The levy will see deposits of more than €100,000 hit with a 9.9 per cent charge when lenders reopen their doors after a scheduled public holiday tomorrow. Under that threshold and the levy drops to 6.75 per cent.
Though it was reached too late for Cyprus newspapers, and other forms of traditional media were caught unawares, the bailout deal prompted some to queue up outside banks to withdraw cash from ATMs.
http://www.scmp.com/news/world/article/1...k-accounts
Why is Cyprus unique from Greece, Spain, Italy etc? If here, where not there? I see markets being hit on Monday as investors extrapolate. The PR has to be managed carefully or this has the potential to get ugly.
But Cyprus is a small economy as a whole in EU, guess the impact will be insignificant.
The levy is a de facto devaluation of Cyprus' currency. Since it uses the Euro it cannot devalue the euro directly. Hence, in order to decrease its citizens' purchasing power, their bank deposits are taxed to achieve the same goal.
The question is whether this will spark bank runs in Greece, Italy and Spain as well. The rich in these countries will probably wire the balance of their money there to Zurich, London, Paris or Berlin on Monday.
This is worst than daylight robbery. The gov rob from inside the bank.
Me thinks the EU has just floated a trial balloon to see what's the mkt reaction to this move. if manageable then the other trouble economies can do the same. In this way you can devalue your currency without exiting the Euro. So now the cypriot govt is not voting on this to see what the mkt reations will be tomorrow. if there is a run by the rich people of those trouble economies, then this is not a done deal yet. if you have deposits in those trouble economies, you won't be sitting and doing nothing.....head for the exit!!!!!
their public service civil servants are too many and too fat from huge salary in the past..thus leads to today's problem
(17-03-2013, 09:46 PM)felixleong Wrote: [ -> ]wow this is so unfair
never thought garmens can tax deposits... imagine if PAP did this to us, lol
http://www.businessinsider.com/cyprus-ba...uns-2013-3
I followed the link and got to the full text of the Cypriot President's speech:
http://www.businessinsider.com/cyprus-ba...des-2013-3
There is some important information lost in this "tax on deposits" brouhaha: it is not a straight tax per se but a
forced conversion of the deposits into bank shares.
The operative quote is:
"Total rescuing of deposits, with just the exchange of a small percentage of savings with shares of the two banks."
That's right - the Cypriot government is converting a portion of the deposits (which are bank liabilities) into bank equity (which are bank assets). The president admits that:
"Currently, these shares do not have their full value, but with the economic recovery they will repay most it not all of the amount that will be cut."
In other words, it's essentially a debt-to-equity conversion program often used in the capital markets when creditors exchange some or all of their debt for equity in the distressed borrower. Sometimes it's a voluntary exchange when the creditors think it's a good deal. Sometimes it's an involuntary exchange because if the creditors hold out they are worse off.
In the case of Cyprus, the president's message is that Cyprus is in the second situation, because the depositors will lose
40% of their deposits if the bailout does not go through. So losing 7-10% is the lesser of two evils.
Isn't that robbing of the rich without burdening the government?
For a poor Cypriot with $1000, only 67.50 is converted to equity.
For a rich Cypriot with $10 million, $1 million is converted.... oh dear..
I thought most robin hood lovers will applaud the plan.
But, the robin hood lovers are not happy because they are also being robbed a bit.