Depositors Burned in Cyprus

Can anyone explain to me why the EU are putting pressure on the Cypriots to penalise depositors, and why they didn't apply the same pressure to Greece, Portugal, and Ireland?

Have the ECB changed tact, in which case if Ireland were to need a 2nd bailout, can we expect them to push for a similar deposit tax applied to Irish bank accounts?
 
chewchew said:
Can anyone explain to me why the EU are putting pressure on the Cypriots to penalise depositors, and why they didn't apply the same pressure to Greece, Portugal, and Ireland?
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They wanted the cash to come from the banks balance sheets. Bondholders make up a very small percentage of banks balance sheets in Cyprus, not enough to cover the bailout.

However, one could argue, small or not, they should have been wiped out anyway as a starting point.

chewchew said:
Have the ECB changed tact, in which case if Ireland were to need a 2nd bailout, can we expect them to push for a similar deposit tax applied to Irish bank accounts?
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Given the reaction to Cyprus, I think everyone knows that taking insured deposits from bank accounts was a mistake.

Hence, maybe it wont occur again. However, precedent has been created.
 
Fair play to the Cypriots they have held there nerve when a lot of bigger country's have and would have given in.There is NO way Brussels will let them go bankrupt as it will be too embarrassing for the un-elected elite the people who thought up this robbery should be sacked or better still hung from lamp posts!

I hope the Cypriots take Russian cash and stick 2 fingers up to the parasites in Brussels who are bleeding us dry with no end in sight.

Enda take note the next time your on your knees lapping up to these chancers show some balls for once in your life!
 
From rte.ie :
Cyprus's parliament overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout this evening.
The vote by the small state's legislature was a stunning setback for the 17-nation eurozone.
It came after lawmakers in Greece, Portugal, Ireland, Spain and Italy had repeatedly accepted unpopular austerity measures over the past three years to secure European aid.

Fair play to the 1.1 million Cypriots who raised their voices in protest. More balls than us Paddies.
 
I think I'd much prefer to owe money to the ECB or the IMF rather than Russia.

Wouldn't like to be in the Cypriot boat at all.

I don't understand all the posts saying "Fair play" - "more balls than us" etc.
 
Unbelievable that the EU said that deposit insurance does not cover governments imposing levies to take part of the deposit ...

Deposit guarantees only protect against bankruptcy, not levies, says EU

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_19/03/2013_488598

Guarantees on deposits in the European Union are only there if a bank completely collapses, and does not protect from fiscal steps decided by parliaments, the European Commission said on Tuesday, defending a decision to impose a levy in Cyprus.

The euro zone's demand at the weekend that Cyprus place the levy on bank accounts as part of an emergence financial rescue has created a backlash in Cyprus and prompted many Europeans to accuse Brussels of disrespect for its own rules.

EU law guarantees deposits up to 100,000 euros per customer, per bank. But Commission spokesman Simon O'Connor said those guarantees only existed: «in the event of a bank failure."
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CiaranT said:
Unbelievable that the EU said that deposit insurance does not cover governments imposing levies to take part of the deposit ...
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Well since when did the guarantee cover taxes? There is nothing unbelievable about, the EU is simply reiteration what was already fact!

Every single type of investment product has risks and is subject to taxes and the lesson people need to learn is that they need to make themselves better informed about how they manage their money.
 
There is a difference between a tax, like a tax on interest on deposits, and a levy on capital accumulated. The latter is new.
 
Jim2007. "Every single type of investment product has risks and is subject to taxes and the lesson people need to learn is that they need to make themselves better informed about how they manage their money."

I admire a lot of your posts and I agree with the generality of your comment. I try to keep myself informed on a lot of things including financial matters but I had not come across any advice that warned of the tax on the deposits like what has happened in Cyprus. I like your ordinary lay person would not be reading specialist financial magazines but I think a lot of so called financial experts were surprised at this move if they told the truth.
 
Jim2007 said:
Well since when did the guarantee cover taxes? There is nothing unbelievable about, the EU is simply reiteration what was already fact!

Every single type of investment product has risks and is subject to taxes and the lesson people need to learn is that they need to make themselves better informed about how they manage their money.
Click to expand...

+1

With almost everything else people do research. Before buying TVs or computers people search online reviews and expert opinion; before buying a car they do the same and even go for a test drive or pay a mechanic to check it out.

But when it comes to banking pretty much nobody does research, because there is a perceived safety of regulation and deposit insurance. I've always said that deposit insurance is completely worthless and should be abolished for the reason that it gives a false sense of security and discourages due diligence. Cyprus is the perfect example of this point.
 
