Cyprus Banking Confiscation is Spreading

Cyprus-Style Wealth Confiscation Is Now Starting To Happen All Over The Globe

Michael Snyder
Economic Collapse
September 25, 2013

Now that “bail-ins” have become accepted practice all over the planet, no bank account and no pension fund will ever be 100% safe again.  In fact, Cyprus-style wealth confiscation is already starting to happen all around the world.  As you will read about below, private pension funds were just raided by the government in Poland, and a “bail-in” is being organized for one of the largest banks in Italy.  Unfortunately, this is just the beginning.  The precedent that was set in Cyprus is being used as a template for establishing bail-in procedures in New Zealand, Canada and all over Europe.  It is only a matter of time before we see this exact same type of thing happen in the United States as well.  From now on, anyone that keeps a large amount of money in any single bank account or retirement fund is being incredibly foolish.

Let’s take a look at a few of the examples of how Cyprus-style wealth confiscation is now moving forward all over the globe…

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Investors exit gold: ‘Panic is everywhere’

Precious metal enters bear-market territory for 1st time in 12 years

File:Gold Bars.jpg

(CNBC) Gold prices continued to plummet Monday on concern that Cyprus will have to sell excess reserves of the precious metal to raise about $522 million to help finance that country’s $13 billion international bailout, Dennis Gartman, editor of The Gartman Letter, told CNBC.

“There are a lot of people throwing up their hands. Throwing positions overboard. Panic is everywhere,” Gartman said in a “Squawk Box” interview on Monday. “I’ve never seen anything like this. I mean it.”

Gold prices broke below $1,400 Monday, their lowest level since March 2011. “Here we are under [$1,400],” Gartman observed. “Who would have thought it? Not I.”

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British widow: ‘I face ruin from Cyprus crisis’

Sharon Connor stands to lose upwards of €50,000 after her profits from a house sale remain frozen in a bank on the island

Sharon Connor

The Observer, Saturday 13 April 2013

Sharon Connor, the money from the sale of her house in Cyprus is frozen in the Cyprus bank crisis. Photograph: Graham Turner for the Guardian

Tragedy first struck Sharon Connor when her husband, Gary, was killed by a heart attack in January last year. He had just turned 54. From running a successful scuba-diving business on Cyprus, the mother-of-two found herself catapulted into a world of grief, unable to even visit the ornate, two-storey villa the couple had bought on the island.

“It took me five months before I could set foot in the place,” said Connor, who was on her own when she found her husband dead in bed. “I still have flashbacks and see it in my head all the time.”

In March the widow decided to put the property on the market. In the space of three days she had found a buyer, located a new home in the UK and a job outside London. “I was trying to move forward with my life,” the 55-year-old told the Observer from Kent, “until I found myself caught up in the nightmare scenario that has befallen Cyprus”.

This weekend the Briton faces the prospect of financial ruin following the shattering news that the proceeds from her house sale – €181,000 (£155,000) – will remain frozen in the Bank of Cyprus as a result of capital controls enforced to contain the crisis.

As the size of Cyprus’s bailout requirements swelled from €17bn to €23bn, she learned that the money, deposited in a special account for the purposes of the transaction, could not be transferred to the UK. Now she lives in fear that, like other depositors with more than €100,000 in Cyprus, she will also fall victim to the raid on savings that the Cypriot government has been ordered to implement as the price of international aid.

“It is totally unfair. My funds should not be frozen, as they are not savings that have been accruing interest,” said Connor, whose misfortune was that the money hit her account two hours before the close of business on 15 March.

“It was money from a real estate sale that was supposed to be in the bank for a single day. The same day it went in, I sent an email instructing the bank to transfer the funds – some of which were in euros and some in sterling – to the UK, but on Saturday morning the news broke that Cypriot banks were in major financial difficulty.”

Ever since then Connor, who was due last week to buy a three-bedroom semi in Kent, has been battling to get her money released. She has written to “everyone who is anyone”, including David Cameron and Angela Merkel, and started a Facebook campaign called “Gary and Sharon v Merkel”.

“Every day is a struggle,” said the widow, who is from Welling in south-east London. “I was set on moving on after Gary passed last year and had everything in motion when, overnight, my world was turned upside down again … it is a scenario that had made me physically ill.”

Connor has calculated that she could lose €50,000 (£42,000) as a result of the emergency levy that Nicosia must now enact to qualify for financial assistance from the EU and the International Monetary Fund. Revelations that the beleaguered Cypriot government will have to find almost double the amount to meet the terms of the €10bn bailout – amid signs that the EU’s wealthy north has tired of rescuing the bloc’s heavily indebted south – have only sharpened her anguish. “Now I live in worry that with the latest news that Cyprus’s bailout requirements are going to be much bigger than thought, depositors will suffer even more,” she said.

