Cypriots Stunned by Forced Savings Cuts

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

Nothing to do for the moment but keep watching.

Here's an example of the sort of pressures Luxembourg will be applying.

Hands off our finance sector, Luxembourg warns

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

I love Clarke and Dawe. Since they were first posted on iTulip, I've been watching as much of their work as I could find...

Thanks for posting.

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

Here's an example of the sort of pressures Luxembourg will be applying.

Hands off our finance sector, Luxembourg warns

Some interesting dynamics emerging now...

Cyprus is very special case, found right solution-German finance minister

BERLIN | Thu Mar 28, 2013 7:09am GMT

BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble said on Thursday Cyprus was a very special case and the European Union had found the right solution for it with its deal for a 10 billion euro (8.42 billion pounds) bailout tied to the imposition of losses on bank depositors.

"Cyprus was a very special case, everyone knew that," Schaeuble told SWR radio. "And we found the right solution."

Schaeuble also said Luxembourg had a totally different business model to the east Mediterranean island which is due to reopen its banks later on Thursday almost two weeks after they were shut. Any comparison of the two would be "absurd", he said.

[don]

Re: Cypriots Stunned by Forced Savings Cuts

Here's an example of the sort of pressures Luxembourg will be applying.

Hands off our finance sector, Luxembourg warns

a few Luxembourg factoids (Wikipedia)


The economy of Luxembourg is largely dependent on the banking, steel, and industrial sectors. Luxembourgers enjoy the second highest per capita gross domestic product in the world (CIA 2007 est.), behind Qatar. Luxembourg is seen as a diversified industrialized nation, contrasting the oil boom in Qatar, the major monetary source of that nation.

Although Luxembourg in tourist literature is aptly called the "Green Heart of Europe", its pastoral land coexists with a highly industrialized and export-intensive economy. Luxembourg enjoys a degree of economic prosperity almost unique among industrialized democracies.

In 2009, a budget deficit of 5% resulted from government measures to stimulate the economy, especially the banking sector, as a result of the world economic crisis. This was however reduced to 1.4% in 2010.^[8]


Accounting principles

Establishing accounts depends on the size of companies, and referring to three criteria: total of the balance sheet (total of assets without losses of the accounting year), the net amount of the turnover (net, such as it appears on the profit and loss account) and the average number of the workforce.

The control of medium and big companies must be made by one or several independent auditors of companies, appointed by the general assembly among the members of the Institute of Independent Auditors of Companies. The control of small companies must be made by an accountant appointed by the general assembly for definite duration. The conclusion of the independent auditor’s report can be: - A certificate without reserve, that is to say an approval - A certificate with reserves, that is to say that there is approval with reserves because of discords or doubts. - A refusal to give a certificate.


Labour relations

Labour relations have been peaceful since the 1930s. Most industrial workers are organized by unions linked to one of the major political parties. Representatives of business, unions, and government participate in the conduct of major labour negotiations.
Foreign investors often cite Luxembourg's labour relations as a primary reason for locating in the Grand Duchy. Unemployment in 1999 averaged less than 2.8% of the work force, but reached 4.4% by 2007.


Energy

In 1978, Luxembourg tried to build a 1,200 MW nuclear reactor but dropped the plans after threats of major protests.^[13] Currently, Luxembourg uses imported oil and natural gas for the majority of its energy generation.^[14]



Transportation

Main article: Transportation in Luxembourg
Luxembourg has efficient road, rail and air transport facilities and services. The road network has been significantly modernised in recent years with 147 km of motorways connecting the capital to adjacent countries. The advent of the high-speed TGV link to Paris has led to renovation of the city's railway station while a new passenger terminal at Luxembourg Airport has recently been opened. There are plans to introduce trams in the capital and light-rail lines in adjacent areas within the next few years.

[don]

Anything here?

In the introduction, the resolution informs readers that the FDIC and the Bank of England have been working together to formulate the new bail-in model for future bank failures:

The Federal Deposit Insurance Corporation (FDIC) and the Bank of England—together with the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, and the Financial Services Authority— have been working to develop resolution strategies for the failure of globally active, systemically important, financial institutions (SIFIs or G-SIFIs) with significant operations on both sides of the Atlantic.


The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability. They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers.

