Cyprus: Big Depositors Could Lose Up To 60 Percent

[News_Editor]

<p>NICOSIA, CYPRUS (BNO NEWS) -- Big depositors at Cyprus' largest bank will face losing up to 60 percent of their savings which exceed 100,000 euros ($127,770), far more than had been initially estimated as part of a European rescue package, the government said on Saturday.

</p>

<p>As part of the measures, as much as 60 percent of deposits exceeding 100,000 euros ($127,770) at the Bank of Cyprus could be effectively lost. Deposits up to 100,000 euros are safe and will be paid out to customers, but only 40 percent of deposits exceeding that amount are certain to be paid out in full.

</p>

<p>A statement from the country's central bank said 37.5 percent of the big deposits will be converted into Class A shares of the Bank of Cyprus, giving the owners voting rights and dividends. This would theoretically allow depositors to eventually recover some of their losses, but the shares are now virtually worthless and it is uncertain if they will ever regain value.

</p>

<p>Another 22.5 percent of the big deposits is also at risk of being converted into Class A shares of the Bank of Cyprus, but an independent valuer will first have to decide whether the bank's reserves allow some of it to be returned to depositors. "Not later than 90 days from the completion of the valuation, all or part of that percentage might be converted into shares and the remainder returned to the depositor," the central bank said.

</p>

<p>The remaining 40 percent of the big deposits, excluding the amount below 100,000 euros, is still frozen for liquidity purposes but is expected to be returned to depositors in the near future. "However, the interest continues to be calculated for this deposit based on the existing interest rate," the statement said.

</p>

<p>Also on Saturday, the central bank announced that banks on the island will operate under normal business hours from Tuesday. But a range of measures, including limits preventing customers to withdraw more than 300 euros ($383) per day from their accounts, will continue to apply to avoid further instability in the financial system.

</p>

<p>"The capital control measures apply to all banks and are exceptional, non-discriminatory, temporary and critical to regulate the flow of capital throughout the country," the central bank said. "Each day, we will measure and look to refine or relax these controls with the overriding goal of safeguarding and stabilizing the Cypriot financial system."

</p>

<p>Banks in Cyprus were closed between March 16 and Thursday to avoid a bank run during the island's financial crisis.

</p>

<p>The Cypriot government reached an agreement with the European Union, European Central Bank and the International Monetary Fund on Monday to restructure the country's crucial banking system, avoiding a dramatic exit from the eurozone. Shareholders and large depositors will face huge losses in return for the 10-billion euro ($12.7 billion) bailout.

</p> <p> (Copyright 2013 by BNO News B.V. All rights reserved. Info: [email protected].) </p>

[F430murci]

Lots and lots of Russian money at stake here.

[Payboy]

A bad precedent.

[meatboy]

Lots and lots of Russian money at stake here.

what about thais

[F430murci]

Lots and lots of Russian money at stake here.

what about thais

Do Thais have any money?

Seriously, Abramovich and most Russian billionaires and large businesses had huge amounts in Cyprus. This article says even Putin stands to lose big and this issue could cause increased friction with Russia.

http://m.guardiannews.com/world/2013/mar/29/cyprus-bailout-germany-russia-relationship

[Potosi]

There is a number of Thai $ billionaires. Abramovich, Putin and folks like these have pulled their funds from Cyprus already, it was in the news that large amounts have been transfered despite the ban, and a bank CEO was sacked over that scandal. To lower class of millionaires ist trapped only, doctors, architects, small-business owners.

[Credo]

I fail to see how this is legal. Isn't it really stealing people's money?

[F430murci]

There is a number of Thai $ billionaires. Abramovich, Putin and folks like these have pulled their funds from Cyprus already, it was in the news that large amounts have been transfered despite the ban, and a bank CEO was sacked over that scandal. To lower class of millionaires ist trapped only, doctors, architects, small-business owners.

It was a joke about Thais having any money.

You may be correct or this could be speculation. Link up source if you have one. Many Russian players seems pretty pissed off right now according to what I am hearing from Russian wife that is an investment banker and also structures a lot of Cayman stuff for these guys.

Abramovich and Ambramov, only worth about 4 billion, may have gotten okay. Maybe not. They had a lot tied in in Cyprus holdings, banks and businesses.

[Steely Dan]

I fail to see how this is legal. Isn't it really stealing people's money?

