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View Diary: Bank Run in Cyprus, Will it Spread to Southern Europe? (322 comments)

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  •  no...the primary beneficiaries are those with (7+ / 0-)

    deposits above the insured level.  Depositors below that governmentally insured threshold would have suffered no loss from a bank failure.  Now, though, they are being taxed to cover the deposits of a bunch of Russian mobsters and oligarchs.

    From The Economist:

    The politics of saving wealthy Russians with money loaned by thrifty Germans were always going to be tricky.

    What had not been anticipated was a 6.75% loss for savers with deposits in Cypriot banks below the insurance ceiling. Cypriots woke up this morning to find bank branches closed to them. By the time they will be able to get at their money, it will be too late. The offer of equity in banks to replace the value of their savings is meant to be a balm but it’s not a choice they would have made. Why this decision was taken is not yet clear. The most plausible explanation is that the Cypriot government itself preferred to spread the pain rather than wipe out non-resident depositors and jeopardise its long-term prospects as an offshore financial centre for Russian and other money.

    http://www.economist.com/...

    Oregon: Sure...it's cold. But it's a damp cold.

    by Keith930 on Sun Mar 17, 2013 at 06:17:49 AM PDT

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    •  The Russian money laundering thing is a sideshow, (6+ / 0-)

      that is not why these banks are in trouble. The diary even says this:

      The banks in Cyprus failed because they took huge losses when the EU bailed out Greece, not because of anything done in Cyprus. Banks in Cyprus have taken large deposits from Russia, but alleged Russian money laundering activities have nothing to do with the bank failures.
      Nobody is "covering the deposits" of Russian mobsters. This is a part of the European banking crisis - the Cypriot banks unwisely invested in some of the riskiest banks in Europe, and through their losses there are now undercapitalized.
      •  Yes, the haircuts forced on Greek bondholders (2+ / 0-)
        Recommended by:
        doc2, nchristine

        began this.  It sounds like banks in Cyprus were some of those bondholders.

        This was not done to bail out bank shareholders in Cyprus as stated upthread.  They in fact will be severely diluted.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Sun Mar 17, 2013 at 07:34:54 AM PDT

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      •  Indeed, the banks passed a stress test (0+ / 0-)

        less than two years ago.

        "To recognize error, to cut losses, to alter course, is the most repugnant option in government." Historian Barbara Tuchman

        by Publius2008 on Sun Mar 17, 2013 at 08:45:31 AM PDT

        [ Parent ]

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