SocGen's Post-Mortem On Cyprus' "Unique Stability Levy" A/K/A Deposit Confiscation

Tyler Durden's picture


From SocGen:

Cyprus bailout with unique stability levy

In the early hours of Saturday, the Eurogroup agreed an adjustment programme of up to €10bn for Cyprus, the first under the ESM. Eurogroup President Dijsselbloem referred to the “exceptional nature” of the situation that required “unique measures”. In the special case of Cyprus, this is a upfront one-off “stability levy” of 6.75% on all bank deposits of 100K or less and 9.9% for deposits over 100K, with the aim to raise €5.8bn. A MoU will be finalised shortly. The national approval processes of the euro area member states will then be launched and final agreement should be reached in the second half of April. The IMF is also expected to offer financial support.

The package for Cyprus still comes with tough conditionality and the risk is that introducing a new “unique” bank levy measure – despite the many reassurances - could trigger renewed concerns.

Full conditionality of austerity and structural reform (again!)

The Eurogroup Statement on Cyprus reads that the programme for Cyprus will be based on “ambitious measures to ensure the stability of the financial sector, determined action to carry out the required fiscal adjustment and structural reforms to support competitiveness as well as sustainable and balanced growth, allowing for the unwinding of macroeconomic imbalances”. Cyprus has already progressed on measures amounting to 4.5% of GDP and stepped up efforts on privatisation. While privatisation is a medium-term positive for the economy, like structural reform it often comes with a J-curve effect in that layoffs could result from the process. The statement added that “Further measures concern the increase of the withholding tax on capital income, a restructuring and recapitalisation of banks, an increase of the statutory corporate income tax rate and a bail-in of junior bondholders”.

Conditionality is here to stay! Indeed, there appears to be no change in the economic policy model of austerity and structural reform that has characterised the euro crisis to date. More broadly speaking, this is also fully consistent with the message from the 14-15 March European Council that “growth-friendly fiscal consolidation” remains a top priority for the euro area. Once published, the reports supporting the MoU will allow detailed analysis; our focus will be on the growth assumptions. In the case of Greece, weaker-than-expected growth outcomes explain a significant chunk of the subsequent government debt overshot. In the case of Cyprus, the aim is for general government debt to reach 100% of GDP by 2020.

ECB Executive Board Member Joerg Asmussen noted that Cyprus is systemically relevant. He further indicated that once the recapitalisation of the Cypriot banking sector is complete, they will once again gain access to Euro-system’s monetary policy liquidity, until then ELA (Emergency Liquidity Assistance) will be available from the National Bank of Cyprus. No mention was made of OMT, but given what we understand to be full funding, this would not be relevant at present.

A new unique measure … this time a “stability levy” on bank depositors

Uniqueness has become something of a red flag word in the euro debt crisis. The unique situation in Greece led to PSI, in Cyprus it is the “stability level”. The levy of 6.75% will be applied to all bank deposits of 100K or less and 9.9% for deposits over 100K, with the aim to raise €5.8bn (just over 30% of GDP). The tax we be paid by both residents and non-residents. Unsurprisingly, the bulk of the questions at the press conference centred hereon.

On the question of whether a similar levy could be applied if Spain or Italy were to request bailout, Eurogroup President Dijsselbloem responded, “the situation in Cyprus with the specifics of the banking size and structure has led to this specific package and these instruments, full-stop.” Asked specifically whether he could rule out a deposit levy in a subsequent bailout in another country, Dijsselbloem replied, “It’s not being discussed at all, there is no reason to even discuss it, so I won’t discuss it or speculated on it. We have a very specific, very complex situation which we’ve had to deal with in a way that is leading to a very fair way of sharing the burden, and that’s the package that we have agreed here”.

On practical steps, Asmussen noted that the Cypriot authorities are taking immediate measures to ensure that the levy can be collected. He indicated that the levy would be frozen on accounts, but emphasised the rest of the deposits can be freely used by all the deposit holders. Asmussen also indicated that the Greek operations of the two largest Cypriot banks would be ring-fenced with the assets sold to a Greek institution with no additional cost on the Greek adjustment programme. The levy as we understand will not be levied on depositors with Cypriot banks in Greece.

Other sources of support … Russia … the IMF

On other sources of support, the comments at the press conference noted that Russia might extend maturity and lower interest payments on its existing loan package to Cyprus. These arrangements have yet to be finalised in talks and Russia was not involved in the discussions overnight at the Eurogroup meeting.