The joint US/UK resolution states that depositor haircuts are already legal in the UK thanks to the 2009 UK Banking Act:

In the U.K., the strategy has been developed on the basis of the powers provided by the U.K. Banking Act 2009 and in anticipation of the further powers that will be provided by the European Union Recovery and Resolution Directive and the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking.

Such a strategy would involve the bail-in (write-down or conversion) of creditors at the top of the group in order to restore the whole group to solvency.

And that the legal authority has already been given in the US buried in Dodd-Frank:

It should be stressed that the application of such a strategy can be achieved only within a legislative framework that provides authorities with key resolution powers. The FSB Key Attributes have established a crucial framework for the implementation of an effective set of resolution powers and practices into national regimes. In the U.S., these powers had already become available under the Dodd-Frank Act. In the U.K., the additional powers needed to enhance the existing resolution framework established under the Banking Act 2009(the Banking Act) are expected to be fully provided by the European Commission’s proposals for a European Union Recovery and Resolution Directive (RRD) and through the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking (ICB), enhancing the existing resolution framework established under the Banking Act.


The development of effective resolution strategies is being carried out in anticipation of such legislation.

The unsecured debt holders can expect that their claims would be written down to reflect any losses that shareholders cannot cover, with some converted partly into equity in order to provide sufficient capital to return the sound businesses of the G-SIFI to private sector operation. Sound subsidiaries (domestic and foreign) would be kept open and operating, thereby limiting contagion effects and cross-border complications. In both countries, whether during execution of the resolution or thereafter, restructuring measures may be taken, especially in the parts of the business causing the distress, including shrinking those businesses, breaking them into smaller entities, and/or liquidating or closing certain operations.

The resolution states that while the US would prefer large financial institutions be resolved through ordinary bankruptcy, depositor wealth confiscation will be pursued in the case of a systemically important institution (i.e. BOA, JPMorgan, Goldman Sachs, etc):



As demonstrated by the Title I requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the U.S. would prefer that large financial organizations be resolvable through ordinary bankruptcy. However, the U.S. bankruptcy process may not be able to handle the failure of a systemic financial institution without significant disruption to the financial system.

The resolution authority states that shareholders would lose all value prior to depositor scalpings:

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.

The banksters plans for a bail-in resolution agency include investment banks and clearing houses as well as deposit bearing institutions!!!

The introduction of a statutory bail-in resolution tool (the power to writedown or convert into equity the liabilities of a failing firm) under the RRD is critical to implementing a whole group resolution of U.K. firms in a way that reduces the risks to financial stability. A bail-in tool would enable the U.K. authorities to recapitalize an institution by allocating losses to its shareholders and unsecured creditors, thereby avoiding the need to split or transfer operating entities. The provisions in the RRD that enable the resolution authority to impose a temporary stay on the exercise of termination rights by counterparties in the event of a firm’s entry into resolution (in other words, preventing counterparties from terminating their contractual arrangements with a firm solely as a result of the firm’s entry into resolution) will be needed to ensure the bail-in is executed in an orderly manner.




The existing Banking Act does not cover nondeposit-taking financial firms, notably investment banks and financial market infrastructures (clearing houses in particular), the failure of which, in many cases, would also have significant financial stability consequences. The Banking Act also has limitations with regard to the application of resolution tools to financial holding companies. The U.K. is in the process of expanding the scope of the Banking Act to include these firms. This is expected to be achieved through the introduction of the U.K. Financial Services Bill, which is due to complete its passage through Parliament by the end of this year.

Exactly as played out with the Cyprus template, depositors will receive equity shares in the new, bailed-in institution:

The remaining claims of the debt holders will be converted, in part, into equity claims that will serve to capitalize the new operations. The debt holders may also receive convertible subordinated debt in the new operations. This debt would provide a cushion against further losses in the firm, as it can be converted into equity if needed. Any remaining claims of the debt holders could be transferred to the new operations in the form of new unsecured debt.

Exactly as played out with the Cyprus template, depositor funds will be stolen in whatever quantities are required to keep the TBTF zombie bank afloat:

Once the recapitalization requirement has been determined, an announcement of the final terms of the bail-in would be made to the previous security holders.


This announcement would include full details of the write-down and/or conversion.


