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Cyprus Shifts To Plan 'DD' (Douple-Dip The Large Depositors)

Tyler Durden's picture





 

It seems that the Cypriot government is going full circle on its plans to save its nation and its people. As UK Think Tank Open Europe notes, "it now seems we have come all the way back round to the deposit levy as a solution in Cyprus. Overnight, the EU/IMF/ECB Troika rejected the plans for a Cypriot solidarity fund, particularly one based on pension assets and gas reserve revenues (which German Chancellor Angela Merkel specifically spoke out against)." The new - Plan 'D' - (Plan A - Haircuts; Plan B - Beg Russia for Bailout; Plan C - Solidarity Fund) appears to be moar haircuts and double-dip on the large depositors (seemingly what Brussels wants anyway). Plan 'D' - a restructuring and bigger deposit levy (a 12.2% tax on deposits above €500,000 or a 9.46% deposit on deposits above €100,000 would yield the necessary €3.5bn) - "may amount to trying to burn the larger depositors twice," as the plan to shift bad assets to a bad bank (along with the large uninsured depositors) and wound down (meaning 20-40% losses) and still face the initial large-deposit-tax - leaving the Russians large depositors with 50%-plus losses.

 

Via Open Europe,

Full circle in Cyprus

 

Thinking about the plan in more detail, it occurred to us that this may amount to trying to burn the larger depositors twice. As we noted in today's press summary, the plan essentially is to move all the bad assets to a bad bank, along with the large uninsured depositors (€100,000+). These assets would then be wound down or sold off at a large discount with the depositors footing the bill (and taking losses of 20% - 40%). This, along with the merging of Bank of Cyprus and the good bank, is how the recapitalisation costs will be reduced by €2.3bn.

 

So, the large depositors will take significant losses here and yet may still face a large deposit tax as well? That seems to be pushing the boundaries to us, although it is not impossible. Cyprus would not recover as destination for foreign investment for some time. One way to structure this could be for the tax only to be applied to depositors above €500,000 (as we suggest below) and the bad bank to apply to all uninsured deposits. Obviously, the bad bank scheme also only applies to Laiki bank, but as the second largest Cypriot bank it is still likely to account for a large amount of big deposits.

 

Still this could see larger depositors taking up to 50% hits in some cases. We can't imagine Moscow would take that one lying down, especially given comments earlier in the week...

 

****************** Original Post *********************

 

It now seems we have come all the way back round to the deposit levy as a solution in Cyprus. Overnight, the EU/IMF/ECB Troika rejected the plans for a Cypriot solidarity fund, particularly one based on pension assets and gas reserve revenues (which German Chancellor Angela Merkel specifically spoke out against). 

 

The bank restructuring plan does seem to be holding water for now, so this has at least reduced the money Cyprus needs to raise by €2.3bn. Unfortunately, though, that still leaves €3.5bn to be found. As we noted a week ago, there are few options for doing it – and it slightly worries us that Cyprus and the eurozone are only just realising this.

 

Inevitably, that has led us back to a deposit levy. Fortunately, with the amount of money needed reduced, a new version can focus on larger depositors – which is reportedly what was originally proposed by the Troika last week. Barclays has a useful table on the breakdown of deposits (via @FGoria):

 
 
Going from these figures, a 12.2% tax on deposits above €500,000 would yield the €3.5bn necessary. A 9.46% tax would also be sufficient if applied to all depositors over €100,000.
Either of these options would probably be acceptable to the Cypriot parliament. Sources suggest that the Democratic Party (DIKO, Cypriot President Anastasiades's junior coalition partner) has indicated its support for such proposals, which would bring the government up to 28 votes – so potentially needing only one more. 
There are plenty of pitfalls left, but we may get a vote this evening. That said, noises from the Troika earlier suggested they could take the weekend to review the bank restructuring deal.
As has been the case for the whole of this week, uncertainty seems to be the order of the day. One thing we can take away is that a deal may be inching closer…
AND - why a debt restructuring for Cyprus can't work (@OpenEurope)
And why this Plan 'DD' may still be unwelcome in Brussels... (Via FT)
That may make sense in the medium term, but in itself does not create new money. And it is time-consuming to separate good assets from bad. There is also a risk of knock-on impacts on Greece. Many of the Cypriot banks’ bad assets are in Greece. So we may soon find ourselves looking for [more Plans... This delay] will require more support from the EU, and probably the IMF too. That is unwelcome, and will be hard to swallow in Berlin, but the alternative is financial autarchy for the island and withdrawal from the eurozone, which will expropriate bank depositors in a different way.
 


