Cyprus bank account "tax"

[huggzy]

Cyprus lawmakers reject controversial bank tax bill

There were zero votes in favour, 36 against, and 19 abstentions.

I always find it fascinating when a controversial bill has abstention votes...does that mean that this lawmaker would have voted in favour but knew he'd be torn to pieces when he steps out of parliament?

It is still alarming that the IMF and EC pushed for this. Cyprus is but a tiny cog in the grand Euro wheel, and you had to think that this was a test balloon to see how the people would react to this kind of proposal...surely everyone had to know that people would vehemently oppose this, wouldn't they? (and how could they not consider that the entire continent might lose confidence in the banking system if they did this???? These EU leaders are evil people, but not stupid people!)

I feel like something else is up. Maybe they have a less draconion alternative (draconion nonetheless) for the Cypriots up their sleeve, and they ran this option by them first to soften the people up?

 

[vancity_cowboy]

I always find it fascinating when a controversial bill has abstention votes...does that mean that this lawmaker would have voted in favour but knew he'd be torn to pieces when he steps out of parliament?

It is still alarming that the IMF and EC pushed for this. Cyprus is but a tiny cog in the grand Euro wheel, and you had to think that this was a test balloon to see how the people would react to this kind of proposal...surely everyone had to know that people would vehemently oppose this, wouldn't they? (and how could they not consider that the entire continent might lose confidence in the banking system if they did this???? These EU leaders are evil people, but not stupid people!)

I feel like something else is up. Maybe they have a less draconion alternative (draconion nonetheless) for the Cypriots up their sleeve, and they ran this option by them first to soften the people up?

this reminds me of the antics of another unelected government that we are more familiar with - the GVRD - and their attempts to raise capital through property tax levies, gasoline tax levies, etc.

maybe they'll try this bank account levy idea next

 

[lenny]

I think there's a lower probability of fire and theft than of a bank failure or financial crisis of some sort.

I've heard someone say Canadian bank account funds are guaranteed by the government of Canada to 50K. It would take end of the world Armageddon kind of things, with banks going broke & the government falling, to lose that money. (In which case your cash in your residence is probably going to be useless anyway.) Or, if you use internet banking, you being held responsible for your accounts being hacked & drained.

OTOH if you withdraw 50K in cash from your bank, it is vulnerable from the moment you step outside the doors. A money order might be safer. Keep it in your place in a safe, all it would take is a robber with a weapon to your head to lose it all.

 

[visiting]

I've heard someone say Canadian bank account funds are guaranteed by the government of Canada to 50K. .

it's 100k, but only if they are a member listed here---> http://www.cdic.ca/Pages/Members.aspx

CIDC has a calculator for those who want to see if they are insured... click here-> http://www.cdic.ca/Pages/Calculator.aspx

Current financial position
According to the CDIC's 2010 Annual Report, CDIC protects $590 billion CAD in total eligible deposits, and has $1.95 billion CAD in assets to meet insurance claims.[4] This amount represents 0.33% of total eligible deposits. The CDIC is also authorized to borrow up to $17 billion if necessary from the federal government or the financial markets, and may request further funds from Parliament.


List of financial collapses since 1967
Commonwealth Trust Company 1970
Security Trust Company Limited 1972
Astra Trust Company 1980
District Trust Company 1982
AMIC Mortgage Investment Corporation 1983
Crown Trust Company 1983
Fidelity Trust Company 1983
Greymac Mortgage Corporation 1983
Greymac Trust Company 1983
Seaway Mortgage Corporation 1983
Seaway Trust Company 1983
Northguard Mortgage Corporation 1984
CCB Mortgage Investment Corporation 1985
Canadian Commercial Bank 1985
Continental Trust Company 1985
London Loan Limited 1985
Northland Bank 1985
Pioneer Trust Company 1985
Western Capital Trust Company 1985
Bank of British Columbia 1986
Bank of British Columbia Mortgage Corporation 1986
Columbia Trust Company 1986
North West Trust Company 1987
Principal Savings & Trust Company 1987
Financial Trust Company 1988
Settlers Savings and Mortgage Corporation 1990
Bank of Credit and Commerce Canada 1991
Saskatchewan Trust Company 1991
Standard Loan Company 1991
Standard Trust Company 1991
Shoppers Trust Company 1992
Central Guaranty Mortgage Corporation 1992
Central Guaranty Trust Company 1992
First City Trust Company 1992
First City Mortgage Company 1992
Dominion Trust Company 1993
Prenor Trust Company of Canada 1993
Confederation Trust Company 1994
Monarch Trust Company 1994
Income Trust Company 1995
North American Trust Company 1995
NAL Mortgage Company 1995
Security Home Mortgage Corporation 1996