IMF Managing Director Lagarde indicated that the conditions for the IMF to offer financial support to the Cypriot adjustment programme are in place with; (1) a sustainable solution in the interest of the Cyprus economy, (2) a fully financed solution and (3) appropriate burden sharing. No indication of a possible amount was given, but based on past practices an amount of €1-3bn seems likely.

Adjustment for Portugal and Ireland

The Eurogroup overnight also confirmed agreement to extend the maturities of EFSF loans to Ireland and Portugal. Extension of EFSM loan maturities will be reviewed by ECOFIN. We expect this to be finalised in April.

It is worth recalling that according to its technical features (available on the ECB website), OMT “may also be considered for Member States currently under a macroeconomic adjustment programme when they will be regaining bond market access”. We understand the possibility to use OMT for Portugal and Ireland to be an on-going debate at the ECB.

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Sat, 03/16/2013 - 11:47 | 3335174 Tsunami Wave
Tsunami Wave's picture

We all get the government we deserve.. this will come to the U.S. soon enough.  Wait till theres more capital controls.

Sat, 03/16/2013 - 11:55 | 3335193 otto skorzeny
otto skorzeny's picture

you may "deserve" these fucking assholes but I sure as hell don't

Sat, 03/16/2013 - 12:13 | 3335237 Tsunami Wave
Tsunami Wave's picture

In this country.. 50.1% choose our "represented leaders".  Since we have a consolidated and powerful federal government, and a bad diffusion of power to the state and local levels, we get little to no voice.  Hence.. 'we get what we deserve'.

Sat, 03/16/2013 - 12:14 | 3335241 Manthong
Manthong's picture

“this will come to the U.S. soon enough”


All in good time.. first they need to remove your guns, then  they will need your gold..

No big deal anymore,  they already have your kids.. financially and (a)morally.

Sat, 03/16/2013 - 12:34 | 3335312 Cdad
Cdad's picture

Ummm....Cyprus/IMF/Euro finance ministers are confiscating depositor cash to pay for what now?  

Sat, 03/16/2013 - 13:24 | 3335448 Desert Irish
Desert Irish's picture

Belguim caterers?

Sat, 03/16/2013 - 14:54 | 3335685 SimplePrinciple
SimplePrinciple's picture

In the USSA, it will be a fee on retirement accounts to pay for the extraordinary privilege of being allowed to have one.

Sat, 03/16/2013 - 23:39 | 3337190 Big Slick
Big Slick's picture

Let me check my handy chart… Cyprus = Pissed Russians = People with AK-47s

Long 7.62x39!

Sun, 03/17/2013 - 01:00 | 3337292 Manthong
Manthong's picture

Longer.. 7.62x51.

Sun, 03/17/2013 - 12:15 | 3338427 Miffed Microbio...
Miffed Microbiologist's picture

Agreed, my caliber of choice as well. Hard to find and expensive now. Kicking myself for lack of vision and not stocking more earlier. I'm assuming the russkies don't have that problem.


Sat, 03/16/2013 - 20:43 | 3336724 Killer the Buzzard
Killer the Buzzard's picture

Short boaters insurance companies bitchez...

Sat, 03/16/2013 - 12:28 | 3335290 otto skorzeny
otto skorzeny's picture

if you believe that voting is on the up-and-up I have a few Diebold machines and electoral college votes I want to sell you

Sat, 03/16/2013 - 14:38 | 3335659 Pseudo Anonym
Pseudo Anonym's picture


I have a few Diebold machines and electoral college votes I want to sell you

dummy.  keep them and use them.

Sat, 03/16/2013 - 19:17 | 3336451 Totentänzerlied
Totentänzerlied's picture

And before electronic voting? Your countrymen really are that stupid. Sorry, better luck next time. That's American exceptionalism: we're so dumb, they don't need to rig our elections.

Sat, 03/16/2013 - 12:08 | 3335229 spooz
spooz's picture

How are more capital controls going to negate our FDIC insurance on deposits as well as our ability to print our own currency?

