Bank Watch ...

[boisdevie]

Seems like some richer savers in Cyprus are being shafted in one quick go whereas the brits are being shafted slowly thorugh QE and effectively negative interest rates on savings. Drop a frog in boiling water and it will jump out but bring it to the boil slowly and it'll end up boiling to death.

[adam2]

Seems like some richer savers in Cyprus are being shafted in one quick go whereas the brits are being shafted slowly thorugh QE and effectively negative interest rates on savings. Drop a frog in boiling water and it will jump out but bring it to the boil slowly and it'll end up boiling to death.

Yes, but.
AFAIK this applies not just to "rich savers" but to all bank accounts. What about the owner of a small business that had 102, 000 euro in the bank to meet a 100,000 euro payroll in a few days time. They now have about 92,000 euro and cant pay their staff.

I predict, firstly civil disorder in Cyprus, secondly major bank runs in Greece, Italy, Spain, Portugal, and Ireland as people rush to protect their funds from confiscation.

Not yet TEOTWAWKI, but it moves a little closer.

[Aurora]

Mugs! It's already happened in the UK.

The recent devaluation of sterling by 10% against all major currencies has had exactly the same effect.

People are worse off, those with deposits have been robbed in much the same way as those in Cyprus.

[Little John]

Mugs! It's already happened in the UK.

The recent devaluation of sterling by 10% against all major currencies has had exactly the same effect.

People are worse off, those with deposits have been robbed in much the same way as those in Cyprus.

Yeah, but at least our authorities have the good grace to do it under the cover of QE.......

[adam2]

Mugs! It's already happened in the UK.

The recent devaluation of sterling by 10% against all major currencies has had exactly the same effect.

People are worse off, those with deposits have been robbed in much the same way as those in Cyprus.

Yes but people dont see it like that.
The policy in Cyprus will be seen as outright theft by the government and may well provoke violent reaction.

Inflation and devaluation in the UK is not so obviously a direct and immediate result of government policy.
Rising prices in the UK are regularly considered to be the work of "speculators" or "wicked fat cat utility bosses" the government encourage such views by holding periodic investigations into the prices of food, petrol, gas etc.

[raspberry-blower]

The overall effect of QE or of partial confiscation is indeed very similar, but QE is a bit more gradual.
I predict a series of bank runs in the less stable bits of the eurozone as people rush to protect their money.

Although this is said to be a "one off" I believe that they said that about income tax !

Trouble with the banking sector is that it is all heavily interconected. There is a real possibility that this event may trigger another major "systemic failure" bringing it crashing back down just like in 2008. I suspect that some UK banks are going to reveal losses on derivatives that have gone pop over the shenanigans in Cyprus. Get bank runs in PIIGS countries and there will be panic

Meanwhile, here's a worthwhile read: Bank Run in Cyprus: Who's Next?

Cyprus is small, and the hope is that hardly anyone will notice what happens there, or be interested. But throughout the Eurozone over the past five years, deposit guarantees have risen, in a so far pretty successful attempt to prevent bank runs. Overnight, that model has now been thrown out with the bathwater. And all of Europe should be wary of what happened. A precedent has been set, and what's good for the goose fits the gander.

Not that German, French, Dutch depositors will lose sleep right this moment, but then that's precisely the idea. The EU core nations have so far been able to convince their citizens that they are rich and their economies recovering, and everything's under control. Moreover, the story that Russian criminals get a 10% haircut goes down well among the respectable citizenry. What happens if and when Italy or Spain need a bailout like Cyprus is not even considered. But maybe that's not so smart.

[adam2]

Debate on the matter now postponed.

http://www.bbc.co.uk/news/world-europe-21819990

Not certain why, since the debate is and the confiscation is still due to take place before the banks reopen on Teusday.
Perhaps they are considering exceptions, either for themselves, or for russian gangsters who might kill those stealing their money.

Or perhaps the politicians fear for their own safety and need more time to arrange security ?

