Cypriots Stunned by Forced Savings Cuts

[don]

Re: Is the EU Politically Bankrupt?

today's New Word is . . .

Bail-In


n. the reverse of the securing of the release of someone in custody, i.e. paying to keep them there

v. 1-filling a leaking boat with water from a pail

2-refusing to abandon a bankrupt entity by confiscating its chief assets, namely its depositors

[charliebrown]

Re: Is the EU Politically Bankrupt?

Thankyou for posting this.

I think I have too much exposure to bank risk.
Like Cypress, would the intial attack be all deposits in all banks? If JPM or BAC blow up because of derivative time bomb, would only those banks depositors be effected? What about my money market fund which probably has JPM/BAC paper, or my dinky credit union do they have deposits at a larger bank?
Time to pull in the horna a bit i think.

[tastymannatees]

Re: Is the EU Politically Bankrupt?

Makes me wonder about my CEF holdings in the Canadian Imperial Bank of Commerce


Canada Discusses Forced Depositor Bail-In Procedures for “Too Big To Fail” Banks in 2013 Budget

Inquiring minds in Canada managed to slog through a massive 433 page budget proposal and discovered Depositor Haircut Bail-In Provisions For Systemically Important Banks.
Sure enough. Right on page 145 (PDF page 155) of the Canada Economic Action Plan for 2013 We see ...
“The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail- in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.”
In case you are unfamiliar with bank parlance, deposits are not “assets” they are “liabilities”. A plan that would turn “certain bank liabilities” into regulatory capital is a plan to confiscate deposits.
As noted in Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand? I believe guarantees on deposits are inherently fraudulent. But at least the Reserve bank of New Zealand is upfrnot about the situation. Canada is not.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.ca/2013/03/canada-discusses-forced-depositor-bail.html



So looking up New Zealand we come up with this.

The Confiscation Scheme Planned for U.S. and U.K. Depositors (Greece?)
Truth Dig ^ | Mar 28, 2013 | Ellen Brown
Posted on Fri 29 Mar 2013 09:39:56 AM EDT by Texas Fossil
Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.
New Zealand has a similar directive, discussed in my last article here, indicating that this isn’t just an emergency measure for troubled Eurozone countries. New Zealand’s Voxy reported on March 19th:
The National Government [is] pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts . . . .
Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.
Can They Do That?
Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay.

(Excerpt) Read more at truthdig.com ...


Starting to look like a global plan is in place to help themselves to our money.

And here in the USA on page 6 -http://www.fdic.gov/about/srac/2012/gsifi.pdf

12
Under the strategies currently being developed by the U.S. and the U.K., the
resolution authority could intervene at the top of the group. Culpable senior management of
the parent and operating businesses would be removed, and losses would be apportioned to
shareholders and unsecured creditors. In all likelihood, shareholders would lose all value and
unsecured creditors should thus expect that their claims would be written down to reflect any
losses that shareholders did not cover. Under both the U.S. and U.K. approaches, legal
safeguards ensure that creditors recover no less than they would under insolvency.
13
An efficient path for returning the sound operations of the G-SIFI to the private sector
would be provided by exchanging or converting a sufficient amount of the unsecured debt
from the original creditors of the failed company into equity. In the U.S., the new equity
would become capital in one or more newly formed operating entities. In the U.K., the same
approach could be used, or the equity could be used to recapitalize the failing financial
company itself—thus, the highest layer of surviving bailed-in creditors would become the
owners of the resolved firm. In either country, the new equity holders would take on the
corresponding risk of being shareholders in a financial institution. Throughout, subsidiaries
(domestic and foreign) carrying out critical activities would be kept open and operating,
thereby limiting contagion effects. Such a resolution strategy would ensure market discipline
and maintain financial stability without cost to taxpayers.

