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Old 03-24-2013, 01:29 PM   #121
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Didn't Cyprus use to be a British colony ? Maybe the UK should bail them first instead of counting on Germany and France :-)
Britain still has 3,500 troops stationed there, plus 60,000 ex-pats.

Since Britain decided not to join the euro, I expect that their response to a suggested bailout would be, "We told you it would end in tears."
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Old 03-24-2013, 03:06 PM   #122
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Don't want to start a new thread, but this article may have an indiirect affect on the EU problems, as well as affecting those with Swiss Bank accounts.

Switzerland denies banking deal in principle reached with U.S. - chicagotribune.com

Other financial sites tend to look more negatively at this possibility.

Back to the thread.
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Old 03-24-2013, 03:47 PM   #123
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This episode will give many who have banked euros in economically troubled countries pause. I predict that many will start putting their savings under their mattresses.

That is not to say that this is not the best solution for the problem Cyprus is facing.
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Old 03-25-2013, 09:05 AM   #124
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Looks like a new deal is nearly done. Of course there have been several "deals" almost done, so hard to be sure about what will happen until it's finalized. Banks appear to be honoring the EU bank guarantee of accounts under 100,000 Euro and taking most or at least a large amount out of any deposits above that amount.

In many ways this is like FDIC insurance in that in case of an insolvent bank, deposits up to the insured limit are guaranteed and above that are not. In practice FDIC has worked to make those depositors with large accounts lose little, but the confidence in the system through the stated guarantee remains.

This solution, if it sticks, should avoid the worst of the loss of confidence that would come from governments changing the terms of the bank guarantee to confiscate a percentage of all accounts. Meanwhile Russia was reportedly advising all their citizens to withdraw everything from all Western banks. Not sure what they were supposed to do with it then.
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Old 03-25-2013, 10:42 AM   #125
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/snip/ Meanwhile Russia was reportedly advising all their citizens to withdraw everything from all Western banks. Not sure what they were supposed to do with it then.
Why, put it in the Russian bank that is run by the Russian gvmt of course....


But, kind of defeats the purpose of hiding your money from the tax man....
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Old 03-25-2013, 10:47 AM   #126
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Looks like a new deal is nearly done. Of course there have been several "deals" almost done, so hard to be sure about what will happen until it's finalized. Banks appear to be honoring the EU bank guarantee of accounts under 100,000 Euro and taking most or at least a large amount out of any deposits above that amount.

In many ways this is like FDIC insurance in that in case of an insolvent bank, deposits up to the insured limit are guaranteed and above that are not. In practice FDIC has worked to make those depositors with large accounts lose little, but the confidence in the system through the stated guarantee remains.
From the onset, it sort of sounded like this "tax" was a way to implement major financial overhaul and restructuring of banking finances in way that is least bad. With this method you get a structured default (whether you call it that or not is functionally irrelevant) instead of a relatively more disorderly chaotic default.
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Old 03-25-2013, 12:52 PM   #127
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I predict that folks will spread their Euro money around. Interest rates will be the least of their concerns.
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Old 03-25-2013, 01:12 PM   #128
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“When the Russians leave who is going to stay at the Four Seasons for $500 a night? Angela Merkel?”

Russians prepare to quit Cyprus - FT.com
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Old 03-25-2013, 02:46 PM   #129
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Dutch Finance Minister Jeroen Dijsselbloem, who committed taxpayer funds to take over SNS Reaal NV (SR) last month, said troubled lenders in the euro area must now fend for themselves as part of future euro rescues.
Dijsselbloem, who leads the group of 17 euro finance ministers, said imposing losses on depositors and bondholders must be part of the bailout toolkit after such measures were taken to avoid default in Cyprus. His comments, to Reuters and the Financial Times, were confirmed today by Dijsselbloem’s spokeswoman, Simone Boitelle.
One percent on your savings and a need for depositors to pitch in for bad loans, I wonder how a banking system is supposed to have a valid working model in such an enviroment.

Ukip leader Nigel Farage in England is recomending all English people take their money out of banks in Spain. It will be interesting over the coming months to see if the European Union is able to avoid other major banking issues.
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Old 03-25-2013, 03:28 PM   #130
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One percent on your savings and a need for depositors to pitch in for bad loans, I wonder how a banking system is supposed to have a valid working model in such an enviroment.

Ukip leader Nigel Farage in England is recomending all English people take their money out of banks in Spain. It will be interesting over the coming months to see if the European Union is able to avoid other major banking issues.
This is normal procedure when a bank fails. Insured deposits are covered, but deposits above the insured level may not be made whole. Same in the US.