[marknorthfield]

Well it certainly changes the 'mood music' around the Eurozone with a jolt. For some while we've had a distinct tone of 'we're past the worst' in mainstream media coverage. This rather tears down that facade, and quite spectacularly if bank runs happen in other countries as a result of it. If it manages to create a full-blown crisis within a few days, what an interesting distraction that would be for Osborne and his budget!

One detail which surprised me slightly is that all banks in Cyprus are affected. A woman on the radio this morning was relating how rumours had circulated about this possibility in January and so she had moved savings to a foreign-owned bank in Cyprus she had an account with (a German one, I seem to recall), but to no avail. No doubt those with the ability to move savings more easily across international borders might already have done so with a few months warning; makes a rather depressing parallel with the way money is moved offshore to avoid/evade tax by those in a position so to do.

As an aside, documentary maker David Malone (who writes the frequently insightful Golem XIV blog, mostly regarding banking shenanigans and the ongoing debt crisis) had to delete a blog post recently that ties in with all this. He'd written a long investigative piece for Reuters about connections between Cypriot banks, Russian money laundering and a major well-established bank from a mid European country. However, it seems the bank threatened Reuters with legal action over one particular paragraph prior to publication and the piece was pulled. They then also threatened David personally with legal action within a few hours of him posting on his blog about their action against Reuters, the paragraph in question, and an offer in his blog post to distribute the pulled article privately by email on request. He had to delete his post there and then (and presumably refrain from distributing).

That public offer to distribute privately may well have been naive, but knowing his good track record in uncovering things that tend to go under the radar elsewhere, and the speed with which he was threatened, I suspect he hit a nerve.

[the_lyniezian]

It seems very indicative of a certain attitude though- systematic failure but it's the ordinary saver who bears the brunt of it, no thought that that saver might need the money and have had minimal part in it. And might not WANT shares in the bank once they think about it.

[JavaScriptDonkey]

If you know the date of the publication it's possible one of the web archiving projects picked it up.

[frank_begbie]

I wonder if any members of the government in Cyprus with over 100 grand in the bank have been caught out?

[Little John]

I wonder if any members of the government in Cyprus with over 100 grand in the bank have been caught out?

The cabinet? I doubt it. The ordinary MP's? Possibly, in order to give some fake semblance of justice. It'll all come down to power and influence. Those with the most power and influence will have had prior warning.

[adam2]

I think that TPTB under estimated public reaction to this.
Political deadlock now seems possible, with a crucial vote postponned.

"The vote in parliament has been postponed to Monday afternoon. If the deal is defeated, state media say banks could be closed on Tuesday so as to avoid mass withdrawals"

Quote from BBC news.

That should make a nice panic ! either the confiscation goes ahead as announced with risks of civil disorder and bank runs elswhere, or it gets postponned and possibly watered down with the banks shut meanwhile.
Neither outcome will improve faith in the banking system.

An example given today of the consequences of this levy was that people who have paid deposits for holidays, weddings, house purchases and cars have almost certainly lost part of their money.
Reputable firms place such monies in dedicated bank accounts that are intended to protect the customer against failure of the business to which the deposit has been paid. Not much help though in this case as it the government that have taken the money.

On these forums there have been a number of comments over the years about the desireability of keeping some cash to hand in case of bank closures. So doing appears increasingly prudent, although Cyprus is not the UK, it is uncomfortably near home.

If any member of these forums is considering large cash withdrawals "just in case" please take great care not to advertise this and to hide the cash well. Not much point in attempting to evade government confiscation orders and then losing the lot to theft, fire, flood, or other peril.

[kenneal - lagger]

As Russian criminals are involved perhaps they have had a message from one V Putin suggesting that it is not a good idea!!

[adam2]

As Russian criminals are involved perhaps they have had a message from one V Putin suggesting that it is not a good idea!!

http://www.bbc.co.uk/news/world-europe-21825981

About half way down is the warning from Putin about it.