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

And the winner of the "best prediction" category seems to go to the less hysterical viewpoints:

In Cyprus, the bank run that wasn't


Commentators had been confident that as soon as the banks reopened on Thursday at noon after Cyprus signed a rescue deal with the European Union to stave off national bankruptcy, there would be scenes of chaos.

The experts were right, but it wasn't the Cypriots causing the pandemonium. Television crews from around the world crowded into tiny Eleftheria Square in central Nicosia, the convenient location of two of the capital's main banks.


If there were a dozen Cypriots waiting patiently to make a withdrawal, there were probably twice as many cameramen, each one as frenzied as the local people were calm.

...

"I think most people are being pragmatic about it and understand that demonstrations and anger might make things worse," said Kelly-Christou, who is Irish.

...

In any case, much of the anger in Cyprus was probably expended before the deal was done in Brussels on Monday.

...

Others probably realized that they had just as much chance of getting their money later rather than on day one.

...

"We're civilized here - what did people expect?" she said.

There are people with a huge financial interest in describing Cyprus as a debacle. Many of these also have media influence.

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

There are people with a huge financial interest in describing Cyprus as a debacle. Many of these also have media influence.

Two of these are the pro-FIRE industry President of Cyprus, and the Telegraph, which serves as a mouthpiece for FIRE in the City of London:

This article describes the same scene, but with no mention at all that nearly no one showed up to the panic, in spite of the fact they were on the ground to get a quote.

Cyprus has 'no intention of leaving the euro' insists President Anastasiades

The president of Cyprus said his country had no intention of leaving the euro on Friday but hit out at euro zone leaders for treating the island nation as an “experiment”.

....

Outside a branch of Laiki Bank in Nicosia, Doros Kakas, a 50-year-old businessman who lived in London for more than 20 years, said he was one of the fortunate ones, having moved most of his savings to the UK some time ago.

“I’m lucky. Some people in Laiki have lost everything. I’m worried that Spain and Italy will go the way of Cyprus. Then what happens to France, Germany, England? Are we all going down?”

I wonder how many of the ~12 people there they had to pester to find one that gave them a mildly alarmist quote...?

[don]

Re: Cypriots Stunned by Forced Savings Cuts

Two of these are the pro-FIRE industry President of Cyprus, and the Telegraph, which serves as a mouthpiece for FIRE in the City of London:

+1

This article describes the same scene, but with no mention at all that nearly no one showed up to the panic, in spite of the fact they were on the ground to get a quote.

I wonder how many of the ~12 people there they had to pester to find one that gave them a mildly alarmist quote...?

Zorba may be at home, weeping at the kitchen table . . .

[kriden]

Re: Cypriots Stunned by Forced Savings Cuts

Cypriot Politicians’ Loans Written Off

With banks confiscating up to 80 percent of uninsured deposits over 100,000 euros ($130,000) and the country facing a deep economic crisis, Cyprus has forgiven loans to politicians and companies while others are generally being required to pay in full, media reports said, setting off fury on the island country.
The Greek newspaper Ethnos and the website 24h.com.cy said that loans to Members of Parliament from the three major political parties and other officials in the public administration from the Bank of Cyprus and Cyprus Popular Bank (Laiki) will be written down or off.
The list includes former and current politicians, wives and relatives whose debt will be excused while the banks chase others to pay their loans. It was not said whether the government or bank officials drew up the list of those who will be given preferential treatment and who won’t have to pay, essentially having received free money they can keep or spend as they wish.

http://greece.greekreporter.com/2013...s-written-off/

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

Cypriot Politicians’ Loans Written Off

With banks confiscating up to 80 percent of uninsured deposits over 100,000 euros ($130,000) and the country facing a deep economic crisis, Cyprus has forgiven loans to politicians and companies while others are generally being required to pay in full, media reports said, setting off fury on the island country.
The Greek newspaper Ethnos and the website 24h.com.cy said that loans to Members of Parliament from the three major political parties and other officials in the public administration from the Bank of Cyprus and Cyprus Popular Bank (Laiki) will be written down or off.
The list includes former and current politicians, wives and relatives whose debt will be excused while the banks chase others to pay their loans. It was not said whether the government or bank officials drew up the list of those who will be given preferential treatment and who won’t have to pay, essentially having received free money they can keep or spend as they wish.

http://greece.greekreporter.com/2013...s-written-off/

If this information is accurate, and the EU does not step in to put a stop to it, there will be serious problems in the EU. There is no way that a trade and currency union can survive with such large differentials in the levels of official corruption...