 

[Big Dog Striker]

No, seriously -- this whole situation is horrible. I can't believe some of the things they propose.

This wouldn't happen during DSK's time at the IMF. Sure he had his weaknesses which is of public knowledge but he was a brilliant head of the IMF and could have been the President of France. That's probably the reason he's gone. :nod:

 

[huggzy]

So...can it happen in Canada???

Apparently the New Zealand National Government and the central bank in New Zealand has been pushing for "Open Bank Resolution" since last year:


http://www.voxy.co.nz/politics/national-planning-cyprus-style-solution-greens/5/150410

http://www.stuff.co.nz/business/money/8452121/Banks-in-NZ-strongly-rejected-OBR

Anyone who thinks that "this can't happen here" is naive. If this can happen in New Zealand then this can happen anywhere and who knows what our own government may be cooking up in their backroom chats.

This won't be the last NZ hears of this resolution.

The only way "this can't happen here" is if we ourselves prevent this from happening, and we don't just sit back and let it happen.

 

[huggzy]

Cyprus now considering 25% levy on deposits more than 100,000 euros in biggest bank

http://www.bbc.co.uk/news/world-europe-21909673

Cyprus says 'significant progress' in debt crisis talks Continue reading the main story

Cyprus has made "significant progress" in talks with the EU and IMF aimed at securing a bailout, Cypriot Finance Minister Michael Sarris has said.

Mr Sarris was also quoted as saying Cyprus was considering a 25% levy on deposits of more than 100,000 euros (£85,000) in its biggest bank.

Cyprus has to raise 5.8bn euros (£4.9bn; $7.5bn) before Monday to secure a 10bn-euro loan.

Parliament has approved restructuring the island's banks, among other moves.

But it rejected a levy earlier this week, before EU pressure brought the proposal back to the table. The rejected proposal included a levy on smaller deposits.

On Saturday afternoon more than 1,000 bank employees marched to the Cypriot finance ministry, stopping briefly at the presidential palace on the way.

Marchers held placards with slogans such as "No to the bankruptcy of Cyprus" and chanted "United we cannot be defeated".

The BBC's Sean Klein at the demonstration says the mood is angry but peaceful as they head on towards parliament.

'Further work'

Mr Sarris was speaking after talks with the "troika" of the EU, the European Central Bank and the International Monetary Fund.

"Significant progress has been made toward an agreement at least with the troika which will report to the Eurogroup," he said.

"Two or three issues need further work."

He said experts were now discussing these issues, and the talks would resume later on Saturday afternoon with the aim of finalising the package.

Cypriot President Nicos Anastasiades and party leaders were considering a trip to Brussels depending on the outcome of the meeting.

The Eurogroup, of 17 eurozone finance ministers, will meet to discuss the Cyprus bailout at 18:00 local time (17:00 GMT) on Sunday, its president Jeroen Dijsselbloem tweeted.

The European Central Bank has given Cyprus until Monday to raise the bailout money.

If Cyprus fails, the ECB said it would cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.

Cyprus now needs to find out what money-raising measures the EU will accept before putting them to a vote, says the BBC's Chris Morris in Nicosia.

He says Germany is essentially writing the rules for the eurozone, and the message coming from Brussels and Berlin is that the money has to come from the banking sector and investors who have benefited from high interest rates over recent years.