Debt securities would be cancelled or written down in order to return the firm to solvency by reducing the level of outstanding liabilities. The losses would be applied up the firm’s capital structure in a process that respects the existing creditor hierarchy underinsolvency law. The value of any loans from the parent to its operating subsidiaries would be written down in a manner that ensures that the subsidiaries remain solvent and viable.

For now (until the rules are changed when a greater need for funds arises, funds will only be stolen from depositors with more than the FDIC insured $100,000 in their account:

Insofar as a bail-in provides for continuity in operations and preserves value, losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation.


Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.

In order for the resolution to work, the banksters state that the public must be convinced their deposits are safe, when in fact they are subject to bail-in confiscation:

Similarly, because the group remains solvent, retail or corporate depositors should not have an incentive to “run” from the firm under resolution insofar as their banking arrangements, transacted at the operating company level, remain unaffected. In order to achieve this, the authorities recognize the need for effective communication to depositors, making it clear that their deposits will be protected.

0.1% interest on savings deposits with the now VERY REAL THREAT OF COMPLETE CONFISCATION in the US & UK doesn’t sound like such a great return to us.

The Fed appears to be making a calculated play to force savings out of the TBTF banks and into stocks and real estate, a move that is likely to backfire spectacularly.

http://silverdoctors.com/fdic-bank-o...or-tbtf-banks/

[GRG55]

Re: Anything here?

...Exactly as played out with the Cyprus template, depositor funds will be stolen in whatever quantities are required to keep the TBTF zombie bank afloat...

...The Fed appears to be making a calculated play to force savings out of the TBTF banks and into stocks and real estate, a move that is likely to backfire spectacularly.

...

One has to wonder why there are still any deposit funds in those TBTF zombie banks?

Stocks and real estate aside, is it a bad thing if the Fed is trying to "force savings out of the TBTF banks"?

[tastymannatees]

Re: Anything here?

In the introduction, the resolution informs readers that the FDIC and the Bank of England have been working together to formulate the new bail-in model for future bank failures:

The Federal Deposit Insurance Corporation (FDIC) and the Bank of England—together with the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, and the Financial Services Authority— have been working to develop resolution strategies for the failure of globally active, systemically important, financial institutions (SIFIs or G-SIFIs) with significant operations on both sides of the Atlantic.


The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability. They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers.

The joint US/UK resolution states that depositor haircuts are already legal in the UK thanks to the 2009 UK Banking Act:

In the U.K., the strategy has been developed on the basis of the powers provided by the U.K. Banking Act 2009 and in anticipation of the further powers that will be provided by the European Union Recovery and Resolution Directive and the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking.

Such a strategy would involve the bail-in (write-down or conversion) of creditors at the top of the group in order to restore the whole group to solvency.

And that the legal authority has already been given in the US buried in Dodd-Frank:

It should be stressed that the application of such a strategy can be achieved only within a legislative framework that provides authorities with key resolution powers. The FSB Key Attributes have established a crucial framework for the implementation of an effective set of resolution powers and practices into national regimes. In the U.S., these powers had already become available under the Dodd-Frank Act. In the U.K., the additional powers needed to enhance the existing resolution framework established under the Banking Act 2009(the Banking Act) are expected to be fully provided by the European Commission’s proposals for a European Union Recovery and Resolution Directive (RRD) and through the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking (ICB), enhancing the existing resolution framework established under the Banking Act.


The development of effective resolution strategies is being carried out in anticipation of such legislation.

The unsecured debt holders can expect that their claims would be written down to reflect any losses that shareholders cannot cover, with some converted partly into equity in order to provide sufficient capital to return the sound businesses of the G-SIFI to private sector operation. Sound subsidiaries (domestic and foreign) would be kept open and operating, thereby limiting contagion effects and cross-border complications. In both countries, whether during execution of the resolution or thereafter, restructuring measures may be taken, especially in the parts of the business causing the distress, including shrinking those businesses, breaking them into smaller entities, and/or liquidating or closing certain operations.

The resolution states that while the US would prefer large financial institutions be resolved through ordinary bankruptcy, depositor wealth confiscation will be pursued in the case of a systemically important institution (i.e. BOA, JPMorgan, Goldman Sachs, etc):



As demonstrated by the Title I requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the U.S. would prefer that large financial organizations be resolvable through ordinary bankruptcy. However, the U.S. bankruptcy process may not be able to handle the failure of a systemic financial institution without significant disruption to the financial system.

