Governments raiding savings accounts to bail out banks

clairefontaine

Sarn wrote: »

Under the DGS deposits of up to €100k are being covered. It is not right that individuals with savings over €100k are losing out while bondholders get off scot free, it should be applied equally. Again, the protection in place is up to €100k, diversify your assets to minimise a loss. I understand this may not be feasible when running a small business.



No, it's not a case of 'they have more than me, take it off them'. Anyone putting their money in a financial institution should be aware of what cover is in place. In the case of EU countries it is €100k. If they are not happy, then they should move it or spread the risk. I don't agree with the policy, but that is the policy in place.

But that is the whole point! With this move on Cyprus, the message is that such a safeguard is not in place. Your money is not safe.

Dwork

clairefontaine wrote: »

But that is the whole point! With this move on Cyprus, the message is that such a safeguard is not in place. Your money is not safe.

Ahh don't worry. The bondholders will keep it safe. No-one messes with their bank accounts. I used to bang on about this under my old account. What we are witnessing is the greatest fraudulent transfer of Public money to private hands in the worlds history. Up till now it has been done in insidious, sneaky fashion, now it's just being done out in the open. Basically, if you are a normal working person, you are just ripe for picking to swell the coffers of Big Finance. It's being done en-masse and is getting ever more brazen. Some nice man will be on next to explain how wrong and deluded I am. As per usual.

Sarn

Dwork wrote: »

Mmmmum, but if they sneakily pop in and stick a midnight tax on your (let say)€12k of 6 - 20%, then it doesn't really matter what level of depositor cover is in place. People lodge money to get interest of between 0.1 and 4%, bit of a waste of time if the state than whips away 6%. Or do you not "get" this issue?

I do get the issue, as you can see in the post you quoted from me earlier.

clairefontaine wrote: »

But that is the whole point! With this move on Cyprus, the message is that such a safeguard is not in place. Your money is not safe.

The topic has drifted slightly since earlier, I will highlight my earlier post.

Sarn wrote: »

I think the key issue is that deposits for individuals below the DGS limit of €100k in Cyprus are being targeted. This flies in the face of the European Commission's approach to depositor protection and maintaining the confidence of depositors (DGS). What's the point of a guarantee if it's not honoured?

kowloon

bluewolf wrote: »

"They have more than me take it off them" may be understandable, but in no way right or excusable nor a good policy.
Saving is what is needed, not discouraging it.

Don't they want people spending their savings though?

kowloon

kowloon wrote: »

Don't they want people spending their savings though?

The keynesians sure do

Dwork

kowloon wrote: »

Don't they want people spending their savings though?

Don't worry, someone will. I just really hate the thought of other people spending my savings.

My name is URL

kowloon wrote: »

Don't they want people spending their savings though?

If it's a choice between people saving their money commercially and stashing it under their mattresses, I'd say they'd want the former.

DublinWriter

I Luv Crysis wrote: »

As of last week we are fully financed up to the end of 2014 - but don't let facts like that get in the way of sensationalist scaremongering.

By 'fully financed' you mean that the bond markets are prepared to lend to us again to keep the country operating on a daily basis.

That's money that will have to be repaid back in the short-term with interest, on top of what has to already be spent to keep the country running.

It's like maxing out a credit card with a €20K limit, having it frozen and then paying €500 to have it unfrozen again while you increase the limit to €22k.

My argument ultimately being:

• we're in deep deep financial **** in this country;
• successive governments know we're a bunch of sheeple;
• don't think it won't happen here.

Mikros

Another deal involving banks made at 3am with questionable democratic oversight. Again senior bank bondholders suffer no losses and now every single depositor loses money, regardless of who they are. Again the ECB is alleged to have blackmailed a country with complete meltdown if they don't agree. It is almost stunning to see how in your face this is.

By calling it a tax the Cypriot government has sidestepped the deposit guarantee that was in place in Europe. If it can happen once it can happen again - any existing guarantee in place in Europe is essentially worthless with this move. Of course Cyprus is a "special case", like Greece, and Ireland, and Portugal, and...