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Fri, 03/22/2013 - 10:06 | Link to Comment Pladizow
Pladizow's picture

Double D's - Is this Merkels Plan?

Fri, 03/22/2013 - 10:16 | Link to Comment idea_hamster
idea_hamster's picture

Leave it to the ECB to ruin a perfectly good mental image like "DD."

Thanks, you bunch of tool bags!

(Oh, and FUCK YOU BERNANKE!)

Fri, 03/22/2013 - 10:21 | Link to Comment Abraxas
Abraxas's picture

Can Deutschland return the tanks? Is the Red Army advancing to the Mediterian now?

Fri, 03/22/2013 - 10:40 | Link to Comment max2205
max2205's picture

DD... You meant DP'd didn't you....

Fri, 03/22/2013 - 20:55 | Link to Comment Buck Johnson
Buck Johnson's picture

No wonder Bernanke is wanting out, the EU essentially threw a grenade into the whole mess.

Fri, 03/22/2013 - 10:20 | Link to Comment glenlloyd
glenlloyd's picture

This has moved from being a circus to being a carnival...and the eurotwits are the carnies.

Fri, 03/22/2013 - 10:52 | Link to Comment Caggge
Caggge's picture

How about this for a solution? Before you steal anyone's deposits, look at all employees in the banking industry worldwide and then make them pay back all bonus money they have received in the past 10 years. They caused this problem, maybe they should be the first to pay for it.

Fri, 03/22/2013 - 16:26 | Link to Comment lolmao500
lolmao500's picture

The rating agencies should pay for this. The Cyprus government should pay for this. The EU bank regulators should pay for this. The banksters should pay for this.

Not the people.

Fri, 03/22/2013 - 10:31 | Link to Comment HD
HD's picture

"Double D's - Is this Merkels Plan?"

   Double D plan may be difficult to support if they run with it.

 

Fri, 03/22/2013 - 10:41 | Link to Comment negative rates
negative rates's picture

Nope, TOXIC double D's are the result.

Fri, 03/22/2013 - 10:07 | Link to Comment bigwavedave
bigwavedave's picture

My kinda plan :D

Fri, 03/22/2013 - 10:08 | Link to Comment maxmad
maxmad's picture

"did you double-dip that chip?"

Fri, 03/22/2013 - 10:16 | Link to Comment francis_sawyer
francis_sawyer's picture

(+1) You stuck it in... Took a bite out of it... & then you dipped AGAIN!

Fri, 03/22/2013 - 10:32 | Link to Comment McMolotov
McMolotov's picture

That's like putting your whole mouth right in the dip! From now on, when you take a chip — just take one dip and end it!

Fri, 03/22/2013 - 10:09 | Link to Comment TeamDepends
TeamDepends's picture

And silver has pulled itself up from the canvas!  Can you believe it!  Now it's the Squids turn to take a beating!  The crowd is going apeshit!  Cue theme from Rocky...

Fri, 03/22/2013 - 10:16 | Link to Comment johnnymustardseed
johnnymustardseed's picture

JPM just sold 800,000,000 million ounces of silver they don't have and we back in the 28 dollar range....told you so... and FUCK JPM !!

Fri, 03/22/2013 - 10:42 | Link to Comment negative rates
negative rates's picture

Give it time, the shit has just hit the fan, but is not stuck yet.