Germany has voiced opposition to another measure approved by the Cypriot parliament on Friday - nationalising some pensions to pay into a solidarity fund along with other assets.

Germany has also made it clear that it will no longer accept an economy within the eurozone that is dominated by its status as an economic tax haven, our correspondent adds.

Leading Cypriot bankers have urged parliament to accept a levy, with small savers exempted.

Russian money

On Tuesday, parliament overwhelmingly rejected a levy that would have made small savers pay 6.75%, while larger investors would have paid 9.9%.

The proposal had provoked widespread anger among both ordinary savers and large-scale foreign investors, many of them Russian.

The government fears a levy would prompt foreign investors to withdraw their money, destroying one of the island's biggest industries.

Mr Sarris travelled to Moscow this week to seek Russian support for alternative funding methods, but Russia said it would only act after the EU reached a deal with Cyprus.

Among nine bills approved on Friday, Cyprus MPs voted to restructure the banking sector, starting with the second-largest and most troubled lender, Laiki (Popular) Bank.

Under the restructuring, troubled lenders will be split into so-called good and bad banks, protecting smaller deposits but allowing levies on bigger ones.

There is now speculation that the biggest lender, the Bank of Cyprus, will also be restructured.

Parliament also voted for capital controls to prevent large withdrawals from Cyprus.

Banks in Cyprus have been closed since Monday and many businesses are only taking payment in cash.

Anthanasios Orphanides, former governor of the Cyprus Central Bank, told the BBC that Cyprus was a victim of German domestic political pressures ahead of a general election there later this year.

German Chancellor Angela Merkel and her party needed to avoid being accused of using "German taxpayers' money to pay off Russian oligarchs".

 

[vancity_cowboy]

A solution to a problem it never created.

i'm not so sure about your final statement... germany didn't create the sub-prime mortgage crisis, the usa did that, but germany was certainly the principle architect of the european economic community. the negotiations between the two countries were undertaken as members of the eu. if it wasn't for the eu germany would be telling the cypriots to pound sand

 

[huggzy]

Bank of Cyprus big savers to lose up to 60%

http://www.cbc.ca/news/business/story/2013/03/30/cyprus-bank-deposits.html

A Central Bank official and a senior finance ministry technocrat says Bank of Cyprus savers with over €100,000 could take losses of up to 60 per cent.

The officials, who spoke on condition of anonymity because they're not authorized to publicly discuss details of the issue, said Saturday that deposits over €100,000 ($129,000) at the country's largest lender will lose 37.5 per cent of their value after being converted into bank shares.

They said they could lose up to 22.5 per cent more, depending on an assessment by officials who will determine the exact figure aimed at restoring the troubled bank back to health.

Cyprus agreed Monday to make depositors contribute to a financial rescue in order to secure €10 billion ($12.9 billion) in loans from the eurozone and the IMF.

 

[vancity_cowboy]

Apparently the New Zealand National Government and the central bank in New Zealand has been pushing for "Open Bank Resolution" since last year:


http://www.voxy.co.nz/politics/national-planning-cyprus-style-solution-greens/5/150410

http://www.stuff.co.nz/business/money/8452121/Banks-in-NZ-strongly-rejected-OBR

Anyone who thinks that "this can't happen here" is naive. If this can happen in New Zealand then this can happen anywhere and who knows what our own government may be cooking up in their backroom chats.

This won't be the last NZ hears of this resolution.

The only way "this can't happen here" is if we ourselves prevent this from happening, and we don't just sit back and let it happen.

apparently economists are calling this form of bank stabilization a 'bail in'

have a look at the recently released official 2013 Canadian budget, it contains provisions that will result in depositor haircut bail-ins

from page 144 (page 154 of the pdf):

The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.

i presume 'without the use of taxpayer funds' means WITH the use of depositor funds

also from page 145 (page 155 on the pdf)

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

remember, this is from the official 2013 budget document, which means that they are talking about their plans for THIS YEAR!

time to break out the pitchforks?

http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf

budget documents aren't dreamt up overnight. this means the Canadian government was fully aware of this bail-in technique long before it was trotted out against the cypriot banks

things that make you go hmmmmm...

