Eurozone and IMF agree 10bn-euro Cyprus bailout deal | General financial discussion | Discussion forum

This really underscores that there are risks will all investments. One could keep ones money under their mattress, I suppose, but where's the fun with that.

So, the real question is "what would a one time tax of 6.75% of bank deposits do to your net worth?" If your asset allocation has a 5% cash component and that 5% is all in Cypriot banks your net worth just went down by just over 1/3 of 1% - for someone with $100,000 invested that is $337.50 and for someone with $1,000,000 invested that is $3375.00.

Neither of those sums are trivial but neither are they substantial.

Greg

martin14 said

[snip]

Would you be happy ?

Of course I would not be happy. Some will make out much better than others. Since my original response I was thinking about the poor family who moved €100,000 from their investment account into their bank on Friday to be ready Tuesday morning when the banks re-open after their bank holiday to pay for their new home. And, as you say, poof, it is no longer €100,000.

I am not really familiar with the Cypriot economy but the general Eurozone economy is in the toilet. Someone has to pay, and some will be hit harder than others, as life simply isn't 100% fair.

As to the CDIC/DGCM question -- this doesn't appear to be related to a bank failure, but to a potential economic meltdown. If one Cypriot institution were to fail this weekend I suspect their equivalent of CDIC/DGCM would reimburse one for 100% of ones deposits just in time for the new tax to take 6.75% of it.

Again, would I be happy? Of course not. And I really feel sympathy for the Cypriot population. I feel less sympathy for the Russians who are heavily invested in Cyprus. I am not a economist by any stretch of the imagination and wonder if a 6.75% devaluation of the currency would be better or worse. (I suspect what I am talking about is a devaluation of the Euro (€) and that, too, has much bigger implications.)

The really scary event for us is when the US next experiences a shudder that brings their economic mess to the fore, as they appear to be sitting on a real house of cards.

And, speaking of "house of cards", I recently watched all 13 episodes of Netflix' first serial offering and enjoyed it immensely. It is highly recommended. But, of course, some will hate it.

Greg

martin14 said

[snip]

We have an Italian account that wil be emptied first thing Monday morning.

I hope that goes without issue.

I found a fairly succinct Q&A here written from the UK perspective. At the end of it there are a few links to other reading I have yet to visit.

Again, good luck!

Greg

steal
/stēl/Verb
Take (another person's property) without permission or legal right and without intending to return it: "thieves stole her bicycle".

Seems simple to me.

Folks, drawing any parallels between the Cyprus banking system and Canada's banking system is like comparing a1971 Datsun B210 and a 2013 Audi A6. Sure they both have four wheels and are considered a vehicle but that is where the comparison ends. Having come from a military family, I have first hand knowledge over the societal mess in Cyprus at every level for many, many years. Let's remember both Canada & the UN had peace keepers in this country for decades. The country is a mess, its economy is a mess, it's politics is a mess --- in fact, this bail-out is not yet fully endorsed and is running the risk of collapsing before it gets started. Now...let's talk about corruption. Do a little research and you'll find these Cyprus banks also hold hundreds of millions of the Russian Mob's money, as they have allowed these funds to flow in for years.

Canada's banking system remains one of the strongest in the world, with the banks all being well capitalized and highly regulated and stress tested. Let's also remember when the US was bailing out their banks, no depositors had lost their money and in Canada no bank or Credit Union required a bail-out.

Europe is still under great pressure as Spain, Italy, Portugal, Greece & Cyprus are all a mess.

James said

steal
/stēl/Verb
Take (another person's property) without permission or legal right and without intending to return it: "thieves stole her bicycle".

Seems simple to me.

James

If the duly elected government of the day passes a new law then it doesn't fit that definition. It may be unfair, immoral or cowardly but it would be "legal".

The latest news I see is that the vote has been pushed back to Monday afternoon, Nicosia time. If the vote fails or is delayed past the bank opening time, Tuesday, I'd not like to be near the doors of those banks.

Greg

Cyprus is still trying to fix the mess..... People with over 100K in an account are going to take a haircut.

"Cyprus Popular Bank Pcl (CPB) and the Bank of Cyprus Plc would be split to create a so-called bad bank, one of the officials said. Insured deposits — below the European Union ceiling of 100,000 euros ($129,000) — would go into a so-called good bank and not sustain any losses, while uninsured deposits would go into the bad bank and be frozen until assets could be sold, said the four officials.

Losses to unsecured creditors, including uninsured depositors, could reach 40 percent under the plan, which has support from the International Monetary Fund and the European Central Bank. The proposal, a version of which was rejected last week, is considered a better option than taxing insured deposits or allowing Cypriot banks to collapse in a disorderly fashion if they lose access to ECB aid, the officials said.