The resolution authority states that shareholders would lose all value prior to depositor scalpings:

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.

The banksters plans for a bail-in resolution agency include investment banks and clearing houses as well as deposit bearing institutions!!!

The introduction of a statutory bail-in resolution tool (the power to writedown or convert into equity the liabilities of a failing firm) under the RRD is critical to implementing a whole group resolution of U.K. firms in a way that reduces the risks to financial stability. A bail-in tool would enable the U.K. authorities to recapitalize an institution by allocating losses to its shareholders and unsecured creditors, thereby avoiding the need to split or transfer operating entities. The provisions in the RRD that enable the resolution authority to impose a temporary stay on the exercise of termination rights by counterparties in the event of a firm’s entry into resolution (in other words, preventing counterparties from terminating their contractual arrangements with a firm solely as a result of the firm’s entry into resolution) will be needed to ensure the bail-in is executed in an orderly manner.




The existing Banking Act does not cover nondeposit-taking financial firms, notably investment banks and financial market infrastructures (clearing houses in particular), the failure of which, in many cases, would also have significant financial stability consequences. The Banking Act also has limitations with regard to the application of resolution tools to financial holding companies. The U.K. is in the process of expanding the scope of the Banking Act to include these firms. This is expected to be achieved through the introduction of the U.K. Financial Services Bill, which is due to complete its passage through Parliament by the end of this year.

Exactly as played out with the Cyprus template, depositors will receive equity shares in the new, bailed-in institution:

The remaining claims of the debt holders will be converted, in part, into equity claims that will serve to capitalize the new operations. The debt holders may also receive convertible subordinated debt in the new operations. This debt would provide a cushion against further losses in the firm, as it can be converted into equity if needed. Any remaining claims of the debt holders could be transferred to the new operations in the form of new unsecured debt.

Exactly as played out with the Cyprus template, depositor funds will be stolen in whatever quantities are required to keep the TBTF zombie bank afloat:

Once the recapitalization requirement has been determined, an announcement of the final terms of the bail-in would be made to the previous security holders.


This announcement would include full details of the write-down and/or conversion.


Debt securities would be cancelled or written down in order to return the firm to solvency by reducing the level of outstanding liabilities. The losses would be applied up the firm’s capital structure in a process that respects the existing creditor hierarchy underinsolvency law. The value of any loans from the parent to its operating subsidiaries would be written down in a manner that ensures that the subsidiaries remain solvent and viable.

For now (until the rules are changed when a greater need for funds arises, funds will only be stolen from depositors with more than the FDIC insured $100,000 in their account:

Insofar as a bail-in provides for continuity in operations and preserves value, losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation.


Insured depositors themselves would remain unaffected. Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down.

In order for the resolution to work, the banksters state that the public must be convinced their deposits are safe, when in fact they are subject to bail-in confiscation:

Similarly, because the group remains solvent, retail or corporate depositors should not have an incentive to “run” from the firm under resolution insofar as their banking arrangements, transacted at the operating company level, remain unaffected. In order to achieve this, the authorities recognize the need for effective communication to depositors, making it clear that their deposits will be protected.

0.1% interest on savings deposits with the now VERY REAL THREAT OF COMPLETE CONFISCATION in the US & UK doesn’t sound like such a great return to us.

The Fed appears to be making a calculated play to force savings out of the TBTF banks and into stocks and real estate, a move that is likely to backfire spectacularly.

http://silverdoctors.com/fdic-bank-o...or-tbtf-banks/

The fact that this Bail-in is now being talked about about in multiple countries as policy - UK,USA,Canada, New Zealand and the source seems to be the G20 Financial Stability Board in Basel, Switzerland and appears to be an agreed upon international solution should things get out of hand.

CEF and GTU which I own a good % of my portfolio, the PM's are stored and stored/deposited in the Canadian Imperial Bank of Commerce.

Nothing like the parnoind potential of a bank run to get the adrenaline pumping

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 ...

[doom&gloom]

Re: Anything here?

