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Europe

Big depositors in Cyprus to lose far more

2013-03-31

Big depositors in Cyprus's largest bank stand to lose far more than initially feared under a European Union rescue package to save the island from bankruptcy, a source with direct knowledge of the terms said on Friday.

Under conditions expected to be announced on Saturday, depositors in Bank of Cyprus will get shares in the bank worth 37.5 percent of their deposits over 100,000 euros, the source told Reuters, while the rest of their deposits may never be paid back.

In other words, they will not lose everything above the legally covered amount.

Legally, it could have been all above the 100,000 euro amount -- not that anyone wants to think about that. As an aside, what's the covered amount in the U.S.?

The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance

Indeed. It was a good scam while it lasted.

See, Russian mobsters? Next time do it right and put yer money into Switzerland. Go with the folks who have been laundering dirty money for centuries...

and could accelerate economic decline on the island and bring steeper job losses. Officials had previously spoken of a loss to big depositors of 30 to 40 percent.

"Pray we don't alter the deal further..."

Cypriot President Nicos Anastasiades on Friday defended the 10-billion euro ($13 billion) bailout deal agreed with the EU five days ago, saying it had contained the risk of national bankruptcy.

"We have no intention of leaving the euro," the conservative leader told a conference of civil servants in the capital, Nicosia. "In no way will we experiment with the future of our country."

Cypriots, however, are angry at the price attached to the rescue - the winding down of the island's second-largest bank, Cyprus Popular Bank, also known as Laiki, and an unprecedented raid on deposits over 100,000 euros. Under the terms of the deal, the assets of Laiki bank will be transferred to Bank of Cyprus.

At Bank of Cyprus, about 22.5 percent of deposits over 100,000 euros will attract no interest, the source said. The remaining 40 percent will continue to attract interest, but will not be repaid unless the bank does well. Those with deposits under 100,000 euros will continue to be protected under the state's deposit guarantee.

Posted by:Steve White

#14 "30-40%" > PFFFTTT, slackers, don't be ridiculous - its been up to 60% now since Easter Sunday!

Correct me if I'm wrong, but doesn't "shares in the bank" = means or infers that Depositors will be getting OWNERSHIP SHARES IN SAME ERGO WILL INDEED BE GETTING "PAID BACK" AS THE BANK(S) + [Greek]CYPRUS ECON STAYS AFLOAT OR STAYS SUCCESSFUL OVER TIME???

Posted by: JosephMendiola 2013-03-31 23:22

#13 Thank you, KBK. We're well within limits, then.

Posted by: trailing wife 2013-03-31 20:13

#12 TW, the covered amount is basically $250K per depositor per bank. Until last New Year, transactional accounts (non-interest bearing) were insured for an unlimited amount. As far as I can tell, that TAGP / Dodd-Frank coverage has expired.

Posted by: KBK 2013-03-31 17:32

#11 ..ah, yes, the old snake oil elixir routine. Green Energy(tm) to solve all those miseries at avail you.

Posted by: Procopius2k 2013-03-31 15:16

#10 Smart move airandee. Lots of "Green" investment potential in Michigan.

Michigan Home to Half of the Largest
Bankrupt Green Energy Companies
Pushed by former Gov. Granholm, the state has
four of the top eight stimulus-backed 'green' failures

Gov. Jennifer Granholm often spoke of using green energy to turn around the states economy, but instead Michigan has become the epicenter of government-subsidized failures.

Four of the nation's top eight green energy companies that have filed for bankruptcy had operations in Michigan and received state and federal subsidies.

The Heritage Foundation put together a list of the 19 federally supported green energy companies that filed for bankruptcy and Michigan was represented significantly.

The companies with Michigan operations included A123 Systems, Azure Dynamics, United Solar Ovonics and Evergreen Solar.

Federal, state and local governments were willing to put up as much as $874 million for those four companies, but they still could not avoid bankruptcy. The government aid figure includes tax credits, loans, loan guarantees, grants and other financial incentives, according to The Heritage Foundation.