What was amazing was that the initial proposal from Cyprus would not have made the insured deposits (up to 100K Euros) whole, but charged all depositors. The current agreement is more like a normal bank failure. Banks fail, and depositors need to take precautions when they make deposits. No free lunch, depositor beware, etc. In the US we all pay attention to FDIC limits on accounts (I hope).
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Old 03-25-2013, 04:32 PM   #131
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This is normal procedure when a bank fails. Insured deposits are covered, but deposits above the insured level may not be made whole. Same in the US.

What was amazing was that the initial proposal from Cyprus would not have made the insured deposits (up to 100K Euros) whole, but charged all depositors. The current agreement is more like a normal bank failure. Banks fail, and depositors need to take precautions when they make deposits. No free lunch, depositor beware, etc. In the US we all pay attention to FDIC limits on accounts (I hope).
Exactly. The banks were paying 4.5% compared to <1% from their counterparts in France, Germany, etc. When investors chase such high yields they have got to know it is high risk. I was pleased to see that the small investors are being made whole, just as they are here with gov backed insurance.
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Old 03-25-2013, 05:12 PM   #132
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I didn't see anyone notice that the fed has done the same here, taking $$ from savers and giving it to those that will/can borrow at ultra low rates. These engineered rates cause savers to get less than you lose to inflation, so considered a wealth confiscation by some. Not trying to beat up the fed, but it does grate wrong way for me at least.
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Old 03-25-2013, 05:15 PM   #133
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This is normal procedure when a bank fails. Insured deposits are covered, but deposits above the insured level may not be made whole. Same in the US.

What was amazing was that the initial proposal from Cyprus would not have made the insured deposits (up to 100K Euros) whole, but charged all depositors. The current agreement is more like a normal bank failure. Banks fail, and depositors need to take precautions when they make deposits. No free lunch, depositor beware, etc. In the US we all pay attention to FDIC limits on accounts (I hope).

I agree this is more or less a normal bank failure, although depositors losing 20% and senior bondholders being wiped out, I think is pretty unusual for medium sized bank.

I also know there is some very unhappy Russian Mafia, and wonder how they are going to react. Let's put it this way I wouldn't want to issue life insurance for any bankers/finance minister who pushed this proposal.
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Old 03-25-2013, 05:20 PM   #134
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My understanding from the FT this morning is depositors don't lose, deposits over 100K euros are moved into a bad bank and the depositors will get whatever the bank can bring. All bondholders are stockholders are wiped out. That seems a typical approach for bank failure.
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Old 03-25-2013, 07:19 PM   #135
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I didn't see anyone notice that the fed has done the same here, taking $$ from savers and giving it to those that will/can borrow at ultra low rates. These engineered rates cause savers to get less than you lose to inflation, so considered a wealth confiscation by some. Not trying to beat up the fed, but it does grate wrong way for me at least.
+1
and that's just for starters.
Leverage the that same money by X times and it explains the US Banking System.

The "saver" gets it all back as shares of the banks stated assets.

Likely the new EU model.
http://dealbook.nytimes.com/2013/03/...ples/?src=recg
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Old 03-25-2013, 07:57 PM   #136
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My understanding from the FT this morning is depositors don't lose, deposits over 100K euros are moved into a bad bank and the depositors will get whatever the bank can bring. All bondholders are stockholders are wiped out. That seems a typical approach for bank failure.
But the large depositors are just one of the creditors of the bad bank, ahead of stockholder but equal to senior debt holders, and there is no where near enough assets to pay off all of the creditors. I have heard numbers as low as 20% and as high as 40% haircut for the depositors (for the Lativa bank).
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Old 03-25-2013, 08:29 PM   #137
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I am going to cash in my Greek bonds and use the money to buy waterfront property on Cyprus. Finally, I will have my 2nd home away from the cold and snow.
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Old 03-25-2013, 08:44 PM   #138
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But the large depositors are just one of the creditors of the bad bank, ahead of stockholder but equal to senior debt holders, and there is no where near enough assets to pay off all of the creditors. I have heard numbers as low as 20% and as high as 40% haircut for the depositors (for the Lativa bank).
I haven't seen anything on how the new creditors line up. Certainly, your numbers do not seem out of line.
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Old 03-25-2013, 11:23 PM   #139
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Meanwhile Russia was reportedly advising all their citizens to withdraw everything from all Western banks. Not sure what they were supposed to do with it then.
My guess would be Switzerland or some of the Asian banks. Of course, if they want to stay small, Iceland is open for business again: Einstaklingar | Íslandsbanki
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Old 03-25-2013, 11:31 PM   #140
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I rather doubt that there would be too many wealthy Americans using bank accounts in a place as small and flaky as Cyprus. Switzerland, Luxemburg, etc. would be more like it.
I doubt whether even Switzerland is worth it anymore to Americans. Banking secrecy laws are no longer what they were. The IRS is after all the tax it can get.
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