Why is there no jail time requirement for corporate directors and officers being discussed as well?

[astonas]

Re: Cypriots Stunned by Forced Savings Cuts

Some interesting dynamics emerging now...

Cyprus is very special case, found right solution-German finance minister

BERLIN | Thu Mar 28, 2013 7:09am GMT

BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble said on Thursday Cyprus was a very special case and the European Union had found the right solution for it with its deal for a 10 billion euro (8.42 billion pounds) bailout tied to the imposition of losses on bank depositors.

"Cyprus was a very special case, everyone knew that," Schaeuble told SWR radio. "And we found the right solution."

Schaeuble also said Luxembourg had a totally different business model to the east Mediterranean island which is due to reopen its banks later on Thursday almost two weeks after they were shut. Any comparison of the two would be "absurd", he said.

That's great! Thanks for posting!

I read your excerpt, and when I clicked the link to read it again in context, found that you had included the whole text! A news item, with a quote, whose only function was to say that Luxembourg needn't feel threatened by what happened in Cyprus. Very interesting.

The tricky part is to know if it was to convince Luxembourg to let down their guard before a bank-reform-bill attack, or to acquiesce to Luxembourg's demands to reassure their now-skittish banking clients. Or both.

What is very interesting to me (and at the considerable risk of reading too much into the brief article) is not what was said, but what went unsaid. Either Schaeuble or Reuters chose to mention one difference between Cyprus and Luxembourg (their business models), but not another one. Luxembourg also has one of the lowest national debt to GDP ratios in the EU, while Cyprus had one of the highest. It was Cyprus' inability to deal with its own system internally that caused it to require outside assistance. With 20x GDP in banks, Luxembourg still wouldn't be able to bail out its whole banking sector in a catastrophe, but it might nonetheless be better able to absorb individual smaller failures better than Cyprus.

Of course, the real game is being played in private, we only get to catch the leaks, intentional or not, and then try to connect the dots. We now have two (Thanks again, GRG55!)

1) Luxembourg is worried about bank reform after Cyprus' resolution.
2) Germany publicly reassures Luxembourg, but frames the distinction as one of business model (motive for control), rather than mere financial health (ability to control).

Does this mean that a banking proposal restricting or punishing certain business models is in the works? If so, what are the most key differences between Luxembourg's business model and Cyprus? And more importantly, what business model differences exist between Luxembourg and the City of London? The latter comparison could help us understand if banking reform is being constructed in conjunction with Luxembourg to go after England before their referendum (making it a take-it-or-leave-the-EU vote), or being constructed to include Luxembourg in the attack as well. Given that Luxembourg is double-voting on the ECB governing board now, it may not be possible to do much without their help at the moment.

The other thing I'm unclear about is Luxembourg's relationship with Germany at the moment. Germany's row with Switzerland over the latter's protection of German tax dodgers has been very public, since controversy over a negotiated tax collection agreement's loopholes sank it in the German Bundestag in December 2012. On the other hand, Luxembourg and Germany successfully signed a treaty in April of 2012. I'm not sure to what extent the acceptance of one and not the other depended on the contents of the treaties, the scale of cheating, or the highly publicized, high-profile cheating that was unearthed shortly before the Swiss treaty went up for a vote. If Luxembourg is seen as being just as bad as Switzerland, that makes for a different dynamic than if it is the "partner" that worked with Germany, compared to "rival" that didn't. My understanding is that the actual banking laws themselves are nearly identical in both nations, and that any differences that may be present are largely in interpretation, so this one is hard to get a handle on just by parsing the text of the legal documents themselves.

Does anyone happen to have some insight into Luxembourg's banking system, and the level of resentment it may or may not be stirring up in the EU with its Swiss-style laws ?

[GRG55]

Re: Anything here?

Why is there no jail time requirement for corporate directors and officers being discussed as well?

I'm not aware that it's illegal to overleverage your bank if you are a Director or officer. The industry is allegedly "highly regulated", what with prescribed capital ratios and so forth. Even the regulator sponsored "stress tests" have proven to be a joke...giving clean bills of health to banks that failed months later when the economic situation worsened in their jurisdiction. So who should go to jail? Just the officers and Directors? Maybe some of the regulators who also didn't do their jobs? How about the shareholders who also allowed their management teams to run amok and pay themselves lavish bonuses? I don't think anybody is coming out lily white in this 3-decade long global FIRE escapade.