The companies were part of President Barack Obamas effort to stimulate the economy. Gov. Granholm also trumpeted many of the failed companies as big-time job creators.

"This week's developments show that an economic strategy we devised five years ago is continuing to produce results," Gov. Granholm said in a December 2009 speech announcing the Michigan companies receiving money from the federal stimulus program. "In that time, Michigan has invested more than $1 billion to help nurture the growth of green manufacturing in our state, from advanced batteries and electric vehicles to solar panels and wind turbines. We want Michigan to be a center for advanced manufacturing and the jobs that come with it."

It's not dumb luck that Michigan has hosted some of the biggest green energy collapses.

"We made a concentrated effort to attract these businesses regardless of their business prospects," said James Hohman, a fiscal policy analyst for the Mackinac Center for Public Policy. "Michigan taxpayers have been paying the costs but reaping few of the benefits."

Azure Dynamics in Oak Park developed hybrid electric technology. It was supposed to create 40 jobs within five years (2014). According to a company website, Azure Dynamics liquidated its assets.

Evergreen Solar has a facility in Midland that made solar power products. It was projected to create 101 jobs within five years (2013). Evergreen also liquidated its assets and no jobs exist.

A123 Systems had a plant in Livonia that made advanced batteries for hybrid electric vehicles. It was projected to create 844 jobs within five years (2014). Seven jobs exist at the company, according to federal records.

United Solar Ovonics developed technology for solar cells. It had facilities in Battle Creek and Greenville that were to create a projected 700 jobs. The company sold off its assets this summer, according to news reports.

Posted by: Besoeker 2013-03-31 13:33

#9 Luckily I moved all my Cyprus accounts to Detroit city savings and loan.

Posted by: airandee 2013-03-31 13:28

#8 Just one more example of modern fascism. It's never been all about goose stepping goons, it's all about corruption and cronies.

Sounds sickeningly familiar. 8^(

Posted by: AlanC 2013-03-31 13:26

#7 The Greek press is reportedly having a field day publishing stories about Cypriot politicians, Communists, and union leaders getting their money out ahead of (and sometimes during) the bank holiday.

Posted by: Pappy 2013-03-31 13:11

#6 Sounds like Zero and company's approach to taxes. AlanC.

Indeed it does, and their qualifications remind me of that of the night watchman:

A man is being interviewed for a job. What are your qualifications for the job of night watchman? The slightest noise wakes me up.

Posted by: Besoeker 2013-03-31 11:13

#5 Apparently there have been some additional details coming out that answer some of Beso's question.

At least one of the major banks, Laiki, gave loans to all manner of politically connected companies and unions and MPs directly of which much was "forgiven". So, you take depositors money and gift it to your friends and cronies.
(HT WSJ via EUReferendum) Ooops, then you come up short. Do tell.

Sounds like Zero & company's approach to taxes.

Posted by: AlanC 2013-03-31 10:40

#4 ..it's all the magic of computer keyboards these days than the old 'cook the books' manually. Remember if it's not done by Eurocrats sitting at their properly environmental lighted desks in Brussels then its an evil hacker someplace in a dark room purloining your assets. One is [for your own] good, the other is a criminal. /sarc off - sort of

Posted by: Procopius2k 2013-03-31 09:29

#3 And the money/deposits all went where and how ?

Posted by: Besoeker 2013-03-31 07:20

#2 Although I did think confiscation of savings through inflation would come first.

No reason not to do both, phil_b. After all, to our ruling elites, it's a matter of what they decide to let us keep, not taking a greater of lesser part of what is ours. Nobody -- except them -- needs that much of what a person has greedily kept to himself, anyhow.

Posted by: trailing wife 2013-03-31 05:39

#1 Zerohedge thinks this is a prelude of whats to come everywhere. And they are probably right.

Although I did think confiscation of savings through inflation would come first.

Posted by: phil_b 2013-03-31 04:58

00:00