Anyone with any sort of substantial money on deposit in a peripheral European country is crazy to keep it there now.

Gatling

Advice to all mark your calenders for all the bank holiday weekends then withdrawn on every Thursday before that way if it happens here you should have your cash at home before the Germans demand a cut ,

People say it can't or won't happen here .

There seems to be a push for this country to take another bailout from Europe ,

at what cost

Solair

It'll certainly add a new level of panic to the market should any Irish / British banks have any more month-long IT failures.

bluesteel

I know its AH but the level of ignorance here is incredible. "The EU is taking their money"; blah blah. No the EU isn't taking anything, the Cypriot banks are bust and there isn't enough cash left for everyone because of bad loans. Sound familiar?

The Cypriots have been laundering Russian money for years so that's why the Germans aren't willing to write a blank cheque. And they're right.

bluesteel

There’s no denying that Cyprus needed a solution. The small Mediterranean island was on the brink. Its banking system - which had grown to eight times GDP on the back of inflows of Russian money and aggressive expansion in Greece - was technically bust. Its exposure to the Greek economy, Greek government debt and Cyprus’ own burst property bubble had seen to that.

Nicosia’s euro zone partners made clear there was no time to waste. They had chosen the date of their finance ministers’ meeting on Friday night, knowing that Cyprus already had a scheduled bank holiday this Monday. The country’s president says the European Central Bank was threatening to cut off liquidity on Tuesday if there was no deal. The banking system would have collapsed.

In total, Cyprus requires 17 billion euros - almost 100 percent of GDP - to rescue its banks and deal with the government’s own bills. If Nicosia had borrowed all that cash on top of its existing debt, it would have been carrying an unsustainable burden. It would have only been a matter of time before the debt needed restructuring.

Cyprus’ euro zone partners and the International Monetary Fund rightly decided not to lend it so much money, limiting the bailout to 10 billion euros. This means Nicosia should end up with debt equal to a manageable 100 percent of GDP in 2020.

The problem was where to find the extra 7 billion euros. Given that Germany and other northern European countries weren’t prepared to give a handout, there were two options: haircut the government’s own bondholders or hit bank creditors.

The option of haircutting government debt - as Greece did last year - was rejected. Many bonds are held by Cypriot banks, so a haircut would just have increased the size of the hole in their balance sheets, meaning they would have needed an even bigger bailout. The Cypriot government’s credit would have been destroyed for little benefit.

So, by default, the banks’ creditors had to be tapped. Ideally, bank bondholders would have taken the strain. But Cypriot banks have hardly any bonds. So there wasn’t much money that could be grabbed there.

http://www.breakingviews.com/hugo-dixon-cyprus-deposit-grab-sets-bad-precedent/21074399.article

Dwork

"The banking system would have collapsed". I've heard that before somwhere. Just can't remember where...

Mikros

bluesteel wrote: »

I know its AH but the level of ignorance here is incredible. "The EU is taking their money"; blah blah. No the EU isn't taking anything, the Cypriot banks are bust and there isn't enough cash left for everyone because of bad loans. Sound familiar?

The Cypriots have been laundering Russian money for years so that's why the Germans aren't willing to write a blank cheque. And they're right.

Yes indeed. Every family in Cyprus was laundering Russian money which is why their government have to take money out of everyone's accounts and impose capital controls. Give me a break.

Up until now ordinary deposits in banks have been sacrosanct - that is why there is a European deposit guarantee scheme for smaller amounts up to a min of €20k. It is called a currency *union*, yet today a euro in Cyprus bank account is worth ~9% less than a euro in Germany. If you fail to see the significance of that I'd hold off calling people ignorant.

bluesteel

Mikros wrote: »

Yes indeed. Every family in Cyprus was laundering Russian money which is why their government have to take money out of everyone's accounts and impose capital controls. Give me a break.

Up until now ordinary deposits in banks have been sacrosanct - that is why there is a European deposit guarantee scheme for smaller amounts up to a min of €20k. It is called a currency *union*, yet today a euro in Cyprus bank account is worth ~9% less than a euro in Germany. If you fail to see the significance of that I'd hold off calling people ignorant.