Connor had hoped to be exempted from the levy – along with other special cases – but her appeal for dispensation was turned down by the island’s central bank last week. On Friday she was told by the Bank of Cyprus that it was seeking clarification. “I asked my representative at the Bank of Cyprus to put forward my appeal to the central bank, and in turn they asked for the contract of sale and solicitors’ details,” she recalled. “Last week the central bank committee declined the request. I was also told that I cannot transfer any funds from my accounts to the UK.”

In a cruel twist of fate, the sale was due to have been completed a week earlier. “A document was missing from the necessary paperwork that prevented the deal from being closed,” she said. “Had the transaction gone through as originally planned, the funds would now be in my British bank account.”

Connor, who also has five grandchildren, has now been forced to cash in her two private pension schemes to make ends meet. “I have my furniture in storage with no way of knowing when, or if, I can purchase my own property,” she said. “The local council will not put me on their housing register as I have funds from the sale of a house in the bank, albeit I cannot access them.”

Had it not been for the help of friends and family, she says, she might not have got through the ordeal. “If it was not for the goodness of my sister, Theresa, and other family members, I would be homeless,” she said. “I live in hope that common sense will prevail and I will receive what is rightfully mine. This is money that my husband and I have accumulated and worked for our whole lives.”

Big depositors in Cyprus to lose far more than feared

Cyprus' President Nicos Anastasiades addresses the nation with a televised speech from the presidential palace in Nicosia March 25, 2013. REUTERS-Petros Karadjias-Pool

Customers queue up outside a branch of Laiki Bank as they wait for the reopening of the bank in Nicosia March 28, 2013. REUTERS-Yorgos Karahalis

An employee opens a safe inside a Bank of Cyprus branch before it opened in Nicosia March 28, 2013. REUTERS-Yannis Behrakis

By Michele Kambas

NICOSIA | Fri Mar 29, 2013 4:16pm EDT

(Reuters) – 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.

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

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,” he said.

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.

Cyprus’s difficulties have sent jitters around the fragile single European currency zone, and led to the imposition of capital controls in Cyprus to prevent a run on banks by worried Cypriots and wealthy foreign depositors.

“CYPRUS EURO”

Banks reopened on Thursday after an almost two-week shutdown as Cyprus negotiated the rescue package. In the end, the reopening was largely quiet, with Cypriots queuing calmly for the 300 euros they were permitted to withdraw daily.

The imposition of capital controls has led economists to warn that a second-class “Cyprus euro” could emerge, with funds trapped on the island less valuable than euros that can be freely spent abroad.

Anastasiades said the restrictions on transactions – unprecedented in the currency bloc since euro coins and banknotes entered circulation in 2002 – would be gradually lifted. He gave no time frame but the central bank said the measures would be reviewed daily.

He hit out at banking authorities in Cyprus and Europe for pouring money into the crippled Laiki.

“How serious were those authorities that permitted the financing of a bankrupt bank to the highest possible amount?” Anastasiades said.

The president, barely a month in the job and wrestling with Cyprus’s worst crisis since a 1974 war split the island in two, accused the 17-nation euro currency bloc of making “unprecedented demands that forced Cyprus to become an experiment”.

European leaders have insisted the raid on big bank deposits in Cyprus is a one-off in their handling of a debt crisis that refuses to be contained.

MODEL

But policymakers are divided, and the waters were muddied a day after the deal was inked when the Dutch chair of the euro zone’s finance ministers, Jeroen Dijsselbloem, said it could serve as a model for future crises.

Faced with a market backlash, Dijsselbloem rowed back. But on Friday, European Central Bank Governing Council member Klaas Knot, a fellow Dutchman, said there was “little wrong” with his assessment.

“The content of his remarks comes down to an approach which has been on the table for a longer time in Europe,” Knot was quoted as saying by Dutch daily Het Financieele Dagblad. “This approach will be part of the European liquidation policy.”

The Cyprus rescue differs from those in other euro zone countries because bank depositors have had to take losses, although an initial plan to hit small deposits as well as big ones was abandoned and accounts under 100,000 euros were spared.

Warnings of a stampede at Cypriot banks when they reopened on Thursday proved unfounded.

For almost two weeks, Cypriots were on a ration of limited withdrawals from bank cash machines. Even with banks now open, they face a regime of strict restrictions designed to halt a flight of capital from the island.

Some economists say those restrictions will be difficult to lift. Anastasiades said the capital controls would be “gradually eased until we can return to normal”.

The government initially said the controls would stay in place for seven days, but Foreign Minister Ioannis Kasoulides said on Thursday they could last “about a month”.

On Friday, easing a ban on cheque payments, Cypriot authorities said cheques could be used to make payments to government agencies up to a limit of 5,000 euros. Anything more than 5,000 euros would require Central Bank approval.

