Market Watch

Cyprus Depositor Haircut and Bank Runs

Nothing new, but musing none the less. The bank of Cyprus has “gone there”, to that place the overlords said we would never go…


Cyprus will impose a levy of 6.75% on deposits of less than €100,000 – the ceiling for European Union account insurance, which is now effectively gone following this case study – and 9.9% above that. The measures will raise €5.8 billion, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, said…

And what happens when the Cypriot bank run that has taken the country by storm this morning spreads everywhere else, now that the scab over Europe’s biggest festering wound is torn throughout the periphery as all the other PIIGS realize they too are expendable on the altar of mollifying voters and investors in the other countries that make up Europe’s disunion.

Officials have struggled to find an agreement that would rescue Cyprus, which accounts for just half of a percent of the euro region’s economy, without unsettling investors in larger countries and sparking a new round of market contagion. Policy makers began meeting at 5 p.m. yesterday in a hastily convened gathering, seeking to overcome differences on bondholder losses while financial markets were closed.

While the tax on deposits will hurt wealthy Russians with money in Cypriot banks, it will also sting ordinary citizens. Some ATMs in the country have run out of cash, Erotokritos Chlorakiotis, general manager of the Cooperative Central Bank, told state-run CYBC.

Funds to pay the levy were frozen in accounts immediately, ECB Executive Board Member Joerg Asmussen said. The levy will be assessed before Cypriot banks reopen on March 19 after a March 18 national holiday. Sarris said electronic transfers will also be limited until then.

It didn’t take long before the Cyrpus Cooperative bank issued a statement saying “some ATMs run out of cash” – by some they likely mean all as the entire country is now gripped in a full force depositor run.

With the first light of day after the unprecedented decision to the Eurogroup on the terms of the Memorandum of Agreement and the taxation of savings, hundreds of people flocked to Cyprus stores credit cooperatives Larnaca to withdraw their deposits.

With the opening of stores found they could not withdraw all their money, because the electronic system of credit cooperatives was not working. And when it became possible, writes the Daily Cyprus, the system seemed to finally hit the appropriate amount of the new tax, which provoked strong reactions. Even after the government ordered the stores eventually closed.

At the same time, according to information or ATMs of banks give no money so that there is a huge inconvenience.

Congratulations Cyprus savers – you were just betrayed by both your politicians, and by Europe – sorry, but you are the “creeping impairments” in the game known as European bankruptcy. And so is anywhere between 6.75% and 9.9% of your money, which you were foolish enough to keep with your banks (where at least you were compensated with a savings yield of… 0%).

More importantly, as of this morning Europe has finally grasped that there is a 6.75% to 9.9% premium to holding physical cash in your mattress rather than having it stored with your local friendly insolvent bank.

Full Hedge/Boomberg/Philenews HERE

aaaaaaaaand a bit more since this is really heating up…..

In a radical departure from previous aid packages, euro zone finance ministers want Cyprus savers to forfeit up to 9.9 percent of their deposits in return for a 10 billion euro ($13 billion) bailout to the island, which has been financially crippled by its exposure to neighboring Greece.

The decision, announced on Saturday morning, stunned Cypriots and caused a run on cashpoints, most of which were depleted within hours. Electronic transfers were stopped.

The move to take a percentage of deposits, which could raise almost 6 billion euros, must be ratified by parliament, where no party has a majority. If it fails to do so, President Nicos Anastasiades has warned, Cyprus’s two largest banks will collapse.

One bank, the Cyprus Popular Bank, could have its emergency liquidity assistance (ELA) funding from the European Central Bank cut by March 21.

A default in Cyprus could unravel investor confidence in the euro zone, undoing the improvements fostered by the European Central Bank’s promise last year to do whatever it takes to shore up the currency bloc.

A meeting of parliament scheduled for 10.00 a.m. ET on Sunday was postponed for a day to give more time for consultations and broker a deal, political sources said. The levy was scheduled to come into force on Tuesday, after a bank holiday on Monday.

BREAKS A TABOO

Making bank depositors bear some of the costs of a bailout had been taboo in Europe, but euro zone officials said it was the only way to salvage Cyprus’s financial sector, which is around eight times the size of the economy.

European officials said it would not set a precedent.

Via Reuters

 

Hitler bails out Cyprus HERE

Image above: Some depositor left his bulldozer in from of Cyprus bank. Something must have “upset” him….