The Cypriot Government would be on the hook for the deposit protection.
Look it up.
http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country

Guess what, they don't have it. But you seem to think that German workers should bail out Cypriot banks and their dodgy depositors.

You know the Irish Government has decided I should pay 0.6% of my pension fund to the exchequer every year, for some reason the geniuses on AH don't seem to have noticed
http://www.finance.gov.ie/viewdoc.asp?DocID=6830

Gatling

Thank you professor

steddyeddy

So what's the logic here? Every person who has deposits in the Cypriot banks where laundering money for the mafia and the ones who weren't had crazy loans out?

So again the banks are the innocent victim in all this?

hfallada

I imagine anyone that was wealthy did what the Italians were doing for a while. Closing they bank accounts and running to German and Swiss banks with suit cases full of money to ensure there money was safe. I say they will probably be a run on the failing Spainish banks tomorrow

My name is URL

Fecking bankers.. not only are they robbing people.. they're declaring new holidays for themselves too!

Cyprus Bank Holiday Extended Through Tuesday As Confusion Spreads

http://www.zerohedge.com/news/2013-03-17/cyprus-bank-holiday-extended-through-tuesday-confusion-spreads

Dwork

My name is URL wrote: »

Fecking bankers.. not only are they robbing people.. they're declaring new holidays for themselves too!



http://www.zerohedge.com/news/2013-03-17/cyprus-bank-holiday-extended-through-tuesday-confusion-spreads

Yeah, ye suckers aren't getting yer dough on tuesday either. Run on that Demetriou. Some shower of cnuts, in fairness.

IsaacWunder

https://www.youtube.com/watch?v=K5R2JyU_MKg

Hitler's old pal Steiner can't get the money out of the Cypriot bank.

:pac:

KyussBishop

Cross-posted from another thread:
Good blog post on this, reframing it as 'collective punishment', and explaining why, if Cyprus was being used to launder money, they didn't just go after the laundered money, instead of imposing collective punishment on all:
http://www.golemxiv.co.uk/2013/03/eu-imposes-collective-punishment-on-cypriots/

Great points, that show the lack of desire to hold actual criminals accountable, because that would lead to searching out of criminals/fraudsters elsewhere in the EU.

steddyeddy

KyussBishop wrote: »

Cross-posted from another thread:
Good blog post on this, reframing it as 'collective punishment', and explaining why, if Cyprus was being used to launder money, they didn't just go after the laundered money, instead of imposing collective punishment on all:
http://www.golemxiv.co.uk/2013/03/eu-imposes-collective-punishment-on-cypriots/

Great points, that show the lack of desire to hold actual criminals accountable, because that would lead to searching out of criminals/fraudsters elsewhere in the EU.

That's it in a nutshell and I cant fathom why people are defending the action. They don't give a sh1t about money laundering in reality. If they did they could and should have done something about it long before this. They used this excuse in order to bail out the banks and take people's savings, hard earned or not.

My name is URL

Laundering money was a scumbag move.. the only thing that's going to help now is to print more money out of thin air and hand it to the people responsible for allowing it to happen for so may years, that's an expensive get-out clause for legislators though.. so it's only right that innocent citizens pay for it all.

rock chic

this government IS robbing the people do you realise a lot of disabled people now are being cut off the disability allowance and a lot of carers had their payments stopped and as usual nothing is being done and the government is trying to keep it all hush hush

steddyeddy

I hope the bank employees who in some capacity knew about the money laundering will get jail.

RoverZT

steddyeddy wrote: »

I hope the bank employees who in some capacity knew about the money laundering will get jail.

I hope no one buys a German product ever again.

A boycott of all German manufactured products is what is needed to put them back in their box.

Dwork

My own feeling is that the EU and monetary union has been a disaster for everyone except Germany. They lost the war, but they'll win the peace.