The bank also issued a directive limiting the cash that can be taken to areas of the island beyond the “control of the Cypriot authorities” – a reference to Turkish-controlled northern Cyprus which considers itself an independent state. Cyprus residents can take 300 euros; non-residents can take 500.

Under the terms of the capital controls, Cypriots and foreigners are allowed to take up to 1,000 euros in cash when they leave the island.

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Cyprus President’s Family Transferred Tens Of Millions To London Days Before Deposit Haircuts

zerohedge.com
March 31, 2013

A day after former Cypriot President Vassilou was found to be among many elite Cypriot (politicians and businessmen) who had loans written-off by the major (now insolvent) banks; it appears the rot is far fouler than expected. In a somewhat stunning (or purely coincidental) revelation, ENETEnglish reports that Cypriot newspaper Haravgi claims that current President Nicos Anastasiades’ family businesses transferred ‘dozens of millions’ from their Laiki Bank accounts to London just a week before the devastating depositor haircuts were unleashed upon his people. Of course, the denials are loud and Anastasiades has demanded an investigation into the claims; we are sure the government-selected ‘independent’ committee will be as thorough as the Libor anti-trust investigators. As a reminder, as we noted yesterday, here are Cyprus’ gun control laws.

Via EnetEnglish,

A company owned by in-laws of Cypriot President Nicos Anastasiades withdrew dozens of millions from Laiki Bank on March 12 and 13, according to an article published in Cypriot newspaper Haravgi.

The newspaper, which is affiliated to the communist-rooted AKEL party, reports that three days before the Eurogroup meeting the company took five promissory notes worth €21m from Laiki Bank and transferred the money to London.

Responding to the allegations, Anastasiades said: “The attempt to defame companies or people linked to my family… is nothing but an attempt to distract people from the liability of those who led the country to a state of bankruptcy.

The president added that no one, including himself, will be exempt from the ongoing investigations looking into responsibilities over the near collapse of the economy.

Anastasiades added that when the investigative committee convenes on Tuesday, he will request that its members look into this particular case with the same attentiveness as all other cases.

The company in question has firmly denied the reports.

Last Friday a list of companies and politicians that had loans written off by banks at the heart of Cyprus’ bailout crisis was published in Greece and was subsequently handed to the Cypriot parliament’s ethics committee. The list includes the names of politicians from Cyprus’ biggest parties (excluding the socialist EDEK and the Greens).

This article was posted: Sunday, March 31, 2013 at 5:20 pm

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This Is What It Feels Like To Have Your Life Savings Confiscated By The Global Elite

Flag of the Turkish Republic of Northern Cyprus

Michael Snyder
Economic Collapse

March 30, 2013

What would you do if you woke up one day and discovered that the banksters had “legally” stolen about 80 percent of your life savings?  Most people seem to assume that most of the depositors that are getting ripped off in Cyprus are “Russian oligarchs” or “wealthy European tycoons”, but the truth is that they are only just part of the story.  As you will see below, there are small businesses and aging retirees that have been absolutely devastated by the wealth confiscation that has taken place in Cyprus.  Many businesses can no longer meet their payrolls or pay their bills because their funds have been frozen, and many retirees have seen retirement plans that they have been working toward for decades absolutely destroyed in a matter of days.  Sometimes it can be hard to identify with events that are happening on the other side of the globe, but I want you to try to put yourself into their shoes for a few minutes.  How would you feel if something like this happened to you?

For example, just consider the case of one 65-year-old retiree that has had his life savings totally wiped out by the “wealth tax” in Cyprus.  His very sad story was recently featured by the Sydney Morning Herald

”Very bad, very, very bad,” says 65-year-old John Demetriou, rubbing tears from his lined face with thick fingers. ”I lost all my money.”

John now lives in the picturesque fishing village of Liopetri on Cyprus’ south coast. But for 35 years he lived at Bondi Junction and worked days, nights and weekends in Sydney markets selling jewellery and imitation jewellery.

He had left Cyprus in the early 1970s at the height of its war with Turkey, taking his wife and young children to safety in Australia. He built a life from nothing and, gradually, a substantial nest egg. He retired to Cyprus in 2007 with about $1 million, his life savings.

He planned to spend it on his grandchildren – some of whom live in Cyprus – putting them through university and setting them up. There would be medical bills; he has a heart condition. The interest was paying for a comfortable retirement, and trips back to Australia. He also toyed with the idea of buying a boat.

He wanted to leave any big purchases a few years, to be sure this was where he would spend his retirement. There was no hurry. But now it is all gone.

”If I made the decision to stay, I was going to build a house,” John says. ”Unfortunately I didn’t make the decision yet.

”I went to sleep Friday as a rich man. I woke up a poor man.”

You can read the rest of the article right here.

How would you feel if you suddenly lost almost everything that you have been working for your entire life?

And many small and mid-size businesses have been ruined by the bank account confiscation that has taken place in Cyprus.