[GRG55]

Re: Cypriots Stunned by Forced Savings Cuts

That's great! Thanks for posting!

I read your excerpt, and when I clicked the link to read it again in context, found that you had included the whole text! A news item, with a quote, whose only function was to say that Luxembourg needn't feel threatened by what happened in Cyprus. Very interesting.

The tricky part is to know if it was to convince Luxembourg to let down their guard before a bank-reform-bill attack, or to acquiesce to Luxembourg's demands to reassure their now-skittish banking clients. Or both.

What is very interesting to me (and at the considerable risk of reading too much into the brief article) is not what was said, but what went unsaid. Either Schaeuble or Reuters chose to mention one difference between Cyprus and Luxembourg (their business models), but not another one. Luxembourg also has one of the lowest national debt to GDP ratios in the EU, while Cyprus had one of the highest. It was Cyprus' inability to deal with its own system internally that caused it to require outside assistance. With 20x GDP in banks, Luxembourg still wouldn't be able to bail out its whole banking sector in a catastrophe, but it might nonetheless be better able to absorb individual smaller failures better than Cyprus.

Of course, the real game is being played in private, we only get to catch the leaks, intentional or not, and then try to connect the dots. We now have two (Thanks again, GRG55!)

1) Luxembourg is worried about bank reform after Cyprus' resolution.
2) Germany publicly reassures Luxembourg, but frames the distinction as one of business model (motive for control), rather than mere financial health (ability to control).

One needs to be very careful when connecting dots and there's just two of them. Only two dots always results in a straight line...

Does this mean that a banking proposal restricting or punishing certain business models is in the works? If so, what are the most key differences between Luxembourg's business model and Cyprus? And more importantly, what business model differences exist between Luxembourg and the City of London? The latter comparison could help us understand if banking reform is being constructed in conjunction with Luxembourg to go after England before their referendum (making it a take-it-or-leave-the-EU vote), or being constructed to include Luxembourg in the attack as well. Given that Luxembourg is double-voting on the ECB governing board now, it may not be possible to do much without their help at the moment.

Before Cyprus and Switzerland, in early 2008 Germany (and the USA) had a very public row with the tax haven status of Liechtenstein.

Massive Tax Evasion Scandal in Germany: The Liechtenstein Connection

February 16, 2008 – 05:59 PM
With one bigwig already toppled for tax evasion and hundreds more likely waiting their turn, all roads lead to the tiny principality of Liechtenstein. According to SPIEGEL sources, Germany's largest post-war economic scandal started with a single intelligence source.

It is rapidly becoming one of the largest economic scandals ever in Germany's post-World War II history. As many as 900 wealthy Germans -- many of them well-known -- might be involved. Berlin may have been shorted up to 4 billion euros in taxes. And the accusatory finger is pointing increasingly at what many feel is rampant greed among of many of Germany's top earners -- and at a handful of banks and foundations in the tiny principality of Liechtenstein that help the affluent hide their assets.

The first to fall was Deutsche Post CEO Klaus Zumwinkel. He resigned on Friday after raids on his home and office by officials looking for evidence of massive tax invasion. But with officials planning to launch up to 125 additional tax evasion investigations next week, it is likely that Zumwinkel will soon have to share headline space...

Putting on my cynic cap to answer your above questions:

• Unlike Cyprussia, perhaps the Luxembourg bank "business model" has them much more closely intertwined with the large banks in France and Germany, so it's "hands-off", as Schauble telegraphed;
• As for the City of London, it seems the British government is happy to wipe out the entire rest of the national economy in an effort to save its precious financial center model...at least the USA bailed out the car industry and sprinkled subsidy pixy dust over well connected "clean energy" related firms...

[shiny!]

Re: Anything here?

I don't think anybody is coming out lily white in this 3-decade long global FIRE escapade.

Except for perhaps the citizens on Main Street who worked hard, avoided debt, lived within their means, put their savings in community banks and didn't vote for FIRE Republocrats. And those three people are screwed.

[don]

Re: Anything here?

there's always a silver lining . . .