Chris said:
+1
But when it comes to banking pretty much nobody does research, because there is a perceived safety of regulation and deposit insurance. I've always said that deposit insurance is completely worthless and should be abolished for the reason that it gives a false sense of security and discourages due diligence. Cyprus is the perfect example of this point.
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Agreed Chris, we don't have a Bank Guarantee despite what you may hear from the government or from Europe. If the situation demands it then our capital deposits will take a haircut also. If the exposure deems it then even accounts under €100,000 will be targeted. The reasoning behind this is that there is no plan in place to solve this crisis and Germany et al are just fire-fighting - how long have they known about the issue in Cyprus and what have they done to plan for this.

It's years now since they talked about a collective deposit insurance scheme, much like the FDIC in the USA but what has been done - nothing. European leaders promised they would create a Eurozone wide scheme but the Germans have opposed it and ironically Cyprus supported them on this.

Take a look at the other European countries with banking sectors that dwarf their GDP, who is going to be next, and more importantly what 'rules' will be applied by European leaders at 3AM in the morning. No planning, no leadership!

Even with the countries that are anchoring the Eurozone (Germany, France) the banks (BNP Paribas, Deutsche Bank etc) are highly leveraged, what happens when they look for a bailout?

For me, the Cyprus decision is a tipping point, I would have said 12 months ago that this situation would never arise. What will happen in the next 12 months? And bear in mind that the large depositors who have been burned (and those in other countries watching this) are already preparing not to be burned at the next banking fiasco (we, the small depositors may not be into financial due diligence but these guys are). So maybe next the small depositor will be burned, this is my expectation as it was the first attempt in Cyprus also.

I'm not quite sure what to do to minimise risk right now but if there is a €100K 'guarantee' in Ireland then my deposit per institution will not exceed €20K. And for the first time in my life I'm looking at gold coins, definitely going to start by putting 20% of my deposit value in something tangible.

The big problems have yet to be addressed by the European 'leaders'.
 
Up until late last year I steadfastly avoided all but the very biggest of (non-Irish) banks. Eventually it seemed that there was no point in missing out on higher interest rates available from Irish banks, since the EU seemed determined that no bank would be allowed to fail, in spite of costs to taxpayers (which I was paying for). So, now I'm six months into several three and five year term deposits... and EU depositors are finally getting burned. Thanks EU. More disastrous handling of the eurozone crisis. I'm resigned to the fact that these clowns will eventually take some or all of my life's savings to pay for the fallout from a bubble that I never partook in.
 
Jim2007 said:
Well since when did the guarantee cover taxes? There is nothing unbelievable about, the EU is simply reiteration what was already fact!

Every single type of investment product has risks and is subject to taxes and the lesson people need to learn is that they need to make themselves better informed about how they manage their money.
Click to expand...

galwegian44 said:
Agreed Chris, we don't have a Bank Guarantee despite what you may hear from the government or from Europe. If the situation demands it then our capital deposits will take a haircut also. If the exposure deems it then even accounts under €100,000 will be targeted. The reasoning behind this is that there is no plan in place to solve this crisis and Germany et al are just fire-fighting - how long have they known about the issue in Cyprus and what have they done to plan for this.

It's years now since they talked about a collective deposit insurance scheme, much like the FDIC in the USA but what has been done - nothing. European leaders promised they would create a Eurozone wide scheme but the Germans have opposed it and ironically Cyprus supported them on this.

Take a look at the other European countries with banking sectors that dwarf their GDP, who is going to be next, and more importantly what 'rules' will be applied by European leaders at 3AM in the morning. No planning, no leadership!

Even with the countries that are anchoring the Eurozone (Germany, France) the banks (BNP Paribas, Deutsche Bank etc) are highly leveraged, what happens when they look for a bailout?

For me, the Cyprus decision is a tipping point, I would have said 12 months ago that this situation would never arise. What will happen in the next 12 months? And bear in mind that the large depositors who have been burned (and those in other countries watching this) are already preparing not to be burned at the next banking fiasco (we, the small depositors may not be into financial due diligence but these guys are). So maybe next the small depositor will be burned, this is my expectation as it was the first attempt in Cyprus also.

I'm not quite sure what to do to minimise risk right now but if there is a €100K 'guarantee' in Ireland then my deposit per institution will not exceed €20K. And for the first time in my life I'm looking at gold coins, definitely going to start by putting 20% of my deposit value in something tangible.

The big problems have yet to be addressed by the European 'leaders'.
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Good points made there, and I agree that nothing has been done to address the financial crisis. It started with the realisation that private citizens, private organisations and sovereign governments had taken on way too much debt. And the "solution" has been to transfer those debts to governments and run even higher deficits. But the underlying problem, i.e. too much debt, has only gotten worse!

As for holding up the FDIC as something to introduce here, I would strongly oppose it. The FDIC is even less capable of handling a Cyprus style situation. It insures trillions of dollars worth of deposits, but according to Wikipedia had only $19 bn in reserves in 2010.

I agree with your plan of moving into tangible stuff. While I have very little cash left within this country I also have very little cash full stop.
 
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