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

Well, well. Simon Johnson thinks there's hope...

The Debate on Bank Size Is Over

http://economix.blogs.nytimes.com/20...-size-is-over/

And Thomas Hoenig. Vice Chair of the FDIC and former Chief Executive of the Federal Reserve Bank in Kansas City, has something to say about it too...

Stop subsidizing Wall Street

http://www.washingtonpost.com/opinio...7ad_story.html



Yes, how many times can a man turn his head
Pretending he just doesn't see ?
The answer my friend is blowin' in the wind
The answer is blowin' in the wind.
--Bob Dylan--

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

What next? The Fed announces it's serious about exiting from ZIRP & QE and plans to unwind it's massive balance sheet?

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

If this information is accurate, and the EU does not step in to put a stop to it, there will be serious problems in the EU. There is no way that a trade and currency union can survive with such large differentials in the levels of official corruption...

I completely agree.

If this information is accurate, and the EU wants to step in and put a stop to it, this is as good an excuse as they're going to get to make structural changes to banking or bankruptcy regulations.

If they try and fail (or fail to try) that would indeed be a negative indication for the EU's ability to use the crisis to implement a more robust system in general.

So I'd say that this is a key piece of the puzzle to watch over the next few weeks and months.


(1) If reform is attempted on an EU (or EMU) level instead of just in Cyprus, I'd expect to see Luxembourg screaming especially loudly. It has a banking sector 20x GDP, compared to Cyprus' 8x. If a broad reform package can be rammed down Luxembourg's throat, that would be a very strong indicator about how far reforms might go. Luxembourg currently has not one, but two votes on the ECB governing council due to an Executive Board seat, so this is particularly telling. That puts it in the same category as France, Italy, Germany, Belgium, and Portugal. If it can't defend its FIRE sector at this peak of influence, it'll have even more trouble doing it later.

(2) If reform is implemented, but only locally, in Cyprus, I'd still call that indeterminate. (But not particularly encouraging.)

(3) If we don't hear even a peep about bank reform, however, I'd say that the EU has very little chance of making it.


Nothing to do for the moment but keep watching.

[don]

Re: Cypriots Stunned by Forced Savings Cuts

shedding a little light on the problem . . .

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

Hyperbole, sure for cyprus. However try this template on something bigger and its duck and cover time.

I've been thinking about this meme as well. Perhaps we can use the reporters in various media outlets as a barometer for what certain interested parties are really thinking. There's obviously flaws and limitations to the methodology, but the thinking runs like this:

Let's take it as a given that a certain media outlet is highly responsive to a certain interest group. The Telegraph to the City of London banks, for example. As long as the Telegraph is still fanning hysteria, that means the banks aren't really worried about a UK bank run. If they were, they'd want to reassure their readers, not scare them. So as long as the Telegraph is still fanning the flames of panic, it means the banks,at least, are more scared of reforms than they are of contagion.

WE should be scared when the Telegraph starts making soothing, "everything's fine here, don't worry about us." kinds of sounds. Until then, the bankers believe they're safe.

[don]

Re: Cypriots Stunned by Forced Savings Cuts

as our latest and greatest distraction fills the msm, pay no attention to that hand on your wallet . . .

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

as our latest and greatest distraction fills the msm, pay no attention to that hand on your wallet . . .

A pink bunny suit and long ears would really add to the charm...