As Banks in Cyprus Falter, Other Tax Havens Step In

By ANDREW HIGGINS

LIMASSOL, Cyprus — Bloodied by a harsh bailout deal that drives a stake through the heart of this Mediterranean country’s oversize financial industry, Cyprus now faces a further blow to its role as an offshore tax haven: the vultures from competing countries are circling.

With a flood of e-mails and phone calls in recent days to lawyers and accountants here who make a living from helping wealthy Russians and others avoid taxes, competitors in alternative financial centers across Europe and beyond are promoting their own skills at keeping money hidden and safe.

“We are aware of the economic problems facing Cyprus at the moment,” read one such message, sent by a law firm in Malta, a fellow member of the euro zone. “We would like to propose an avenue of action for your consideration: offering corporate relocation to Malta,” continued the business pitch, trumpeting Malta’s low taxes and “flexible yet robust regime” for financial services.

Similar unsolicited offers have originated in well-known havens like Switzerland, Luxembourg and the Cayman Islands, as well as in a spate of other locations, including Dubai and Singapore. Even the northern part of Cyprus, controlled by Turkish Cypriots, has joined the feeding frenzy, promoting its own banks as a stable alternative to those run by Greek Cypriots in the crisis-racked southern part of the divided island.

Particularly successful at luring Russians, Cyprus has built up a large infrastructure of lawyers, accountants and other professionals schooled in the arts of tax avoidance. Its corporate registry now has 320,000 registered companies, a staggering number for a country with only 860,000 people. Most are hollow shells set up for foreign companies and wealthy individuals seeking to avoid taxes.

“We have been thrown to the wolves, and now the wolves have responded,” said Nicholas Papadopoulos, who heads the financial and bnudgetary affairs committee in the House of Representatives.

Bitterly critical of last week’s bailout deal — which is forcing Cyprus to shrink its banking and financial services industry drastically and stick the largest bank depositors with much of the bill — Mr. Papadopoulos said the European Union was “punishing a whole country just to hit Russians.”

Even if new controls in Cyprus make it impossible to move much capital elsewhere for the moment, rival havens are nonetheless intent on luring foreign-owned businesses that have been incorporated in Cyprus and might be more than happy to relocate.
Mounting a counteroffensive is the Cyprus Fiduciary Association, an industry lobbying group.

“The banking sector is finished, but the service industry can survive,” said the group’s secretary, Andreas Marangos, a Limassol lawyer. Russians who now use Cyprus will open bank accounts elsewhere but can be persuaded to stick around for other offshore services, he predicted.

He said he had urged the Fiduciary Association to “name and shame” member companies that help foreign clients relocate to alternative havens. “We are trying to convince professionals not to destroy the industry,” he said.

The rush by rival havens could pose grave economic troubles as Cyprus struggles to keep afloat a vital financial industry that employs tens of thousands of people. Cypriot unemployment, already at 15 percent, is expected to soar as the finance sector and the economy as a whole contract, aggravating a crisis that the bailout was intended to solve. Along with shipping, the financial industry is especially crucial here in Limassol, a port city popular with wealthy Russians looking for sun and a safe place to put their money.

Cyprus, although only a relatively small player in a global network of low-tax financial centers, has made serving tax-averse foreigners a central pillar of its economy. A small sunny island whose main economic engine used to be potato farming, Cyprus shifted to a finance-centered model after Turkish troops took control of the northern part of the island in 1974.

While Cyprus and its rivals dislike being described as “tax havens” and prefer to be known as “offshore financial centers,” those now picking at Cyprus’ carcass trumpet their ability to keep money beyond the reach of tax authorities. A Swiss company, the Gonthier Group, last week sent e-mails to Cyprus firms working with foreigners, suggesting they offer their clients a Swiss alternative, namely an investment “vehicle which is extremely low-profile, not classified as a bank account or trust and thus very much under the radar of national fiscal authorities.”

Tilly Schneeberger Gonthier, the head of the Montreux-based company, said on Sunday by telephone that her pitch was “absolutely not” an invitation to evade taxes, but merely an offer of a secure alternative to Cyprus-based investment vehicles. She denied wanting to hurt the Cypriot financial services industry.

“We are trying to help them,” Ms. Gonthier said. “They have a lot of unhappy clients.”

