs down, calling for Cyprus bank deposits under €100K to be guaranteed....
-
Monday, March 18, 5:12 PM ETThe Eurogroup backs down, calling for Cyprus bank deposits under €100K to be guaranteed. "The Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on March 16 ... the stability levy on deposits is a one-off measure." We've heard "one-off" more than once during this crisis. The euro (FXE) firms by about 25 pips.
Other date
Latest Global Articles
This news story has 22 comments:
The pandoras box has been open .Now i read that Russia might actually buy these banks?
Was this a con job to see if Russia would step in and bail them out? High stakes poker if it is..
I am looking for a run on some European banks soon..
In the U.S., we have FDIC insurance up to specific levels. If the bank breaks, then depositors above the FDIC guarantee levels are exposed to losses.
In the recent past, and currently, borrowings against future generations of taxpayers is used to bail out U.S. banks that go broke, thus protecting all depositors, even the ones over the FDIC limits. The Cyprus case is fair warning to all that such taxpayer protections are not guaranteed and might not be there next time.
You put your money in the bank for safety..Why were the Senior Bond holders let off the hook? Wait till we see who they are. I have my guess ready..
"Officials involved in the rescue talks say that “bailing in” senior bondholders wouldn’t have made sense given that, by the end of September, Laiki and Bank of Cyprus had only some €184 million of senior bonds between them—peanuts next to the €10 billion the two banks need in new capital.
With relatively little money to gain, officials decided that breaking two taboos — taxing depositors and burning senior bondholders — in one go, didn’t seems like a good idea." (WSJ)
Suggesting otherwise smells like spin on whoever's part, and if the number really is that small then this move was even dumber than it looks on the surface.
Once all equity and bondholders are broke, then of course remaining losses have to be borne by depositors--after all, you can't pay out money that is gone. But even then, the insured deposits should be insured. Those over the insured level should take the whole hit.
And...do you really believe that $184M figure? Maybe it's so, but I'm skeptical.
Anything above 100K is fair game IF the equity holders and bondholders have already been zeroed out. In the US, above specified levels, depositors are exposed to risk IF the bank breaks and AFTER the bondholders are zeroed.
It appears that what's happening in Cyprus is the depositors are losing despite bondholders walking with money. It's hard to even find words for this. It is a betrayal of those individual depositors, but it is also a betrayal of the whole protocol underpinning how these markets work.
The whole idea that risk-takers get higher returns is threatened if they can shove the risk off on regular customers when things start to go pear-shaped.
And on top of that, the government which made guarantees is instead imposing a levy. And it isn't even done openly, but disguised as a one-off tax--well, that trick can be used on anything and anyone at any time, for as long as they will stand for it.
This stinks to high heaven.
Still in the mood for German-bashing, huh ?
How about talking of that US master plan to take over the entire world by selling those worthless CDO's ?
Come on, even you must admit that they couldn't have botched this Cyprus bailout any worse.
Who says it was the Germans ?
Have you for any moment considered the possibility it might have been the Dutch Eurozone Commissioner's plan (Dijsselbloem) ?
Rings any bells ? He's the head of the eurozone ministers of Finance and he replaces Juncker who went on eternal leave to take care of his vineyard.
Google this guy up and it won't be your finest day. Looks like a cross-breed of Dr. Spock and Frankenstein.
If it's stupidity bashing you like to practice, where were you when the SEC let US banks sell those deceitful CDO's to the rest of the world ? You must have been born by then.
The min stupidity of the US Govt was not lax review of CDOs. It was not bailing out sub-prime borrowers, and not bailing out Lehman.
Sub-prime borrowers had no "skin in the game". Most had 0% down payment and got to stay payment free in their homes for over a year before foreclosure. A net gain for them...
Grandmothers with life savings in the bank at 0.25% interest are paying the price and deserve a "bailout" for doing the right thing.
Encouraging risk is one thing, but bailing out banks, corporations, or people who grossly overextend themselves is lunacy.
Look, life is not a morality game.
I don't agree with you that chronical bailouts would favor the economy. They would favor high inflation, that's for sure. If you like inflation, you must indeed like endless bailouts.
But why would creditors then take care of noting who takes credit and how much credit is being taken. Let the bailouting money endlessly flow in that case and see where that would lead us.
I got no job, have no qualifications, didn't study (why should I ?), but, no problem, my Bank J.P. Macrom is going to give me the money, even knowing that I never will be able to pay it back. Indeed, Macrom is backed by helicopter-Ben who creates money at everybody's leasure. That sure sounds like paradise.
One question: what are these taxes for then ?
I propose the abolishment of taxes: in the Macro-paradise there is no room for taxes. Bailouts will fix it all.
Life is neither a naivity game.
Have you ever considered the possibility the US are doing better than the EU because 1/ $ is the reference currency, hence the US can monetize more debts than anyone else without being hurt by inflation 2/ the US have shale gas, hence their economy grows stronger 3/ the US have raped the world with that CDO-business, hence have a stronger capital basis now.
or don't you read any newspapers so as to have developed an oversimplified world view ?
That Cyprus decision woke a lot of people up, and scared the speculators as well..
another great day to SELLLLLLLL!!!!!!
This move was a game changer for sure...