Fri, 03/22/2013 - 10:09 | Link to Comment akarc
akarc's picture

But the markets are up! I'm guessing this Orwellian quote found on Google Finance may be the reason:

US jobless claims remain near 5-year low MarketWatch - 8:39am WASHINGTON (MarketWatch) - The number of Americans who applied last week for new unemployment benefits rose slightly but clung near a five-year low, another indication that fewer people are losing their jobs.

Fri, 03/22/2013 - 10:17 | Link to Comment Doubleguns
Doubleguns's picture

As the number or workers approaches zero there are fewer to lose thier job. Just saying. Think job participation rate.

Fri, 03/22/2013 - 10:31 | Link to Comment akarc
akarc's picture

But, But But, the markets are going "upper".  Everything must be better. CNBC said Greece is gonna help fix the Cyprus thingy so it will be o.k.  Thats what there saying. Thats what their buying. So it must be true. Right?

Fri, 03/22/2013 - 12:58 | Link to Comment GOLDTRADERRR
GOLDTRADERRR's picture

@akarc

 

Congratulations!

You managed to use two of the possible (they're, there, their) choices INCORRECTLY!

And all in two succeeding sentences.

The correct choice was THEY'RE (as in THEY ARE).

This error and so many others is revealing the astonishingly poor education of our populace

which is displayed constantly on these threads DAILY.

If you folks can't construct a correctly spelled sentence or one without the word FUCK in it,

why should any of us take your comments or thinking process seriously?

Fri, 03/22/2013 - 13:04 | Link to Comment Nobody For President
Nobody For President's picture

This from someone you cannot spell Trader correctly?

Fri, 03/22/2013 - 13:48 | Link to Comment Doubleguns
Doubleguns's picture

And uses the word fuck in his sentences.  Just saying.

Fri, 03/22/2013 - 14:16 | Link to Comment GOLDTRADERRR
GOLDTRADERRR's picture

@Doubleguns

Yes, I use the word fuck occasionally, but it's not the only word in my vocabulary as it appears to be in so many posts. It's a good word but it loses it's impact when used incessantly.

But your point is taken.

Fri, 03/22/2013 - 14:14 | Link to Comment GOLDTRADERRR
GOLDTRADERRR's picture

@Nobody  For President

The extra Rs were to differentiate my user name from others already taken...dumbass.

Fri, 03/22/2013 - 10:38 | Link to Comment Van Halen
Van Halen's picture

The hysterical part is that the goddamned fool who wrote this article has not figured that after 5 years of losing jobs, there aren't a whole lot of jobs left to lose. But if it were explained to said writer, there would be a short, silent pause followed by widened eyes and then the exclamation, "Success!"

Fri, 03/22/2013 - 10:09 | Link to Comment Everybodys All ...
Everybodys All American's picture

bank run full speed ...

Fri, 03/22/2013 - 10:13 | Link to Comment LMAO
LMAO's picture

Dear peepull of dze Kypridiotic Rebublic,

 dzee Germins, dzee ECB and dzee IMF hgave prepaired for Hju a dzjiant sith-sandwitz.

Dzjeeenious, dzjeeenious, dzjeeennious……!

Enzjoy, Malakas

Mr. Pan(ic)os

Fri, 03/22/2013 - 10:10 | Link to Comment toys for tits
toys for tits's picture

I prefer the ZH think tank.

Thanks Tyler(s).

Fri, 03/22/2013 - 10:11 | Link to Comment Debeachesand Je...
Debeachesand Jerseyshores's picture

Totally Fucked on Plans A------Z.

Fri, 03/22/2013 - 10:15 | Link to Comment akarc
akarc's picture

And my ol lady wonders why I don't make plans

Fri, 03/22/2013 - 10:13 | Link to Comment GrinandBearit
GrinandBearit's picture

I can't even keep up with all these Cyprus BS anymore.  Glad ZH does it for me.