Chucky the tree

Dwork wrote: »

My own feeling is that the EU and monetary union has been a disaster for everyone except Germany. They lost the war, but they'll win the peace.

You might want to read a history book and discover what Ireland was like before the EU.

Dwork

Chucky the tree wrote: »

You might want to read a history book and discover what Ireland was like before the EU.

Umm, I'm ollllldddd. Lets see what it's like after the EU. We're not there yet sonny boy.

Cavehill Red

Gold and silver sharply up, Euro down in early Asian trading. No surprises there I suppose.

mylefttesticle

A little EU/ECB/IMF experiment to test the waters.

Everytime something like this happens some people accuse others of scaremongering, in reality stuff has just got real, the day a institution/s can demand a government of a country dip into the pockets of its people is the start of the end of democracy and the start of a worldwide dictatorship not based on violence but on economic fear.

Dont trust banks or governments from this point on.

If you cant feel it, it doesnt exist.

mb1725

Nigel Farage might be right after all?

https://www.facebook.com/permalink.php?story_fbid=496912407023034&id=133737666673845

twinytwo

Gatling wrote: »

And we thought we were raped by Europe ,they've shutdown atms and banned all electronic transfers of funds out of banks ,

If it happened here well some would come on here and whinge and moan ,some Facebook or twitter come Tuesday everybody(those who have) would go back to work and say well what are we suppost to do

rest assured this was done only after the rich/governement etc moved their money.

Dwork

They tuk urr bobs.




Only this time, they did. Well, if you're a Cypriot. There might be CypRiots later in the week.

ilovesleep

mylefttesticle wrote: »

A little EU/ECB/IMF experiment to test the waters.

Everytime something like this happens some people accuse others of scaremongering, in reality stuff has just got real, the day a institution/s can demand a government of a country dip into the pockets of its people is the start of the end of democracy and the start of a worldwide dictatorship not based on violence but on economic fear.

Dont trust banks or governments from this point on.

If you cant feel it, it doesnt exist.

That's it. Being ordered about from the German government as if:
a)they are in power on a european level like some sort of a european president.
and
b) we had a say and a vote who to vote into power at a european level.

Gatling

twinytwo wrote: »

rest assured this was done only after the rich/governement etc moved their money.

Wouldn't have expected anything less .
The Euro the biggest scam in history

mylefttesticle

ilovesleep wrote: »

That's it. Being ordered about from the German government as if:
a)they are in power on a european level like some sort of a european president.
and
b) we had a say and a vote who to vote into power at a european level.

I never mentioned Germany, The IMF are based in Washington.

Do what you want really and believe what you want.

mylefttesticle

RoverZT wrote: »

I hope no one buys a German product ever again.

A boycott of all German manufactured products is what is needed to put them back in their box.

What a stupid post! Do you think all Germans are eating ice creams and drinking latte's? for all the positive things said about Germany you should really do some research to see that all is not that rosy there and the underbelly of poverty and being homeless amongst other things is real, bad, ongoing and getting worse.

stretchdoe

It's pretty simple.
Banking interests, in collusion with the politicians they have in their pocket, run the world.
This isn't 'conspiracy theory' stuff.
After all that's happened, and all the evidence that shows that to be the case, is anyone even still doubting that?
And they'll continue to do so, as long as people stand for it.

my my my

the icb may raid my bank accounts

ilovesleep

mylefttesticle wrote: »

I never mentioned Germany, The IMF are based in Washington.

Do what you want really and believe what you want.

So many people fear the IMF and I'm not sure. You see, they are the lenders of last resort for countries. When governments need to borrow and nobody else will lend, well the IMF is available.

At the end of the day, the IMF want their money back and recommend measures to implement to get their money back and to set you/country on a healthy path. Like a bitter pill.

Like, if you were to lead 500 euro to a neighbour in need, and when it comes to paying you back, he makes excuses, that he doesn't have it. Yet you see him, going to the pub, shopping in dunnes and going to the betting office. You'd be likely to tell him or ask of him could he please stop with the weekly betting and pub trips and shop in aldi instead of dunnes, to save money and to pay me back what you owe me.