Sat, 03/16/2013 - 12:23 | 3335274 otto skorzeny
otto skorzeny's picture

the last time I checked the FDIC had a mere pittance in reserve compared to what was on deposit-again- this goes back to you trusting ANYTHING the govt tells you

Sat, 03/16/2013 - 13:44 | 3335492 spooz
spooz's picture

You don't understand our monetary system if you think the US can "run out of money".  lol

Sat, 03/16/2013 - 15:08 | 3335731 outofideas
outofideas's picture

Oh sure it can, what it can't run out of is currency. There is a difference.

Sat, 03/16/2013 - 12:14 | 3335236 ebworthen
ebworthen's picture

Yes, first it is 0% interest, then it is $9.95/month to have a "secure" account "safe from identity theft" - which my bank is trying to sell right now.  Pretty soon the U.S. banks will just charge you a $10/month fee or 5% of deposits "to ensure your account security".

Sat, 03/16/2013 - 12:44 | 3335345 Id fight Gandhi
Id fight Gandhi's picture

Those checks cashed places take less a rip.

Sat, 03/16/2013 - 12:48 | 3335362 ebworthen
ebworthen's picture

Less overhead.

For the TBTF Banks, buying the entire legislative and judicial branches of government ain't cheap.

And of course you can't expect them to not pass the costs on to us peasants.

Sat, 03/16/2013 - 13:15 | 3335431 Arius
Arius's picture

thats true and fair .... in addition, they will add their overhead to the process .... WHY NOT ?

Sat, 03/16/2013 - 11:47 | 3335177 Buckaroo Banzai
Buckaroo Banzai's picture

"unique stability levy," oh crap, that's beautiful. Orwell himself would be proud. This "levy" will definitely NOT be "unique", and the last thing it will promote is "stability."

Sat, 03/16/2013 - 12:17 | 3335251 chdwlch1
chdwlch1's picture

"unique stability levy" in Italian is "furto" or "theft"!

Sat, 03/16/2013 - 14:05 | 3335542 Cull Morgan
Cull Morgan's picture

It's "unique" because Cyprus is the only Euro zone country with a large fraction of bank deposits consisting of dirty Russian money.

The Germans have resisted the bail out because they don't want German tax payers money to assist more or less criminal Russians. They've been negotiating with the Russian government about how to split the 17 billion Euros needed for this initial bail out of the Cypriotic banks.

This is a Fuck You to the Russkies. "Fine, if you won't chip in 6 billion, we'll just take it". Probably half the Russian members of parliament will be stung by this...

Sat, 03/16/2013 - 22:13 | 3336983 Renewable Life
Renewable Life's picture

Currency war my ass, this is the stuff of "real wars"!!!!!

The last time I checked, if my neighbor announces he is going to steal 10% of my money, and then fucking does, there's only two moves left at t hat point.......become the bitch and get ready for 10% more soon, or march over to his house with an AK and get my fucking money back!!!!

Your move Russia!

Sat, 03/16/2013 - 11:47 | 3335179 Jack Sheet
Jack Sheet's picture

"Unique" until the next instance. And of course such "stability levies" - an inventive euphemism for confiscation- do not need to be restricted to low single-digit percentages. Coming soon to a bank near you.

Sat, 03/16/2013 - 12:29 | 3335289 falak pema
falak pema's picture

Well its no more unique than JPM/HSBC levies on a continuous basis in derivative or Libor scam mode, via FED collusion and Zirp sleight of hand...Statist plays and oligarchy nays, "no we NEVER cheat"...two sides of the same sham fiat game. 

Like I said :  in a democracy those who get elected will now turn on their Oligarchy friends and say : "Bud, my neck stays on and your wallet goes empty!"...spreading out the pain when the cake goes bad and stinky, its every man for himself.

Cannibalism isn't far away! Sharpen your knives Oligarchs.

Sat, 03/16/2013 - 23:24 | 3337157 steve from virginia
steve from virginia's picture



This is bailout #2 for the Cypriot banks, there will be more. There will also be more depositor haircuts ... if there are any more depositors in Cypriot banks after Friday or so.


Certainly going to see runs in other vulnerable states such as Italy and Spain. Any insolvent bank with large liabilities to senior creditors is not subject to depositor haircuts.


French banks, anyone?

Sat, 03/16/2013 - 17:44 | 3336205 Vuke
Vuke's picture

"Don't let it happen. It depends on you."

Sat, 03/16/2013 - 11:54 | 3335186 Desert Irish
Desert Irish's picture

Now the Russian mob is involved the Troika may have finally met their match...long "depends" for bankers...