She said that nobody in Cyprus had yet taken up her offer, but added: “This doesn’t happen very fast. It takes time.”

Mr. Papadopoulos, the parliamentary finance committee head, said he didn’t begrudge competitors in other locations trying to lure away clients rattled by his own country’s troubles. With Cyprus and dozens of other havens chasing the same limited pool of clients, he said, competition is fierce: “This is a zero-sum game.”

Echoing a widespread view here, he complained that Cyprus had been unfairly singled out as a haven for shady money by the European Union even as others, including fellow members of the 27-nation bloc, provide much the same services.

“We have made mistakes, but the whole point of seeking help from the European Union was to get fair treatment,” he said, referring to Cyprus’s request for a 10 billion euro lifeline from its European partners and the International Monetary Fund. “We now see that we are still a long way from being a union in which the same rules apply equally.”

A central demand of a bailout package announced early last Monday in Brussels, the headquarters of the union’s bureaucratic apparatus, is that Cyprus dismantle its finance-dominated economic model. Just a few years ago, this model produced growth rates of 5 percent or more but is now crumbling amid the rubble of its reckless and destitute banks.

Cypriot banks gorged for years on deposits from overseas, especially Russia, and spewed out loans at such a rate that the banking sector ended up dwarfing the rest of the economy. Its total assets — now mostly loans of uncertain worth — grew to be eight times larger than the whole country’s economic output.

But this imbalance is no worse than that in Malta, where the banking sector is also about eight times gross domestic product. And it is far less severe than in Luxembourg, where banking assets are more than 22 times G.D.P. Both Malta and Luxembourg, each a member of the European Union, last week loudly insisted they were very different from Cyprus — while their own financial service providers rushed to court Cyprus’s clients.

How much success those countries have had at getting Russians and others to decamp is still unclear, although many lawyers here acknowledge that they have already helped a number of foreign clients open new bank accounts outside Cyprus. The country’s own banks, closed for nearly two weeks to prevent depositors from withdrawing all their cash, reopened last week but are now caught up in a web of capital controls that make most normal transactions all but impossible.

Vasilis Zertalis, the chief executive of Prospectacy, a Nicosia corporate services company, said he understood that foreigners with companies and investment vehicles registered in Cyprus now needed to find banks elsewhere. But he is outraged by the efforts of rival centers to profit from Cyprus’s pain.

“When somebody is down, you should not try to push them further and give them a final blow,” said Mr. Zertalis. “I believe in capitalism, but there should be certain ethics. It is not proper to try and steal our clients and take advantage of this country’s misery.”

As Cypriot authorities last week unveiled plans to shut down Cyprus’s second biggest bank, Laiki, and worked out a strategy to preserve the Bank of Cyprus, the country’s biggest financial institution, by effectively confiscating 60 percent or more of deposits over 100,000 euros, a financial services company in the Cayman Islands made a particularly transparent grab for business.

“It has been very interesting in your part of the world recently,” Bateman Financial said in an e-mail sent to Mr. Zertalis and other Cypriots in the same line of work. “Given the inherent pressure banks will be placed under in Cyprus, your firm may see a need to consider other jurisdictions when consulting clients. The Cayman Islands can offer the stability that is currently desired.”

[GRG55]

Re: Anything here?

there's always a silver lining . . .

As Banks in Cyprus Falter, Other Tax Havens Step In

...

Surely nobody is surprised...

...The outflow from Cyprus (if it's allowed to outflow) is almost certainly going to Dubai, Singapore, London and possibly Switzerland, in roughly that order. Malta is not highly regarded for banking privacy, so if that is not a concern Switzerland or the Channel Islands are the better bet. Gibraltar levies a 10% business tax on remittances, so is somewhat less desirable than Dubai for that reason.

[astonas]

Re: Anything here?

Surely nobody is surprised...

No, not at all surprised. (Thanks for the prediction.)

I agree that Dubai, Singapore, and Switzerland, all safe from either EMU or EU meddling, are likely to see a pickup, more than Malta and Luxembourg anyway. I'm less certain about including London on the list, given the impending EU referendum showdown there. What led you to think it might benefit? Is it that many of the customers are themselves from anglophone countries? Or perhaps that there is very high confidence that Britain would sooner leave the EU than submit to bank regulation?