No. of Recommendations: 5
Terms for their banks are now much closer to a traditional bankruptcy, with bondholders and deposits above €100'000 getting a decent haircut in Bank of Cyprus' case, while being wiped out in case of Bank Laiki... Laiki (Popular Bank) will be wound up overnight... The Bank of Cyprus... will have to endure a major "haircut" - a forced wipeout of investment value, on all deposits of more than 100,000 ($A124,899)... the lion's share of the island's Russian deposits.

It only took 5 years and innumerable bailouts of other banks (and governments) for the EU to finally let go of insolvent banks. Unfortunately, the deal concentrates losses on particular discrete individuals, some of whom will lose virtually everything they have. Not all these individuals are Russians, either.

I heard Maria Caruso-Cabrera interview a Cypriot single mother with two kids who, in one fell swoop, will lose her bank job and her life savings in Popular Bank. This lady (shedding genuine tears) is not the only one, I'm sure.

Although I have never supported bank bailouts - including Citi and the rest, I find it very sad that everyone in the world has been led to believe that large banks cannot fail (TBTF/TBTJ). Obviously, it is merely large banks in small countries that can fail.

Large depositors are indirectly being told they must only deposit large sums in large banks in large countries. That is, except for Luxembourg, Liechtenstein and Switzerland, which presumably have the resources to stand behind their banks. I wonder if that is, in fact the case.

Between the Russians and the Cypriots (and possibly some European expats living in Cyprus), there are more than a few who will lose virtually everything. After bailing out banks in Ireland, Portugal, Spain, Belgium and even Greece, the authors of this deal will be seen by those affected as having purposely singled out and targeted individuals in Cyprus.

I fear that another Gavrilo Princip will be created out of all this.* If I were among the European powers-that-be, I would consider going into hiding for a while.


* This is a big problem in a world where the prevailing zeitgeist involves a small group of "elite leaders" picking "winners and losers" - in a seemingly arbitrary manner.
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