The following is a bank account statement that was originally posted on a Bitcoin forum that has gone absolutely viral all over the Internet.  One medium size IT business has lost a staggering amount of money because of the “bail-in” that is happening in Cyprus…

Cyprus Bank Account Confiscation

The following is what the poster of this screenshot had to say about what this is going to do to his business…

Over 700k of expropriated money will be used to repay country’s debt. Probably we will get back about 20% of this amount in 6-7 years.

I’m not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.

The business is definitely ruined, all Cypriot workers to be fired.
We are moving to small Caribbean country where authorities have more respect to people’s assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.

Special thanks to:

– Jeroen Dijsselbloem
– Angela Merkel
– Manuel Barroso
– the rest of officials of “European Comission”

With each passing day, things just continue to get worse for those with deposits of over 100,000 euros in Cyprus.  A few hours ago, a Reuters story entitled “Big depositors in Cyprus to lose far more than feared” declared that the initial estimates of the losses by big depositors in Cyprus were much too low.

And of course the truth is that those that have had their deposits frozen will be very fortunate to ever see any of that money ever again.

But just a few weeks ago, the Central Bank of Cyprus was swearing that nothing like this could ever possibly happen.  Just check out the following memo from the Central Bank of Cyprus dated “11 February 2013″ that was recently posted on Zero Hedge

Central Bank of Cyprus Memo

Sadly, the truth is that the politicians will lie to you all the way up until the very day that they confiscate your money.

You can believe our “leaders” when they swear that nothing like this will ever happen in the United States, in Canada or in other European nations if you want.

But I don’t believe them.

In fact, as an outstanding article by Ellen Brown recently detailed, the concept of a “bail-in” for “systemically important financial institutions” has been in the works for a long time…

Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.

If you do not believe that what just happened in Cyprus could happen in the United States, you need to read the rest of her article.  The following is an extended excerpt from that article

*****

Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay. (See here and here.) But until now the bank has been obligated to pay the money back on demand in the form of cash. Under the FDIC-BOE plan, our IOUs will be converted into “bank equity.”  The bank will get the money and we will get stock in the bank. With any luck we may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account so they can have ready cash to pay the bills.

The 15-page FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.”  It begins by explaining that the 2008 banking crisis has made it clear that some other way besides taxpayer bailouts is needed to maintain “financial stability.” Evidently anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite, the authors state:

An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.

No exception is indicated for “insured deposits” in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks.  The directive is called a “resolution process,” defined elsewhere as a plan that “would be triggered in the event of the failure of an insurer . . . .” The only  mention of “insured deposits” is in connection with existing UK legislation, which the FDIC-BOE directive goes on to say is inadequate, implying that it needs to be modified or overridden.

*****

You can find the rest of her excellent article right here.  I would encourage everyone to especially pay attention to what she has to say about derivatives.

Sadly, what is happening in Cyprus right now is just the continuation of a trend.  In recent years, governments all over the world have turned to the confiscation of private wealth in order to solve their financial problems.  The following examples are from a recent article posted on Deviant Investor

October 2008 – Argentina’s leftist government, facing a gigantic revenue shortfall, proposes to nationalize all private pensions so as to meet national debt payments and avoid its second default in the decade.

November 2010 – Headline – Hungary Gives Its Citizens an Ultimatum: Move Your Private Pension Fund Assets to the State or Permanently Lose Your Pension – This is an effective nationalization of all pensions.

November 2010 – Ireland elects to appropriate ten billion euros from its National Pension Reserve Fund to help fund an eighty-five billion euro rescue package for its besieged banks. Ireland also moves to consider a regulatory move that compels some private Irish pension funds to hold more Irish government debt, thereby providing the state with a captive investor base but hugely raising the risk for savers.

December 2010 – France agrees to transfer twenty billion euros worth of assets belonging to its Fonds de Reserve pour les Retraites (FRR), the funded portion of its retirement system, to help pay off recurring social benefits costs. No pensioners are consulted.

April 2012 – Argentina announces that its Economy Ministry has taken an emergency loan from the national pension fund in the amount of $4.3 billion. No pensioners were consulted.

June 2012 – Treasury Secretary Timothy Geithner unilaterally appropriates $45 billion from US federal pension funds to help tide over US deficits for the remainder of fiscal year 2011.

January 2013 – Treasury Secretary Geithner again announces that the government has begun borrowing from the federal employees pension fund to keep operating without passing the approaching “fiscal cliff” debt limit. The move effectively creates $156 billion in borrowing authority from federal pension funds.

March 2013 – Open Bank Resolution finance minister, Bill English, is proposing a Cyprus style solution for potential New Zealand bank failures. The reserve bank is in the final stages of establishing a rescue scheme which will put all bank depositors on the hook for bailing out their banks. Depositors will overnight have their savings shaved by the amount needed to keep distressed banks afloat.