The imf aren't the bad guys here. It's europe and the ecb.

oppenheimer1

Mikros wrote: »

Another deal involving banks made at 3am with questionable democratic oversight. Again senior bank bondholders suffer no losses and now every single depositor loses money, regardless of who they are. Again the ECB is alleged to have blackmailed a country with complete meltdown if they don't agree. It is almost stunning to see how in your face this is.

By calling it a tax the Cypriot government has sidestepped the deposit guarantee that was in place in Europe. If it can happen once it can happen again - any existing guarantee in place in Europe is essentially worthless with this move. Of course Cyprus is a "special case", like Greece, and Ireland, and Portugal, and...

Anyone with any sort of substantial money on deposit in a peripheral European country is crazy to keep it there now.

The problem is that in many EU countries senior bondholders and depositors rank at the same level, so that you cannot burn one without burning another. Another problem that is unique to the Cypriot banks is that they have very very few senior bondholders and that the vast majority of the liabilities of the bank are in deposits. A bondholder burning exercise - if it were possible, wouldn't raise enough cash in this particular instance.

The problem with the Deposit Guarantee Scheme is that it was never intended to protect depositors against a systemic failure of an entire banking system, but to protect them against the failure of a single bank. The reason I'm guessing they have imposed a tax on accounts below 100k is because there are not enough accounts over 100k to raise the required cash without imposing an enormous haircut (I've seen 60% quoted in places). Even the very wealthy couldn't afford this and it would destroy the remnants of their economy. The need to spread the pain is a mathematical and economic necessity, not a vindictive exercise.

As for the need to undertake this exercise at all. Well the Cypriots need €17bn to get their banking system fixed. This is simply too much for their government to afford in the medium to long term. €10bn is the maximum they can afford and the maximum the official lenders are willing to extend. That leaves the Cypriots with a problem. They had to find €7bn somewhere and the only realistic place they could find that is in the savings accounts of its banks. The only other option was to ask the EU for the money as a grant. I'm sure they did and were refused as such an action would be politically impossible for the rest of the EU. Could you imagine how it would be played here, as we would be asked to contribute, let alone more prudent countries?

Essentially the Cypriots are stuck between a rock and a hard place. They are seen small enough to be expendable, so if they don't accept the harsh terms their banking system will fall into a disorderly collapse, where savers risk losing everything. And if that actually happened they would also find out that the government guarantee for their deposits would be worthless as their government would never be able to afford it. So essentially its Hobson's choice of lose 9.9% of your deposits, or lose it all.

As for safety of the peripheral countries banks, I don't think the link can be so quickly made. For example, other countries banks have more junior bondholders than depositors, so allows the option of burning them first exists. The profile of the Cypriot banks truly is unique. In theory this action in Cyprus should not lead to a run in other countries when looked at rationally.

Dwork

ilovesleep wrote: »

So many people fear the IMF and I'm not sure. You see, they are the lenders of last resort for countries. When governments need to borrow and nobody else will lend, well the IMF is available.

At the end of the day, the IMF want their money back and recommend measures to implement to get their money back and to set you/country on a healthy path. Like a bitter pill.

Like, if you were to lead 500 euro to a neighbour in need, and when it comes to paying you back, he makes excuses, that he doesn't have it. Yet you see him, going to the pub, shopping in dunnes and going to the betting office. You'd be likely to tell him or ask of him could he please stop with the weekly betting and pub trips and shop in aldi instead of dunnes, to save money and to pay me back what you owe me.

The imf aren't the bad guys here. It's europe and the ecb.

Cool story bro. Which of the Cypriots borrowed off the IMF? They should indeed pay back every cent they owe. Sorry, which ones?

mylefttesticle

ilovesleep wrote: »

So many people fear the IMF and I'm not sure. You see, they are the lenders of last resort for countries. When governments need to borrow and nobody else will lend, well the IMF is available.

At the end of the day, the IMF want their money back and recommend measures to implement to get their money back and to set you/country on a healthy path. Like a bitter pill.

