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View Diary: Cyprus imposes immediate tax on all bank deposits to avoid default (72 comments)

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  •  It was all foreign depositors, big or small (0+ / 0-)

    "The dispute was centered on the demand by the British and Dutch state, that the Icelandic state should guarantee at least for the repayment of the Icelandic minimum deposit guarantees (up till €20,887 per account holder)"

    The Icelandic government nationalised the failed banks, guaranteed domestic deposits for the previously agreed amount, and said that since the deposit guarantee scheme, although required by law, wasn't actually a government scheme, but one run by now failed banks, it didn't have to guarantee the money for foreign depositors. The British and Dutch governments returned the deposits to their nationals, and then demanded the Icelandic government reimburse them.

    Eventually, the EFTA court sided with the Icelandic government (ie saying that the guarantee scheme didn't have to be backed ultimately by the government), so the UK and Dutch governments are just getting paid back from the assets of the failed banks as they are liquidated (there was another court case over whether paying that back took precedence over the banks' bondholders - the bondholders lost that).

    Bigger foreign depositors (eg British local councils) were also hit. But the main dispute was over the first €20,000 or so in in the accounts - ie mainly the little guy.

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