Can you see the pattern?

As I wrote about the other day, no bank account, no pension fund, no retirement account and no stock portfolio will be able to be considered 100% safe ever again.

And once the global derivatives casino melts down, there are going to be a lot of major banks that are going to need to be “bailed in”.

When that day arrives, they are going to try to come after your money.

So don’t leave your entire life savings sitting in a single bank – especially not one of the banks that has a tremendous amount of exposure toderivatives.

Hopefully we can get more people to wake up and realize what is happening.  We are moving into a time of great financial instability, and what worked in the past is not going to work in the future.

Be smart and get prepared while you still can.

Time is running out.

This article was posted: Saturday, March 30, 2013 at 5:00 am

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Cyprus-Style “Bail-Ins” Are Proposed In The New 2013 Canadian Government Budget!

Michael Snyder
Economic Collapse
March 29, 2013

The politicians of the western world are coming after your bank accounts.  In fact, Cyprus-style “bail-ins” are actually proposed in the new Canadian government budget.  When I first heard about this I was quite skeptical, so I went and looked it up for myself.  And guess what?  It is right there in black and white on pages 144 and 145 of “Economic Action Plan 2013″ which the Harper government has already submitted to the House of Commons.  This new budget actually proposes “to implement a ‘bail-in’ regime for systemically important banks” in Canada.  “Economic Action Plan 2013″ was submitted on March 21st, which means that this “bail-in regime” was likely being planned long before the crisis in Cyprus ever erupted.  So exactly what in the world is going on here?  In addition, as you will see below, it is being reported that the European Parliament will soon be voting on a law which would require that large banks be “bailed in” when they fail.  In other words, that new law would make Cyprus-style bank account confiscation the law of the land for the entire EU.  I can’t even begin to describe how serious all of this is.  From now on, when major banks fail they are going to bail them out by grabbing the money that is in your bank accounts.  This is going to absolutely shatter faith in the banking system and it is actually going to make it far more likely that we will see major bank failures all over the western world.

What you are about to see absolutely amazed me when I first saw it.  The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada.

The following comes from pages 144 and 145 of “Economic Action Plan 2013″ which you can find right here.  Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…

Canada’s large banks are a source of strength for the Canadian economy.  Our large banks have become increasingly successful in international markets, creating jobs at home.

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.

So if taxpayer funds will not be used to bail out the banks, how will it be done?  Well, the Canadian government is actually proposing that a “bail-in” regime be implemented…

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.

So if the banks take extreme risks with their money and lose, “certain bank liabilities” (i.e. deposits) will rapidly be converted into “regulatory capital” and the banks will be saved.

In other words, the banks will just be allowed to grab money directly out of your bank accounts to recapitalize themselves.

That may sound completely and utterly insane to us, but this is how things will now be done all over the western world.

Sometimes a “bail-in” can be done by just converting unsecured debt into equity, but as we just saw in Cyprus, often when there is a major bank failure a lot more money is required to “fix the banks” than can possibly be raised by converting unsecured debt into equity.  That is when it becomes very tempting to dip into uninsured back accounts.

In fact, some European politicians are openly admitting as much.  According to RT, the European Parliament will soon be voting on a new law which will make Cyprus-style bank account confiscation a permanent part of the solution when major banks fail throughout the EU…

A senior lawmaker told Reuters the Cyprus model may not be an isolated case, and is perhaps a future template in dealing with troubled European banks.

The new template is now likely to turn into a full-scale EU law, letting taxpayers off the hook in case a bail-out is needed, but imposing major losses on bigger savers on a permanent basis.

“You need to be able to do the bail-in as well with deposits,” said Gunnar Hokmark, member of European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks, Reuters reported.

“Deposits below 100,000 euros are protected … deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in,” Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed the idea.

The European Commission has written the draft of the law, which now awaits approval from eurozone member states and the parliament on whether and when it can be implemented. It’s been reported, the law is planned to take effect in the beginning of 2015.

Are you starting to understand?

The other day when I said that “The Global Elite Are Very Clearly Telling Us That They Plan To Raid Our Bank Accounts“, I was not exaggerating.

And for those in Cyprus with deposits of over 100,000 euros, the news just keeps getting worse and worse.

When the crisis first erupted, they were told that 10 percent of all deposits over 100,000 euros would be confiscated.

Then a few days later they were told that it would be 40 percent.

Now, according to the Washington Post, those with deposits over 100,000 euros at the second largest bank in Cyprus may lose as much as 80 percent of those deposits…

A deal was finally reached in Brussels with other euro countries and the International Monetary Fund early Monday. The country’s second-largest bank, Laiki, is to be split up, with its healthy assets being absorbed into the Bank of Cyprus. Savers with more 100,000 euros ($129,000) in either Bank of Cyprus and Laiki will face big losses. At Laiki, those could reach as much as 80 percent of amounts above the 100,000 insured limit; those at Bank of Cyprus are expected to be much lower.