 

[huggzy]

apparently economists are calling this form of bank stabilization a 'bail in'

have a look at the recently released official 2013 Canadian budget, it contains provisions that will result in depositor haircut bail-ins

from page 144 (page 154 of the pdf):



i presume 'without the use of taxpayer funds' means WITH the use of depositor funds

also from page 145 (page 155 on the pdf)



remember, this is from the official 2013 budget document, which means that they are talking about their plans for THIS YEAR!

time to break out the pitchforks?

http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf

budget documents aren't dreamt up overnight. this means the Canadian government was fully aware of this bail-in technique long before it was trotted out against the cypriot banks

things that make you go hmmmmm...

Well...I've pulled my money out of the banks now and it took me five fucking days to do it (and this is with no financial crisis happening here - I couldn't imagine how helpless I would feel if I was trying to pull my money out when you could see the financial system sinking and the government getting its claws into everything). Am I being paranoid?

I see that the IMF is now visiting Egypt to discuss an emergency bailout there now as well.

 

[PlayfulAlex]

Well...I've pulled my money out of the banks now and it took me five fucking days to do it (and this is with no financial crisis happening here - I couldn't imagine how helpless I would feel if I was trying to pull my money out when you could see the financial system sinking and the government getting its claws into everything). Am I being paranoid?

I see that the IMF is now visiting Egypt to discuss an emergency bailout there now as well.

I'm not ready to close my accounts but I am very concerned that we really don't have other options than the banks. Although, with rates this low, I guess there's not that much difference, if we keep our savings in a box under the bed...

 

[huggzy]

Neil Macdonald: Canada's 'Cyprus solution' for bank defaults

apparently economists are calling this form of bank stabilization a 'bail in'

have a look at the recently released official 2013 Canadian budget, it contains provisions that will result in depositor haircut bail-ins

from page 144 (page 154 of the pdf):



i presume 'without the use of taxpayer funds' means WITH the use of depositor funds

also from page 145 (page 155 on the pdf)



remember, this is from the official 2013 budget document, which means that they are talking about their plans for THIS YEAR!

time to break out the pitchforks?

http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf

budget documents aren't dreamt up overnight. this means the Canadian government was fully aware of this bail-in technique long before it was trotted out against the cypriot banks

things that make you go hmmmmm...

Here's a great summary for the Canadian solution you've pointed out.

http://www.cbc.ca/news/business/story/2013/04/02/f-rfa-macdonald-canada-cyprus-banks.html

Neil Macdonald: Canada's 'Cyprus solution' for bank defaults

Buried deep in last month's federal budget is an ambiguously worded section that has roiled parts of the financial world but has so far been largely ignored by the mainstream media.

It boils down to this: Ottawa is contemplating the possibility of a Canadian bank failure — and the same sort of pitiless prescription that was just imposed in Cyprus.

Meaning no bailout by taxpayers, but rather a "bail-in" that would force the bank's creditors to absorb the staggering losses that such an event would inevitably entail.

If that sounds sobering, it should. While officials in Ottawa are playing down the possibility of a raid on the bank accounts of ordinary Canadians, they chose not to include that guarantee in the budget language.

Canadians tend to believe their banks are safer and more backstopped than elsewhere in the world. The federal government enthusiastically promotes the notion, and loves to take credit for it.

It may well be true, even if Canada's six-bank oligopoly isn't terribly competitive, at least in comparison to the far more diverse American banking universe.

But in the ever-more insecure world that has unfolded since the financial meltdown of 2008, it is also increasingly clear that nothing is safe anymore, not even blue-chip bank stocks and bonds or even, in the case of the Cyprus bail-in, private bank accounts.

And now, Canada is making a bail-in official government policy, too.