Sat, 03/16/2013 - 12:06 | 3335222 ebworthen
ebworthen's picture

Stealing 10% of their money ought to be worth a broken leg for each banker, eh?

Would be funny to see them all in crutches at the next gathering.

Would be reported as "coincidental ski accidents".

Sat, 03/16/2013 - 12:13 | 3335232 Desert Irish
Desert Irish's picture

It'll just take one to be found committed "suicide" by hanging himself off Blackfriars Bride (after he shot himself in the back of the head twice) and a renegotiation will be promptly undertaked.


Then we have Bulgaria and Romania....oh man the fun is just starting

Sat, 03/16/2013 - 22:13 | 3336984 earleflorida
earleflorida's picture

hey, at least their northern neighbor Ukraine's 'got talent, too', with some of that ole-fashion "Black Majik"?!

Sat, 03/16/2013 - 13:24 | 3335457 Winston Churchill
Winston Churchill's picture

Uniquely coincidental ski accidents .

Sat, 03/16/2013 - 13:53 | 3335516 AbbeBrel
AbbeBrel's picture

Seems like there will be far more broken legs as Sheeple start running instead of walking to their banks in Spain and Italy to drain their accounts before the EU beats them to the cashier, or Unique and Ubiquitous capital controls are dropped on the Eurozone accounts (limiting withdrawls to 100E per day).

Sat, 03/16/2013 - 11:53 | 3335190 otto skorzeny
otto skorzeny's picture

"Help us Obi-Wan-Bitcoin- you're our only hope."

Sat, 03/16/2013 - 12:01 | 3335209 Pool Shark
Pool Shark's picture



I think you mean "Obi-Wan-Krugerrand."

"These are not the Bitcoins you're looking for..."



Sat, 03/16/2013 - 12:02 | 3335210 francis_sawyer
francis_sawyer's picture

If all these bitcoin geeks were as 'tech-saavy' as they make themselves out to be ~ they would have come up with the idea of bitcoin on their own...


& who's to say that there won't be numerous who actually do come up with competing bitcoin currencies... When 'competition' enters the fray, value decreases...

Sat, 03/16/2013 - 12:00 | 3335204 ebworthen
ebworthen's picture

"Stability Levy" = theft

This is bullish for Gold, black markets, going off-grid, and of course bank runs and going to cash.

What next?  If they can't steal it this way, they will have to get rid of coin and paper currency so they can steal it digitally.

Sat, 03/16/2013 - 12:11 | 3335220 otto skorzeny
otto skorzeny's picture

that's why bitcoin is so awesome- everything digital is completely safe and can never be instantly wiped out. I am going to start a dive shop and treasure recovery company soon in the Florida Keys to start recovering caches of bitcoins from old Spanish galleons-like mel fisher-but retarded.

Sat, 03/16/2013 - 12:13 | 3335239 francis_sawyer
francis_sawyer's picture

Great idea ~ I'm sure you'll have a bunch of bitcoin 'Gilligans' lining up to be your first mate...

Sat, 03/16/2013 - 13:01 | 3335296 otto skorzeny
otto skorzeny's picture

I'm hoping Russfert T Diggins signs on

Sat, 03/16/2013 - 12:27 | 3335282 ebworthen
ebworthen's picture

Avast!  I like yer idear! 

Do Wenches take bitcoin?

Sat, 03/16/2013 - 12:32 | 3335304 otto skorzeny
otto skorzeny's picture

can you stick em under a stripper's g-string?

Sat, 03/16/2013 - 13:42 | 3335489 francis_sawyer
francis_sawyer's picture

No ~ but I hear you can get 14 year old holographic strippers to do lap dances for you...

Sat, 03/16/2013 - 12:02 | 3335211 Byte Me
Byte Me's picture

So obviously the S in ESM was quietly changed from meaning Stabiliteee to meaning Sequestration..

(Behind closed doors, of course)

Sat, 03/16/2013 - 12:04 | 3335217 JamesBond
JamesBond's picture

Molotov Cocktail Confiscation Bitchez



Sat, 03/16/2013 - 12:08 | 3335227 Downtoolong
Downtoolong's picture

Stability Levy.

I've really got to update my old version of the Bankster's thesaurus. There must be 500 pages by now of synonyms and alternate phrases for lying, cheating, and stealing.

Do NOT follow this link or you will be banned from the site!