Sadly, the truth is that those people will be lucky to ever see any of that money ever again.

How would you feel if someone came along and wiped out your life savings so that banks that took incredibly reckless risks could be bailed out?

Needless to say, a lot of people in Cyprus are very, very angry right now.  The following reactions from outraged depositors in Cyprus are from Sky News

“They have stolen our money,” Milton Loucas told Sky News.

“I have been working for 60 years. I am 80 years old. I cannot work again for my living – they have cut the lot.

“Our money, our social insurance – they have cut them. How are we going to live?”

Another Cypriot, Stelios, came out of the bank empty handed.

“I tried to get my February wages and they gave me a piece of paper only,” he said.

“I have two children in the army and they asked for money – I don’t have money to give them.

“The Government didn’t pay anybody. My old parents didn’t get their pension.”

A lot of people have just had their entire lives turned upside down.

But there were some people that were told ahead of the crisis and were able to get their money out in time.

According to the BBC, foreigners pulled a whopping 18 percent of their money out of Cyprus banks during the month of February alone…

Information from the Central Bank of Cyprus released on Thursday showed that foreign depositors had already withdrawn 18% of their cash from the nation’s banks during February, before the current crisis hit home.

So how did they know to pull their money out and who told them?

In addition, branches of the two largest banks in Cyprus were kept open in Moscow and London even after all of the banks in Cyprus itself were shut down.  So wealthy Russians and wealthy Brits have been able to take all of their money out of those banks while the people of Cyprus have been unable to.  It is hard to even find the words to describe how unfair that is.  The following is from a recent article by Mark J. Grant

So let us then turn back to Cyprus and see why the Russians are not quite so upset as they were at the beginning of the crisis. The answer to this question is Uniastrum bank which is headquartered in Moscow. Eighty percent (80%) is owned by the Bank of Cyprus. After the crisis began and right up until the capital controls were implemented the bank was open for business with no restrictions upon withdrawals. So the crisis began, was all over the Press and the Russian depositors walked into the local bank and withdrew their money from Uniastrum, the Bank of Cyprus, or had it wired in from the other local Cyprus banks and it was then withdrawn. Problem solved!

At the same time Laiki bank and the Bank of Cyprus had operating branches in London. There were no restrictions there either so people could walk into those banks and withdraw their money as well. No restrictions at all right up until the time of the Capital Controls. In the meantime, in Cyprus, people and institutions could not get at their money so the Russians and many British took out their money, closed their accounts while the people in Cyprus were left high and dry.

The wealthy always seem to come out ahead somehow, don’t they?

Meanwhile, those in Cyprus with deposits under 100,000 euros are now dealing with some very stringent capital controls.  In other words, there are some very tight restrictions on what they can do with their money.  For example, the maximum daily cash withdrawal has been set at 300 euros.  The following are some of the other restrictions that are in force right now

As well as the daily withdrawal limit, Cypriots may not cash cheques.

Payments and/or transfers outside Cyprus via debit and or credit cards are allowed up to 5,000 euros per person per month.

Transactions of 5,000-200,000 euros will be reviewed by a specially established committee, with applications for those over 200,000 euros needing individual approval.

Travellers leaving the country will only be allowed to take 1,000 euros with them.

When the next great wave of the economic collapse strikes, capital controls and bank account confiscation will suddenly become “normal” all over the world.

So get prepared while you still can.

One thing that you can do is make sure that you don’t have all of your eggs in one basket.  The following is what Jim Rogers recently told CNBC

“I, for one, am making sure I don’t have too much money in any one specific bank account anywhere in the world, because now there is a precedent,” he said. “The IMF has said ‘sure, loot the bank accounts’ the EU has said ‘loot the bank accounts’ so you can be sure that other countries when problems come, are going to say, ‘well, it’s condoned by the EU, it’s condoned by the IMF, so let’s do it too.’”

The more places that you have your money, the more difficult it will be for “the powers that be” to loot it.

The global elite are fundamentally changing the game.  From now on, no bank account on earth will ever be able to be considered “100% safe” again.  This is going to create an atmosphere of fear and panic, and no financial system can operate normally when you destroy the confidence that people have in it.

Confidence is a funny thing – it can take decades to build, but it can be destroyed in a single moment.

None of us will ever be able to have confidence in our bank accounts again, and I fear that the next wave of the economic collapse may be closer than I had first anticipated.