Well normally peoples money is stolen by high and permanently understated inflation, or indeed by legislation to target certain groups. What makes this different is the post-hoc nature of the theft. In effect any contract, implied or otherwise with a Eurozone domiciled bank is no longer worth the paper it was written on.

[Credo]

Inflation and taxes are understandable. There are things we can do about both--we can't avoid them, but we can manipulate a largely known situation to minimize the effect. Having someone decide to take 60% of your money straight out of your bank account seems a little bit too much.

[F430murci]

I fail to see how this is legal. Isn't it really stealing people's money?

Well normally peoples money is stolen by high and permanently understated inflation, or indeed by legislation to target certain groups. What makes this different is the post-hoc nature of the theft. In effect any contract, implied or otherwise with a Eurozone domiciled bank is no longer worth the paper it was written on.

Theft by understated inflation??? Actually most of the Russian billionaires stole their money from common Russians, even Putin. After 1991, they simply took what once belonged to all Russians and profited while other suffered.

[Exsexyman]

I fail to see how this is legal. Isn't it really stealing people's money?

The best way to rob a bank is to own one.

[Sandman77]

The people in cypress got one of the highest interests over 20 years, much higher then all other eu member states!

So where are the loose of money I not see it, !

In the school we learn laundrymoney washing is a crime, but now that people pays the bill that breaks the law before!

[midas]

The people in cypress got one of the highest interests over 20 years, much higher then all other eu member states! So where are the loose of money I not see it, ! In the school we learn laundrymoney washing is a crime, but now that people pays the bill that breaks the law before!

What amazes me about this whole scenario, including the financial crisis itself is all these apologists for the banking system.

This will make it much easier for the next time - and there will be a next time.

To justify this kind of theft on the basis that it was Mafia money so it was okay to take it is feeble and totally inaccurate. There must have been many innocent victims that naïvely thought there was nothing to worry about when keeping your money in a deposit account in a bank.

http://m.smh.com.au/national/i-went-to-sleep-friday-as-a-rich-man-i-woke-up-a-poor-man-20130328-2gxab.html

[Credo]

This would be a little like the US gov't testing all $100 bills in Florida and confiscating any of them found with traces of drugs on them.

I truly feel sorry for the many people who had nothing to do with the Mafia or anything illegal who are getting penalized.

[thaibeachlovers]

Hmmmmmmm. Having been in Cyprus last year ( my father used to live there ) and visited several times, it is of no surprise to me that they are in such doo doo that they have resorted to stealing investors money.

IMO, it is a beautiful country with many potential tourist attractions, but completely wasted on "them" that run the country.

BTW, having made the mistake of flying Cyprus Air there from London, if my brain had such power, the whole place would have been incinerated on my arrival ( To say I was not impressed with their sardine can seating, would be a wild understatement ).

[jbrain]

My personal opinion is that the topic title is misleading.

It should read........at least 60%.

[scotto]

Theft at its best watch out all the other governments around the world

will be looking at this very closely now!

who do you trust if you cannot trust a bank?

[zydeco]

Coming soon to a US bank near you. Except they'll just call it a teller fee.

[F430murci]

Coming soon to a US bank near you. Except they'll just call it a teller fee.

Damn near in 2008 thanks to CMO. Main US Banks are very solid now. Even BofA has just about resolved Countrywide liability and amazingly overserved for it in a very short period of time. The bigger issues are still Euro and China has big, big problems. The vast majority of the US QE money is currently landing on foreign balance sheets shoring up foreign reserves that were severely deficient. Most US wealth tied up in equities and very few have huge amounts sitting in uninsured accounts. The story about the guy with a million in his Cyprus account at age 65 is very sad.

[JDGRUEN]

This information has been published for several days now ... only the little guys got hurt... and it was the EU Commissioners who pushed this on Cyprus... If I had money in any EU controlled bank - I would move it ... If Cyprus can be done this way - so can Spain, Greece - then the dominoes will fall all over Europe...

... Russian oligarchs who still had large deposits in Cyprus likely withdrew most of it last week as Cyprus prepared to stop all unauthorized capital movements. On Monday, Reuters reported a major loophole that large Russian account holders may have used to jump ship while ordinary Cypriots lined up at ATMs to withdraw a few hundred euros: Uniastrum Bank, 80 percent of which is owned by Bank of Cyprus, did not place any restrictions on withdrawals in Russia in the week leading up to the restructuring decision.

