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The Eurogroup backs down, calling for Cyprus bank deposits under €100K to be guaranteed....

The 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.
Comments (22)
  • Sorry, this bell has been rung..!!

     

    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..
    18 Mar 2013, 05:17 PM Reply Like
  • At least at the 100k euro level, they're honoring their insurance committment to all depositors to that level. Anything above that is fair game.

     

    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.
    18 Mar 2013, 06:31 PM Reply Like
  • But this is still THEFT!!

     

    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..
    18 Mar 2013, 06:38 PM Reply Like
  • Some googling gives you the answer:

     

    "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)
    18 Mar 2013, 07:46 PM Reply Like
  • If it's just $184M in senior bonds, break them first anyway. There is no taboo there at all. Senior bonds break after junior ones--it's never been the case that they are unbreakable.

     

    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.
    18 Mar 2013, 08:09 PM Reply Like
  • I did not double check it. I admit it seems too low, but what do I know. There has to have been a good reason for them to tap the depositors directly, and this sounds like a half decent one.
    18 Mar 2013, 10:29 PM Reply Like
  • Lakeaffect,

     

    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.
    18 Mar 2013, 07:03 PM Reply Like
  • I don't think it stinks at all. Germany carefully constructed this plan. The cost of bailouts paid by Germany has to be utter chaos in the country receiving bailouts. That way Germany can take over control over all countries in the EU slowly but surely, which was always the master plan. Don't blame the Germans for sticking to the plan.
    18 Mar 2013, 09:03 PM Reply Like
  • Macro,
    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 ?
    18 Mar 2013, 11:21 PM Reply Like
  • filipo, I thought I was bashing stupidity. It's just that the Germans are master practitioners of it these days.

     

    Come on, even you must admit that they couldn't have botched this Cyprus bailout any worse.
    18 Mar 2013, 11:26 PM Reply Like
  • Macro,
    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.
    19 Mar 2013, 04:40 AM Reply Like
  • filipo, Please, read some news. Merkel wants to win elections and the German public wants the rest of EU to feel a lot of pain. A match made in heaven, so to speak. Of course they are backtracking now.

     

    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.
    19 Mar 2013, 08:57 AM Reply Like
  • Neither Lehman, nor sub-prime borrowers, should have been bailed out.

     

    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.
    19 Mar 2013, 11:01 AM Reply Like
  • That's what the ECB thinks. Of course, EU is doing so much better than the USA because of that dogma.

     

    Look, life is not a morality game.
    19 Mar 2013, 11:26 AM Reply Like
  • Macro, I read the same news as you do, but I apparently interpret it differently.
    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.
    19 Mar 2013, 11:42 AM Reply Like
  • Macro,
    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 ?
    19 Mar 2013, 11:54 AM Reply Like
  • Shorting the market doesn't look like a bad move to me so far!

     

    That Cyprus decision woke a lot of people up, and scared the speculators as well..
    19 Mar 2013, 12:00 PM Reply Like
  • You headline is misreported. The EU never called for a levy on under 100k euros, the Cypriots made that call.
    18 Mar 2013, 10:01 PM Reply Like
  • Yeah. Right.
    18 Mar 2013, 10:11 PM Reply Like
  • hey macro; busy with your day job today? i didn't hear a peep

     

    another great day to SELLLLLLLL!!!!!!
    18 Mar 2013, 10:46 PM Reply Like
  • A great day indeed. Whoever shorted at the open is down now only to be more down tmrw.
    18 Mar 2013, 10:50 PM Reply Like
  • Gold and silver still have legs !!!

     

    This move was a game changer for sure...
    19 Mar 2013, 11:29 AM Reply Like
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