Sunday, March 17, 2013

Cyprus Government 'Tax' (Steal) From Depositors Accounts

In political terms it was a tax. In economic terms it was a hair-cut. In real life if you have over 100k euros in the bank you just lost 9.9% of it, with everyone else losing 6.75%.

This is one of the most bone-headed moves I could imagine. Unless they went into this thinking, 'how can we cause a bank run and make sure no one ever puts money into our banking system', they made an absurd mistake. If you are a banker in Switzerland or the Caiman Islands, this coming week could be the busiest of your life...

"Cyprus was working on a last-minute proposal to soften the impact on smaller savers of a bank deposit levy after a parliamentary vote on the measure central to a bailout was postponed until Monday, a government source said.

In a radical departure from previous aid packages, euro zone finance ministers want Cyprus savers to forfeit a portion of their deposits in return for a 10 billion euro ($13 billion) bailout for the island, which has been financially crippled by its exposure to neighboring Greece.

The decision, announced on Saturday morning, stunned Cypriots and caused a run on cash points, most of which were depleted within hours. Electronic transfers were stopped.

The originally proposed levies on deposits are 9.9 percent for those exceeding 100,000 euros and 6.7 percent on anything below that.

The Cypriot government on Sunday discussed with lenders the possibility of changing the levy to 3.0 percent for deposits below 100,000 euros, and to 12.5 percent for above that sum, a source close to the consultations told Reuters on condition of anonymity.

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