 

Fri, 03/22/2013 - 10:24 | Link to Comment francis_sawyer
francis_sawyer's picture

Apparently, it's not even NEWS to NBC...

~~~

The Week in Pictures [March 14-21]

http://www.nbcnews.com/id/51231790/displaymode/1247?beginSlide=1

Fri, 03/22/2013 - 10:14 | Link to Comment eigenvalue
eigenvalue's picture

I bet Merkel will give in and provide endless free support in the end. She has too much to lose.

Fri, 03/22/2013 - 13:09 | Link to Comment Nobody For President
Nobody For President's picture

I'll be happy to take that bet.

She gives in and provides endless free support, or even modest support without a big depositor haircut, she loses the election this fall. And what the hell counts to her, or any other politican?

Fri, 03/22/2013 - 10:14 | Link to Comment timbo_em
timbo_em's picture

Since the to be hammered financial services contribute approx. one third to the nation's GDP, how on earth will Cyprus reach a sustainable debt/GDP (or interest payment/gov. revenue) trajectory in the next 20 years?

Fri, 03/22/2013 - 10:16 | Link to Comment akarc
akarc's picture

Just like America. They won't!

Fri, 03/22/2013 - 10:17 | Link to Comment Mordenkainen
Mordenkainen's picture

Their time horizon is 20 hours and you're asking about 20 years?

Fri, 03/22/2013 - 10:16 | Link to Comment MsCreant
MsCreant's picture

When a debt is not paid, the money that paid that debt needs to cease to exist. Our monetary system is absurd, dare I say, impossible.

Fri, 03/22/2013 - 10:19 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"That may make sense in the medium term, but in itself does not create new money."

What is this "create new money" thing? I thought the only way to create new money was either the printing press or computer keyboard?

/sarc

<Whatever happened to wealth creation through productive "work"?>

Fri, 03/22/2013 - 10:25 | Link to Comment akarc
akarc's picture

Wage destruction. Wealth is now created by slave production. Find the country with the poorest population. Ship all jobs there. Wealthy get weatheir. People get used up. Move to another country. Wash, Rinse, repeat. 

Fri, 03/22/2013 - 10:18 | Link to Comment Charles Wilson
Charles Wilson's picture

Next Up:

Cypriot Oath of Fealty.

Landed Gentry.

Nice Plantations.

Docile workers.

Fri, 03/22/2013 - 10:19 | Link to Comment Dr. Engali
Dr. Engali's picture

Let's go directly to plan "Z" it can't possibly fail:

 

https://www.youtube.com/watch?v=FsMLFqghSGY

 

plus it's lemon scented.

Fri, 03/22/2013 - 10:22 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Is Plankton a blood relative of your avatar?  :)

<There is a family resemblance. Just sayin'.>

Fri, 03/22/2013 - 10:25 | Link to Comment Dr. Engali
Dr. Engali's picture

 LOL...he got the short end of the gene pool.

Fri, 03/22/2013 - 10:19 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I don't think the banks, politicians, IMF, ECB et al are going to have the finally say not without tanks anyways. Wait until the 26th once the pretend and extend kabuke theater no longer holds the Cypriot audience.

Fri, 03/22/2013 - 10:20 | Link to Comment youngman
youngman's picture

All this talk and the banks are still not open....that is kind of chicken shit...let the people do the talking...or walking ..which I think they will...get their money and run....there will not be a bank in Cyprus in two years..

Sat, 03/23/2013 - 04:43 | Link to Comment Parrotile
Parrotile's picture

If the Cypriot hoi polloi have their (unfettered) way, there will not be a functioning Cypriot bank in far less time than that (I'm thinking days, not years!!)

Fri, 03/22/2013 - 10:21 | Link to Comment BobPaulson
BobPaulson's picture

Every time they see Gazprom at the top of the corporate earnings list they cant help but want to confiscate that money, wherever it is hidden.

 

Fri, 03/22/2013 - 10:22 | Link to Comment Sudden Debt
Sudden Debt's picture

After the French revolution NAPOLEON TOOK THE GOLD FROM THE CHURCH!!!