Like, if you were to lead 500 euro to a neighbour in need, and when it comes to paying you back, he makes excuses, that he doesn't have it. Yet you see him, going to the pub, shopping in dunnes and going to the betting office. You'd be likely to tell him or ask of him could he please stop with the weekly betting and pub trips and shop in aldi instead of dunnes, to save money and to pay me back what you owe me.

The imf aren't the bad guys here. It's europe and the ecb.

As i said i dont really care what you say or what you believe, there is enough evidence out there to contradict what you just said, do what you want.

mylefttesticle

oppenheimer1 wrote: »

The problem is that in many EU countries senior bondholders and depositors rank at the same level, so that you cannot burn one without burning another. Another problem that is unique to the Cypriot banks is that they have very very few senior bondholders and that the vast majority of the liabilities of the bank are in deposits. A bondholder burning exercise - if it were possible, wouldn't raise enough cash in this particular instance.

The problem with the Deposit Guarantee Scheme is that it was never intended to protect depositors against a systemic failure of an entire banking system, but to protect them against the failure of a single bank. The reason I'm guessing they have imposed a tax on accounts below 100k is because there are not enough accounts over 100k to raise the required cash without imposing an enormous haircut (I've seen 60% quoted in places). Even the very wealthy couldn't afford this and it would destroy the remnants of their economy. The need to spread the pain is a mathematical and economic necessity, not a vindictive exercise.

As for the need to undertake this exercise at all. Well the Cypriots need €17bn to get their banking system fixed. This is simply too much for their government to afford in the medium to long term. €10bn is the maximum they can afford and the maximum the official lenders are willing to extend. That leaves the Cypriots with a problem. They had to find €7bn somewhere and the only realistic place they could find that is in the savings accounts of its banks. The only other option was to ask the EU for the money as a grant. I'm sure they did and were refused as such an action would be politically impossible for the rest of the EU. Could you imagine how it would be played here, as we would be asked to contribute, let alone more prudent countries?

Essentially the Cypriots are stuck between a rock and a hard place. They are seen small enough to be expendable, so if they don't accept the harsh terms their banking system will fall into a disorderly collapse, where savers risk losing everything. And if that actually happened they would also find out that the government guarantee for their deposits would be worthless as their government would never be able to afford it. So essentially its Hobson's choice of lose 9.9% of your deposits, or lose it all.

As for safety of the peripheral countries banks, I don't think the link can be so quickly made. For example, other countries banks have more junior bondholders than depositors, so allows the option of burning them first exists. The profile of the Cypriot banks truly is unique. In theory this action in Cyprus should not lead to a run in other countries when looked at rationally.

Isnt it unlawful to touch savings within the EU of €100,000 or less?

ilovesleep

Dwork wrote: »

Cool story bro. Which of the Cypriots borrowed off the IMF? They should indeed pay back every cent they owe. Sorry, which ones?

They didnt borrow at all from the imf. My reply was in response to someone who brought up the imf into the topic.

mylefttesticle

ilovesleep wrote: »

They didnt borrow at all from the imf. My reply was in response to someone who brought up the imf into the topic.

Ha! you think the IMF has had no hand in this?

stretchdoe

ilovesleep wrote: »

So many people fear the IMF and I'm not sure. You see, they are the lenders of last resort for countries. When governments need to borrow and nobody else will lend, well the IMF is available.

At the end of the day, the IMF want their money back and recommend measures to implement to get their money back and to set you/country on a healthy path. Like a bitter pill.

Like, if you were to lead 500 euro to a neighbour in need, and when it comes to paying you back, he makes excuses, that he doesn't have it. Yet you see him, going to the pub, shopping in dunnes and going to the betting office. You'd be likely to tell him or ask of him could he please stop with the weekly betting and pub trips and shop in aldi instead of dunnes, to save money and to pay me back what you owe me.

The imf aren't the bad guys here. It's europe and the ecb.

The IMF and the ECB are really just one and the same; both represent the same interests.

They simply play 'good cop/bad cop' as the need arises.