So Who Knew? In February Cyprus Deposit Outflows Soared To A Three Year High

The large depositors got advance warning of the plan and acted accordingly….

The decision to crush Cypriot depositors (first all of them, then just the uninsured ones) came in March, without any prior hints of the carnage that was about to be unleashed upon Cypriot bank unsecured liabilities.

Or so the media narrative goes, because the last thing needed is to give skeptics any indication the “ad hoc” Troika plan was not so ad hoc after all, and some individuals – notably the whale depositors – were warned in advance, sparing them the indignity of pulling a few billion at €300 per day.

Alas, as just released central bank data shows, there may be cracks in the narrative because in February, at a time when the Eurozone was supposedly getting better every day and the Dow Jones was on the verge of its all time high, Cypriot depositors pulled the largest amount of cash in over three years.

Add this curious finding to the to do list for the ‘task force’ investigating who not only circumvented the capital controls, but had advance knowledge it was coming. Surely they will get right on top of that.

Source: Goldman

 

Cyprus Still Bubbling

Europe is broke and it’s not pretty. As the squables about who pays, who gets blamed for their failed socialim. Who thought this whoole EU thing and capital controls was a good thing?

Central everything. When will the people figure it out, borrowing from one pocket to pay another just doesn’t work. Hello Bernanke. In fact socialism doesn’t work. Got that!

With the Cypriot government still ‘undecided’ about what to ‘take’ and the European leaders very much ‘decided’ about what to ‘give’, the fact of the matter is, as JPMorgan explains in this excellent summary of the state of affairs in Europe, that because ELA funding facility is limited by the availability of collateral (and the haircuts applied to those by the central bank), and cutting the Cypriot banking system completely from ELA access is equivalent to cutting it from the Eurosystem making an exit from the euro just a matter of time.

This makes it inevitable that capital controls and a capital freeze will be imposed, in their view, but it is not only bank deposits that are at risk. A broader retrenchment in funding markets is possible given the confusion and inconsistency last weekend’s decision created for investors relative to previous policy decisions.

And then there is Spain — Add to this the move by Spain, which announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing, and the chance of sparking much broader deposit outflows across the union are rising quickly.

Via JPMorgan,

Capital Control Risks

What was widely viewed as an ill-conceived Cyprus deal last weekend renewed fears of a re-escalation of the euro debt crisis. The original proposal to hit insured depositors below €100k caused a bank run and set a new precedent in the course of the Euro area debt crisis, with potential negative consequences for bank deposits not only in Cyprus but also in other peripheral countries. Once again, as it happened with the Greek crisis last May, the Cyprus crisis exposes the fragmentation of the deposit guarantee schemes in the Euro area and its inconsistency with a monetary union.

Insured Depositers?

It appears the American Banking Association has decided to put out fires early…

 While the crisis in Cyprus is a real concern for depositors in Cypriot’s banks, it has no implication for depositors in U.S. institutions. Depositors in U.S. banks are insured up to $250,000 and no insured depositor has ever lost money in a bank failure. The U.S. banking industry has rapidly returned to health with strong earnings, lower losses and significant increases in capital.

The FDIC insurance fund has over $25 billion in reserves and the banking industry – which bears all the financial costs of supporting the FDIC – pays over $12.3 billion each year to assure adequate funding.

Simply put, U.S. insured depositors are safe and their deposits are protected by a strong FDIC fund, a financially secure banking system and the full faith and credit of the U.S.

So, it seems, the basis for not worrying about US deposits is the rule of law and the deposit insurance? Remind us again what Cypriots thought they had?

Move along, nothing to see here …

Europe Braces for Fresh Turmoil With Cyprus Deposit Levy

Europe braced for renewed turmoil as outrage in Cyprus over an unprecedented levy on bank deposits threatened to derail the nation’s bailout and spark a new round in the region’s debt crisis. The euro tumbled.

Cypriot President Nicos Anastasiades, who bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.6 billion) by taking a piece of every bank account in Cyprus, addressed the nation to seek support for the tax. He delayed a vote on the measure in parliament until tomorrow amid talks to restructure the levy.

Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member bloc since the European Central Bank’s pledge in September to backstop troubled nations’ debt.

a worrying precedent

The levy is “a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future,” Joachim Fels, chief economist at Morgan Stanley in London, wrote in a client note.Europe braced for renewed turmoil as outrage in Cyprus over an unprecedented levy on bank deposits threatened to derail the nation’s bailout and spark a new round in the region’s debt crisis. The euro tumbled.

Cypriot President Nicos Anastasiades, who bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.6 billion) by taking a piece of every bank account in Cyprus, addressed the nation to seek support for the tax. He delayed a vote on the measure in parliament until tomorrow amid talks to restructure the levy.

The levy is “a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future,” Joachim Fels, chief economist at Morgan Stanley in London, wrote in a client note.

Yes even for low information voetrs …

It happen to us, when a major big bank went bust way back, and we were left with no cash, back in the Cater era. Our money what little we had, was insured but we had no cash for bills. What would you do if all your cash was untouchable for weeks on end?

Bank Accounts In Cyprus Taxed With No Say So By Depositers(formerly known as voters)

Dictatorship’s are so much easier, especially when you have no Constitution…

And then for some that’s just a mere speed bump, to be ignored.

For those who read the previous article on the topic of last minute chaos and confusion in Cyprus, and Europe, it will come as no surprise that the previously scheduled Monday bank holiday (aka Green Monday) has been extended into Tuesday. So prepare to not be surprised.

From Kathimerini:

The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed.

Nicosia postponed from Sunday to Monday the tabling in Parliament of the bill including the measures for the Cypriot bailout – including a bank account haircut and a tax hike on interest and corporate earnings – but the European Central Bank insists on a rapid voting because there are already signs a domino effect will follow across European lenders and markets from Monday.

There is genuine fear of market unrest on Monday morning when stocks may crumble in the eurozone and bank accounts in other southern European bank may suffer.

Skai radio reported on Sunday that the Bank of Greece has sent between 4 and 5 billion euros to Cyprus in order to help Cypriot banks respond to cash requirements by their clients.

So, if the official name of the March 18 holiday was “Green Monday“, will the March 19th ad hoc holiday be called “Red Tuesday“? Inquiring minds want to know.

Government now moves into outright theft???