This article was posted: Friday, March 29, 2013 at 6:21 am

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Words Of Warning: Get Your Money Out Of European Banks

Central bank of cyprus

Central bank of cyprus (Photo credit: Wikipedia)

 

Michael Snyder
Economic Collapse
March 25, 2013

 

If you still have money in European banks, you need to get it out.  This is particularly true if you have money in southern European banks.  As I write this, the final details of the Cyprus bailout are being worked out, but one thing has become abundantly clear: at least some depositors are going to lose a substantial amount of money.  Personally, I never dreamed that they would go after private bank accounts in Europe, but now that this precedent has been set it should be apparent to everyone that no bank account will ever be considered 100% safe ever again.  Without trust, a banking system simply cannot function, and right now there are prominent voices on both sides of the Atlantic that are loudly warning that trust in the European banking system has been shattered and that people need to get their money out of those banks as rapidly as they can.  Even if you don’t end up losing a significant chunk of your money, you could still end up dealing with very serious capital controls that greatly restrict what you are able to do with your money.  Just look at what is already happening in Cyprus.  Cash withdrawals through ATMs have now been limited to 100 euros per day, and when the banks finally do reopen there will be strict limits on financial transactions in order to prevent a full-blown bank run.  And of course anyone with half a brain will be trying to get as much of their money as they can out of those banks once they do reopen.  So the truth is that the problems for Cyprus banks are just beginning.  The size of the “bailout” that will be needed to keep those banks afloat will just keep getting larger and larger the more money that is withdrawn.  Cyprus is heading for a complete and total banking meltdown, and because the economy of the island is so dependent on banking that means that the economy of the entire nation is going to collapse.  Sadly, similar scenarios will soon start playing out all over Europe.

 

So if you hear that a “deal” has been reached to “bail out” Cyprus, please keep in mind that the economy of Cyprus is going to collapse no matter what happens.  It is just a matter of apportioning the pain at this point.

 

According to the New York Times, it looks like much of the pain is going to be placed on the backs of those with deposits of over 100,000 euros…

 

The revised terms under discussion would assess a one-time tax  of 20 percent on deposits above 100,000 euros at the Bank of Cyprus, which has the largest number of savings accounts on the island. Because the Bank of Cyprus suffered huge losses on bets that it took on Greek bonds, the government appears to be taking  depositors’ money to help plug the hole.

A separate tax of 4 percent would be assessed on uninsured deposits at all other banks, including the 26 foreign banks that operate in Cyprus.

 

Does that sound bad to you?

 

Well, if a deal is not reached, there is a possibility that those with uninsured deposits could lose everything.  According to Ekathimerini, EU officials are telling Cyprus to choose between a “bad scenario” and a “very bad scenario”…

 

The main question surrounds the future of the island’s largest lender, Bank of Cyprus. If unsecured deposits (above 100,000 euros) at all Cypriot banks are taxed then large savings at Bank of Cyprus are likely to be taxed between 20 and 25 percent. If the levy is not imposed on deposits at other lenders, the haircut for Bank of Cyprus customers will be much larger.

The option of a full bail in of Bank of Cyprus depositors is still on the table. As with the Popular Bank of Cyprus (Laiki), which is to go through a resolution process, the full bail in option could lead to deposits above 100,000 euros being lost. The only compensation for unsecured depositors will be shares in the “good” bank that will be created by a possible merger between the “healthy” Laiki and Bank of Cyprus entities.

When asked by Kathimerini how the Cypriot economy will survive if all company and personal deposits above 100,000 euros disappear from the country’s two biggest lenders, the EU official said: “Unfortunately, Cyprus’s choices are between a bad scenario and a very bad scenario.”

 

So what percentage of the deposits in Cyprus are uninsured deposits?

 

Well, nobody knows for sure, but according to JPMorgan close to halfof the total amount of money on deposit in EU banks as a whole is uninsured.

 

Do you think that some of those people will start moving their money to safer locations after watching how things are going down in Cyprus?

 

They would be crazy if they didn’t.

 

And if you think that “deposit insurance” will keep you safe, you are just being delusional.

 

According to CNBC, very strict capital controls are coming to Cyprus.  These rules will apply even to accounts that contain less than 100,000 euros…

 

Financial controls are coming. Depositors with less than 100,000 euros may not lose their money outright, but they won’t like the restrictions–no matter how much they have in the bank. Limits on withdrawals, limits on check cashing, and perhaps even outright conversion of checking accounts into fixed term deposits are coming (translation: you don’t have a checking account, you have a bond from the bank).

 

A lot of people are going to lose a lot of money in Cyprus banks, and a significant percentage of them are going to be Russian.

 

And as I wrote about the other day, you don’t want to have the Russians mad at you.

 

According to the Guardian, Moscow is already considering various ways that it might “punish” the EU…

 

However, with Russian investors having an estimated €30bn (£26bn) deposited in banks on the island, the growing optimism about a deal was accompanied by fears of retaliation from Moscow. Alexander Nekrassov, a former Kremlin adviser, said: “If it is the case that there will be a 25% levy on deposits greater than €100,000 then some Russians will suffer very badly.