"The government proposes to implement a bail-in regime … designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability," says Finance Minister Jim Flaherty's March 21 budget, on page 144.

That would be done, the document says, through the rapid conversion of "certain bank liabilities."

Ottawa's budget document leaves the definition of "certain liabilities" to the reader's imagination.

Bank deposits?

There has been very little public debate about the plan to date, but Finance Department officials and the banks protest it should never be taken to mean small personal deposits would be seized.

Deposits are insured by the Canadian Deposit Insurance Corporation, up to $100,000, and the inviolability of that insurance is key to maintaining the crucial public trust.

"The risk of the Canadian government not honouring its insurance on deposits is as close to zero as you can get," says Craig Alexander, chief economist at TD Canada Trust.

Perhaps.

As the Cyprus meltdown proceeded, it became clear that Europe's finance ministers and central banks, encouraged by the International Monetary Fund, were not only willing to freeze and seize uninsured deposits over 100,000 euros, they were also initially willing to cancel deposit insurance and go after small depositors, too.

In the end, the plan was rewritten, and insured deposits were protected. But the signal had been sent: The Europeans and the IMF had been prepared to do the unthinkable.

Holland's finance minister then declared that bail-ins would be the template for all future bank rescues in Europe, and that he could not rule out seizure of deposits elsewhere.

"It was a monumentally stupid thing to do," says TD Canada Trust's Alexander. "I do not believe we would ever see that in Canada.

"I think the international community will have learned from their mistake. And it was a huge mistake."

High-risk bonds

So what does Canada have in mind with its proposed bail-in scheme?

The aim is virtuous: Canada wants to erase the enormous moral hazard created by the concept of "too big to fail."

Americans still burn with anger at the decision to reward irresponsible, even fraudulent bankers with trillions in public bailout money, while the rest of the country sank into recession. Canadian tax money was also used to prop up banks and the automotive industry.

In ruling out future bailouts, Ottawa's logic is simple: Make it clear there is no tax-funded safety net, and you discourage reckless behaviour, protecting taxpayers in the process.

That leaves the question, though, of how to save a sinking bank, something that would devastate the economy. (Although one has to assume that by the time a Canadian bank started sinking, the economy would already be in a nightmare.)

As things currently stand, if a big-six bank began to fail its shares would tank, and investors would lose everything. A run would begin, and the bank would flounder, desperate for capital. Credit markets would also likely freeze.

Without government intervention, the bank would be placed in receivership, and its bondholders would carve up what would be left of the bank's assets.

What Ottawa intends to propose — the concept has been discussed for a few years now in the rarefied circles of monetary experts — is the creation of a new type of higher-risk bank bond known as "contingent capital."

The bondholder would enjoy a higher-than-normal return, maybe even a much higher-than-normal return.

But it would be understood that in the event of a threatened failure, the bond would be converted to shares, meaning potentially a total loss for the bondholder, and a source of capital for the bank.

Think of it as a kind of pre-approved loan for the bank itself.

Trust in government

In a speech, Mark Carney, Canada's departing central banker, has called publicly for just such a system.

At TD Canada Trust, Alexander says this kind of system would make the banks stronger.

But he also notes that many Canadians believe, mistakenly, that their RRSPs and other holdings are safe and insured, too, up to the $100,000 threshold.

They don't often realize that government bonds as well as stocks and mutual funds are among the investments that don't qualify for CDIC insurance.

As to whether small, insured deposits are safe in the event of a failure, that boils down to a question of trust in government.

Christine Lagarde, head of the IMF, was prepared to seize a portion of all deposits in Cyprus. So was the European Central Bank, and so were Europe's finance ministers.

Holland's finance minister, who led the euro-group effort, later "clarified," his statement about seizing deposits elsewhere, saying that Cyprus was clearly a "one-off" event.

But then so, supposedly, was the massive haircut imposed on the unfortunate holders of Greek sovereign bonds last year.

The fact is, if Ottawa is seriously contemplating the failure of a Canadian bank, ordinary Canadians might want to do the same, and govern themselves accordingly.