to bad....

the church....

now lost all it's money in pedophile and other rape cases....

Fri, 03/22/2013 - 10:21 | Link to Comment Downtoolong
Downtoolong's picture

I can't imagine any fool leaving their money in a Cyprus bank after this. Whatever plan they pretend to come up with will still only be the plan of the day. I would take any money I have in those banks out the first chance I get, even after the haircut.

 

Fri, 03/22/2013 - 10:50 | Link to Comment Two dogs
Two dogs's picture

They're all proven fools for having money there in the first place.  Coming soon:

Restrictions in daily withdrawals

Ban on premature termination of time savings deposits

Compulsory renewal of all time savings deposits upon maturity

Conversion of current accounts to time deposits

Ban or restrictions on non cash transactions

Restrictions on use of debit, credit or prepaid debit cards

Ban or restriction on cashing in checks

Restrictions on domestic interbank transfers or transfers within the same bank

Restrictions on the interactions/transactions of the public with credit institutions

Restrictions on movements of capital, payments, transfers

Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety

Fri, 03/22/2013 - 10:51 | Link to Comment LostAtSea
LostAtSea's picture

If only you could.  There will be capital controls in place to limit withdrawals to only what you "need".

Fri, 03/22/2013 - 11:34 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

The Fed and the Agency thank you for supporting their message to the unwashed masses -- er, I mean The People:

Leave your taxable, traceable and confiscatable money right in our core banks, and avoid all those peripheral banks and offshore places of privacy.

Fed membership has its privileges. /s

Fri, 03/22/2013 - 12:11 | Link to Comment Diogenes
Diogenes's picture

You can trust a bank run by honest, conservative bankers in a country that has an honest, efficient government that is not addicted to deficit spending.

Fri, 03/22/2013 - 10:21 | Link to Comment Sudden Debt
Sudden Debt's picture

MAKE GERMANY PAY!!! THEY STARTED WORLD WAR 2 IN THE FIRST PLACE!!!

 

Fri, 03/22/2013 - 10:25 | Link to Comment Abraxas
Abraxas's picture

And their friends started the first one.

Fri, 03/22/2013 - 10:34 | Link to Comment francis_sawyer
francis_sawyer's picture

Was it over when the Germans bombed Pearl Harbor?

Fri, 03/22/2013 - 10:55 | Link to Comment Abraxas
Abraxas's picture

No, man! The Americans bombed Pearl Harbor. Remember? Or was it Sadam Husein? I forget.

Fri, 03/22/2013 - 10:55 | Link to Comment Sudden Debt
Sudden Debt's picture

No, it was over when the Germans build the Apollo rockets to fly to the moon

Fri, 03/22/2013 - 11:47 | Link to Comment francis_sawyer
francis_sawyer's picture

& all of a sudden, stopped going... As well as the Soviets [& everyone else]... Weird... They must have heard that it was too windy on the surface...

Fri, 03/22/2013 - 12:06 | Link to Comment slackrabbit
slackrabbit's picture

It was because they had WMDs; we just didn't find them cos they moved them to the middle east in a slow moving camper van.

Fri, 03/22/2013 - 11:26 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Technically, that's not correct. The Germans were targeting Poland as an Annex, and the Brits and French threatened a War if they did. When Germany did invade Poland, it was the British and French who DECLARED war.

Fri, 03/22/2013 - 10:26 | Link to Comment optionsman
optionsman's picture

WTF........the TBTF downsized to the size of Cyprus banks?

Fri, 03/22/2013 - 10:26 | Link to Comment Debugas
Debugas's picture

more support will be required from EU down the road so that is why it is better to declare bankruptcy now

Fri, 03/22/2013 - 10:27 | Link to Comment falak pema
falak pema's picture

It does not create new money but it wipes out bad debt; instantly in part, and the rest over time.

