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Old 03-25-2013, 11:32 PM   #141
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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.
I'm not sure why bondholders (other than holders of subordinated bonds) should be treated any worse than uninsured depositors and other unsecured creditors? In theory they should all rank pari pasu for their claims.
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Old 03-26-2013, 07:08 AM   #142
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After Cyprus, eurozone faces tough bank regime - Eurogroup head | Reuters

"A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region's finance ministers said.

Asked what the new approach meant for euro zone countries with highly leveraged banking sectors, such as Luxembourg and Malta, and for other countries with banking problems such as Slovenia, Dijsselbloem said they would have to shrink banks down."It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we'll come and take away your problem. We're going to push them back. That's the first response we need. Push them back. You deal with them."

That statement by Eurogroup head Jeroen Dijsselbloem to the Financial Times and Reuters has sent the euro tumbling, his office is now busy doing damage control by saying the Cypress case is specific and not meant to include banks in Spain, Italy and other countries.

Was his statement mis-interpreted or did he let the cat out of the bag inadvertently?
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Old 03-26-2013, 07:17 AM   #143
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One has to love the financial media. "Sent the Euro tumbling" all the way from 1.305 to 1.295. The need for drama and overstatement is amazing.
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Old 03-26-2013, 07:21 AM   #144
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One has to love the financial media. "Sent the Euro tumbling" all the way from 1.305 to 1.295. The need for drama and overstatement is amazing.
Maybe you should tell that to the Guardian newspaper, that is where I got the statement from, and the Guardian is supposed to be not in the same league as the Daily Mail, Telegraph or the Sun
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Old 03-26-2013, 09:39 AM   #145
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One of the things that I find interesting is that it seems that the reason that the Cypress banks are in trouble is because they held a lot of Greek bonds...

IOW, the EU 'fix' for the Greeks (a 70% haircut on their bonds) caused the Cypress banks to go under... I am sure the ripples will continue to cause other things to happen...
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Old 03-26-2013, 12:48 PM   #146
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Another intersting tidbit, if you put 100K Euros in the biggest and second biggest banks in Cyprus it is being viewed as 200K and you are a large depositor with a probable 40K Euro hit. If you put in one of the two largest and 3rd or smaller bank you are going to be made whole.
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Old 03-26-2013, 07:42 PM   #147
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Before you get too worried about the Russian Millionaires who had their money stashed in Cyprus Banks, you might want to read this Reuters article.

INSIGHT-Money fled Cyprus as president fumbled bailout | Reuters

Apparently many if not most of those "savers" used loopholes in the system, to withdraw their wealth either before, or in spite of the "Asset Freeze". Essentially this leaves the unsecured (and maybe even the secured) people of Cyprus to absorb a loss that is likely to bankrupt the entire country for decades.

Locating Cyprus
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File Type: jpg Cyprus.jpg (144.1 KB, 5 views)
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Old 03-27-2013, 04:50 AM   #148
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The pain to large depositors is even worse than envisioned.

From the WSJ

Quote:
NICOSIA, Cyprus—Cypriot officials gave the first indications of the steep losses facing large deposit holders at the island's two biggest lenders, as hundreds of angry bank workers staged a demonstration outside the central bank and demanded the resignation of its governor.
Cyprus's central bank chief said Tuesday that large depositors at the island's biggest lender, Bank of Cyprus Pcl, could lose as much as 40% on their deposits. In a television interview later, the finance minister said large uninsured deposit holders at the second-biggest, Cyprus Popular Bank Pcl, might only see one-fifth of their money returned and could wait several years before being paid back.
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Old 03-27-2013, 09:10 AM   #149
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This is probably a direct result of the other large depositors who were allowed to remove much or all of their deposits while this solution was being negotiated and debated. The banks were ordered to be closed, but many allowed substantial hardship withdrawals, with only discretionary rules for what constituted hardship, and banks with offices or corresponding banks outside Cyprus kept those outside locations open and allowed more or less unlimited withdrawals. The smart (or connected) money was allowed to flee, so only those who didn't know or couldn't act will be in the pool of uninsured depositors. The supposedly "clean" solution of following typical insured deposit rules is deeply tainted by allowing many to escape consequences.
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