Cyprus and EU agree draft proposal to rescue banks STRUCTURE SO NO VOTE NEEDED

[sailingaway]

The proposal, which will now be presented to euro zone finance ministers for discussion, will involve setting up a "good bank" and a "bad bank" and will mean that Popular Bank of Cyprus, known as Laiki, will effectively be shut down.




Deposits below 100,000 euros in Laiki will be transferred to Bank of Cyprus. Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debt. It remains unclear how large the writedown on those funds will be.

The EU spokesman said there would be no "levy" imposed on any Cypriot banks, with the package requiring a full "bail-in" of uninsured depositors, which is likely to mean heavy losses for those with large holdings in Laiki and potentially Bank of Cyprus, where many Russians hold bank accounts.

(Reporting by Annika Breidthardt and Jan Strupczewski; Writing by Luke Baker)

http://www.reuters.com/article/2013/03/25/us-cyprus-parliament-idUSBRE92G03I20130325

cyprus news tweeted that it was a 30% hair cut, but I haven't seen any follow up on that.

[sailingaway]

so I'm assuming the government deposit insurance is being ignored?

[sailingaway]

hm, zerohedge seems to think it is higher than 30%

zerohedge ‏@zerohedge now
BoC uninsured haircut said to be under 40%. Unclear what if any recovery to winding down Laiki uninsured deposits

zerohedge ‏@zerohedge now
Brilliant - CYPRUS TENTATIVE DEAL DOESN’T SPECIFY HIT ON DEPOSITORS

zerohedge ‏@zerohedge now
DRAGHI, LAGARDE SAID TO JOIN EURO MINISTERS’ MEETING

zerohedge ‏@zerohedge now
Compared to last Eurogroup deal, huge impairment on "Russian" deposits, one bank insolvent, but at least "insured" deposits are safe

zerohedge ‏@zerohedge now
@TheRiotAct9 No vote on 40% deposit haircut for uninsured deposits

zerohedge ‏@zerohedge now
Now Cyprus parliament just has to pass the 40% deposit haircut "solution"... and the Laiki winddown

[Danan]

Imagine you just made a huge loan the day before they froze the bank accounts. Previously you had no debt and no credit. Now they take away your newly granted credit (at least partially) but the debt stays the same. That's just insane.

In a real bankruptcy of the bank, at least your debt is void too, not just your credit. Or am I wrong, legally?

[sailingaway]

‘Cyprus to lose 40 per cent of GDP by accepting bailout terms’


Cyprus won’t be able to recover from the blow it’ll suffer if agrees to all of the troika’s “unprecedented” bailout terms, Cypriot economy professor, Andreas Theophanous, said an exclusive interview with RT.

Cypriot president, Nicos Anastasiades, is holding talks with the troika (EU, ECB, IMF) in the last attempt to secure €10 billion, which will save the debt-hit Mediterranean island from bankruptcy.

Under the latest plan, a one-time levy of 20 per cent would be placed on uninsured deposits of more than €100,000 at the Bank of Cyprus, with a separate tax of 4 per cent assessed on uninsured deposits of more than €100,000 at all other banks in the country.

A professor of Political Economy at the University of Nicosia and the president of the Cyprus Center for European and International Affairs, Andreas Theophanous, believes that the shock therapy implemented by the EU in Cyprus is the wrong solution as it’ll only worsen the economic situation in the country.

RT: A crucial meeting is underway in Brussels as the president of Cyprus is discussing the crisis with the key figures who hold the country's fate in their hands. What's your prognosis of its outcome?

AT: It’s very difficult to make a forecast. There is a political willingness by the government [of Cyprus] to reach an agreement for the bailout with the Troika, but it seems that they are making it more and more difficult with new and new demands. The fear that exists is that in case that all demands of the troika are accepted, it’ll be very difficult for this agreement to be viable in the sense that it’ll throw the country into a huge fiscal cliff, huge recession and a vicious circle. And it’ll be extremely difficult if not impossible to get out of it.

RT: Cyprus is desperately trying to prevent business from fleeing the country, even the Archbishop of Cyprus is reportedly planning to hold talks with foreign investors. How destructive do you predict the outflow of capital could be if the measures are implemented?

AT: You see, what has happened lately was unprecedented. When they announced the measures last week it led to a big panic. I think the economic problems of Cyprus could be addressed with a gradualist approach. These shock therapies create more problems than they resolve. We think in Cyprus that there’s a huge solidarity deficit in the European Union and in the Troika, which is much higher than any fiscal deficit or public debt of any country in the European south.

RT: Many people now face losing up to a fifth of their life savings. How are banks planning to restore their customers' trust after something so many view as outright robbery?

AT: This is unprecedented. Cyprus lost 25 per cent of its GDP almost two years ago when it was the haircut of the Greek debt. And there has been no compensation for that. If these ideas that are being discussed are implemented – there would be another haircut of Cyprus’ GDP, which will be around 40 per cent. It’ll be impossible, I think, to get out of such a mess. I find it very difficult for this to be viable. Even if there’s agreement, even if it goes through the parliament, I find it extremely difficult for this to be viable in the next few months to come.

http://rt.com/op-edge/cyprus-bailout-talks-anastasiades-754/

[jclay2]

From what I heard last week, it sounds like anyone with over a 100k is going to get screwed. I am betting on greater than 40% cut.

[seyferjm]

"Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debt."

Is what it sounds like? People's money being stolen?

[sailingaway]

zerohedge ‏@zerohedge now
So Cyprus will pass 40%+/- deposit haircut on EUR100k+ not as tax but as part of banking system restructuring not needing a vote

[sailingaway]

zerohedge ‏@zerohedge now
Since Laiki uninsured deposits will be treated as prima facie general unsecured claims of a broke bank, recovery could be 0%.

[ClydeCoulter]

Will Russia really take this sitting down? Or is this exactly a provocation?

[sailingaway]

The plan is likely to mean very heavy losses for uninsured deposits in Laiki, which has suffered since writing down the value of its holdings of Greek government bonds last year.

Around 35 billion euros is held in Cypriot accounts with more than 100,000 euros in them, but it is not clear how much of that total is held in Laiki bank.

If sufficient funds can be found in Laiki to pay off debt and restructure the Cypriot banking sector, uninsured depositors in Bank of Cyprus may not incur any losses, although that remains to be seen.

http://www.reuters.com/article/2013/03/25/eurozone-cyprus-draft-deal-idUSL5N0CH00H20130325

I wonder which bank the Russian accounts were in?

It looks like they decided ignoring government deposit ins would start a world wide run on banks, they seem to be structuring this so as not to trigger that.

[Barrex]

Russia sent a whisper: They can tax it but anything they earn from it they will lose via lawsuits....


Less than 10 hours later tune changed.... It is still an option but if they go through with it they know Russia will act on their whisper. They are superpower and Cyprus is not. Both of them know how things are so whisper is all it was needed.

[sailingaway]

zerohedge ‏@zerohedge now
*LOMBARDI SAYS FROM MOSCOW STANDPOINT CYPRUS DEAL `MUCH WORSE'

[ronpaulfollower999]

This makes me sick.