“Then, of course, Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy.”

 

Could this be the start of a bit of “economic warfare” between east and west?

 

One thing is for sure – the Russians simply do not allow people to walk all over them.

 

Meanwhile, things in Cyprus are getting more desperate with each passing day.  Because they cannot get money out of the banks, many retail stores find themselves running low on cash.  In a few more days many of them may not be able to function at all…

 

Retailers, facing cash-on-delivery demands from suppliers, warned stocks were running low. “At the moment, supplies will last another two or three days,” said Adamos Hadijadamou, head of Cyprus’s Association of Supermarkets. “We’ll have a problem if this is not resolved by next week.”

 

But do you know who was able to get their money out in time?

 

The insiders.

 

According to the Daily Mail, the President of Cyprus actually warned “close friends” about what was going to happen and told them to get their money out Cyprus…

 

Cypriot president Nikos Anastasiades ‘warned’ close friends of the financial crisis about to engulf his country so they could move their money abroad, it was claimed on Friday.

 

Overall, approximately 4.5 billion euros was moved out of Cyprus during the week just before the crisis struck.

 

Wouldn’t you like to get advance warning like that?

 

Well, at this point it does not take a genius to figure out what to do about any money that you may have in European banks.  The following is from a recent Forbes article by economist Laurence Kotlikoff…

 

Whatever happens, no one is going to trust or use Cypriot banks.  This will shut down the country’s financial highway and flip Cyprus’ economy to a truly awful equilibrium in a replay of our own country’s Great Depression, which was kicked off by the failure of one-in-three U.S. banks.

Cyprus is a small country.  Still, the failure of its banks could trigger massive bank runs in Greece.  After all, if the European Central Bank is abandoning Cypriot depositors, they may abandon Greek depositors next.  A run on Greek banks could then spread to Portugal, Ireland, Spain, and Italy and from there to Belgium and France and, you get the picture, to other countries around the globe, including, drum roll, the U.S.   Every bank in each of these countries has made promises they can’t keep were push come to shove, i.e., if all depositors demand their money back immediately.

We’ve seen this movie before.  And not just in real life.  Every Christmas our tellys show It’s a Wonderful Life in which banker Jimmy Stewart barely saves his small town from economic ruin arising from a banking panic.

 

Others are being even more blunt with their warnings.  For example, Nigel Farage, a member of the European Parliament, is warning everyone to get their money out of southern European banks while they still can…

 

The appalling events in Cyprus over the course of the past week have surpassed even my direst of predictions.

Even I didn’t think that they would stoop to stealing money from people’s bank accounts. I find that astonishing.

There are 750,000 British people who own properties, or who live, many of them in retirement down in Spain.

Our message to expats now that the EU has crossed this line, must be: Get your money out of there while you’ve still got a chance.

 

And Martin Sibileau is proclaiming that if you still have an unsecured deposit in a eurozone bank that you should have your head examined…

 

What are depositors of Euros faced with today? Anything but a clean bet! They don’t know what the expected loss on their capital will be, because it will be decided over a weekend by politicians who don’t even represent them.  They don’t really know where their deposits went to and they also ignore what jurisdiction they really belong to. Finally, depositors are paid mere basis points for their trust in the system vs. the 20% p.a. Argentina offered in 2001 (thanks to the zero-interest rate policies of the 21stcentury). In light of all this, I can only conclude that anyone still having an unsecured deposit in a Euro zone bank should get his/her head examined!

 

So where should you put your money?

 

I don’t know that there is anywhere that is 100% safe at this point.  But many are pointing to hard assets such as gold and silver.  The following is what trends forecaster Gerald Celente had to say during one recent interview

 

“People always say to me, ‘Mr. Celente you are always talking about gold.  What are you going to do with gold when everything collapses and there is no money?’  Well, let’s say you are a Cypriot and all of the ATM machines are out of money and the banks are closed?  Do you think those pieces of silver are going to buy you what you need?  Do you think that ounce of gold is going to get you what you want?

That’s the real money.  There is no other money.  When it all comes down, gold and silver are the only things you have to buy what you need, get what you want, or even get out if you need to.”

 

I used to tell people that putting their money in U.S. banks was safer than putting it other places because U.S. bank deposits are covered by deposit insurance up to a certain amount.

 

But now we see that deposit insurance means absolutely nothing.  If they decide to “tax” (i.e. steal) your money from your bank accounts they will just go ahead and do it.

 

So what should we all do?

 

Personally, I think that not having all of your eggs in one basket is a wise approach.  If you have your wealth a bunch of different places and in several different forms, I think that will help.

 

But as the global financial system falls apart, there will be no such thing as 100% safety.  So if you are looking for that you can stop trying.

 

Our world is becoming a very unstable place, and things are going to get a lot worse.  We are all going to have to adjust to this new paradigm and do the best that we can.

 

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