Laiki Bank and Bank of Cyprus branches in London did not limit withdrawals that week, either. No one knows exactly how much money has been transferred out of Cyprus, Reuters reported. Moreover, several solvent commercial banks, including a Cyprus subsidiary of state-controlled Russian bank VTB, will be left mostly unaffected by the restructuring, the Christian Science Monitor reported.

An editorial in the Thursday edition of Vedomosti concluded that the Russian authorities' accepted the Cyprus restructuring after it became apparent that mainly medium-sized businesses would suffer losses, not the large investors that are the Kremlin's first priority.

Now an exodus of all remaining Russian business likely is beginning, some in Cyprus say.

Read more: http://www.foxnews.com/world/2013/03/28/russia-support-for-cyprus-seizures-deposits-may-mean-big-money-already-out/#ixzz2P8QBViAd

Edited March 31, 2013 by JDGRUEN

[F430murci]

Jdgruen:

Thanks. Not suprising. Although I imagine a few were going to die if they didn't let some of those Russian big wigs get there money.

[Potosi]

The solution is certainly worse for the investor than to let the Cypriotic banks collapse, isn't it? What's a bank folding? Nobody gets hurt. They believed they can create more money by sitting in the bank in front of a computer monitor shifting funds around, not by investing in the real economy that manufactures and provides services, but lets not blame them but the government, and the EU. Poor, poor investors, just wanted to elude some taxes, and launder illegal earnings, innocent stuff really, but fell victim to the EU cabal. What a tragedy.

[F430murci]

The solution is certainly worse for the investor than to let the Cypriotic banks collapse, isn't it? What's a bank folding? Nobody gets hurt. They believed they can create more money by sitting in the bank in front of a computer monitor shifting funds around, not by investing in the real economy that manufactures and provides services, but lets not blame them but the government, and the EU. Poor, poor investors, just wanted to elude some taxes, and launder illegal earnings, innocent stuff really, but fell victim to the EU cabal. What a tragedy.

Much truth here. Truth many refuse to see, but many innocents caught up in it also. Most of them probably had less than 100k though.

[Potosi]

Didn't it say "Deposits up to 100,000 euros are safe and will be paid out to customers, but only 40 percent of deposits exceeding that amount are certain to be paid out in full" in the OP?

[F430murci]

Didn't it say "Deposits up to 100,000 euros are safe and will be paid out to customers, but only 40 percent of deposits exceeding that amount are certain to be paid out in full" in the OP?

Yes, hopefully that means those that are not bogus or crooks will not lose too much.

[JDGRUEN]

Didn't it say "Deposits up to 100,000 euros are safe and will be paid out to customers, but only 40 percent of deposits exceeding that amount are certain to be paid out in full" in the OP?

Yes, hopefully that means those that are not bogus or crooks will not lose too much.

This is a disaster - everyone should read much more in depth about this ... When a governmental can by fiat take money from private - personal bank accounts - then we are all in a very serious situation. And the small account holders are being hurt ...

[Potosi]

[F430murci]

Didn't it say "Deposits up to 100,000 euros are safe and will be paid out to customers, but only 40 percent of deposits exceeding that amount are certain to be paid out in full" in the OP?

Yes, hopefully that means those that are not bogus or crooks will not lose too much.

This is a disaster - everyone should read much more in depth about this ... When a governmental can by fiat take money from private - personal bank accounts - then we are all in a very serious situation. And the small account holders are being hurt ...

Explain how small deposits of less than 100k are impacted. Banks fail all the time and I am very familiar with both failures and deposit insurance or guarantees. Not disagreeing, just asking for explanation. Edited March 31, 2013 by F430murci

[jamhar]

I fail to see how this is legal. Isn't it really stealing people's money?

Governments make the laws.

So if they say it true, then its "legal", since they write the laws.

Is it "Just"? Thats a different issue.

Was it "Just" that they were earning nearly 5% on their savings while i was earning under 2%?

The Russians are not amateurs. They knew what was happening

but there are a few who may have not realized what was happening

for them, this will be one expensive lesson.

But at least their first 100K is covered. Thats more than most who get caught up in a ponzi scheme get.