Merkel as lead subscriber to Cyprus's bailout, (on the 10B loan deal Germany pays 2.5 B, France pays 2 B), needs to justify that the bail out money doesn't get flushed like it has in Greece, time and time again. She is in election year.

Fri, 03/22/2013 - 10:30 | Link to Comment Barry McBear
Barry McBear's picture

Expected a better pic for plan DD.

Fri, 03/22/2013 - 10:34 | Link to Comment Van Halen
Van Halen's picture

"that may make sense in the medium term, but in itself does not create new money"

So the plan is to grab as much as you can from depositors then bank (pardon the pun) on:

1) The depositors keeping their money in these accounts after they've been robbed.

2) Nothing like this happening again in oh, a few days to weeks.

 

Fri, 03/22/2013 - 10:36 | Link to Comment Catullus
Catullus's picture

It's still full frontal bullshit. How can taxing deposits to protect deposits possibly work?

You need to equitize everyone else BEFORE depositors. Then you start defaulting creditors. Liquidate your assets and pay back depositors first. That's going to shut the bank down. But that's how this has to be.

We're back to square one: there needs to be 100% reserve depository banking. No more of this bullshit where depositor cash is an "asset" to the bank.

Fri, 03/22/2013 - 10:57 | Link to Comment SillySalesmanQu...
SillySalesmanQuestion's picture

Can I Please have a double dip of Rocky (Merkle) Road on a let them eat cake cone?

Fri, 03/22/2013 - 10:49 | Link to Comment tony bonn
tony bonn's picture

any plan which inconviences the russians will be a death wish.....war will break out in cyprus again....

Fri, 03/22/2013 - 10:51 | Link to Comment SheepDog-One
SheepDog-One's picture

Notice how this entire story has thrown the peasants overboard and the only concern again is 'how can we make it so Central Banksters suffer no losses'?

Fri, 03/22/2013 - 12:13 | Link to Comment Diogenes
Diogenes's picture

And throw in enough extra for their multi million dollar bonuses.

Fri, 03/22/2013 - 10:59 | Link to Comment DavidC
DavidC's picture

And all of it guaranteeing a bank run when the banks reopen. Good one guys, keep it up.

DavidC

Fri, 03/22/2013 - 11:19 | Link to Comment 1eyedman
1eyedman's picture

this is totally hilarious.

 

larger tax on larger deposits appears more politcally acceptable.   however, considering 3 weeks ago there were no issues in cyprus which means any bank in spain/italy/france might suddenly need help; it will now be in the toolkit to seize money from accounts in failed banks.

can anyone else hear the 'great sucking sound' of deposits from the middle east, eastern europe, russia, china running out of western european banks???  does anyone honestly expect a different outcome??    

and who might be ready to recieve such largesse with little oversight for 'washing' purposes?  not the US, probably not Swiss either since the report to the US now.....online chinese banking coming to a portal near you!   or maybe the UAE will now also be a finacial hub!    

absolutely amazing the hubris, idiocy, and blindness of euro technocrats

Fri, 03/22/2013 - 13:18 | Link to Comment Nobody For President
Nobody For President's picture

Yep. Eurocrats long range planning seems to extend to maybe next Monday. These guys have made a blanket 100% out of patches...

Fri, 03/22/2013 - 11:49 | Link to Comment ZZR600
ZZR600's picture

Cyprus gold reserves amount to ~ $700M. I wonder if they will come into play?

Fri, 03/22/2013 - 11:59 | Link to Comment slackrabbit
slackrabbit's picture

See I told you they would have a Double D plan.......now we can stare at them all day...

Fri, 03/22/2013 - 13:10 | Link to Comment Chaos_Theory
Chaos_Theory's picture

So...the Cypriot .gov wants to protect themselves from a peasant revolt, but they're thinking billionaire Russians will take this?  Ya'll better hire food tasters for the next 50-years or develope an immunity to Polonium.

Oh, and the bank runs won't be confined to Cyprus.  Expect Italians and Spaniards to start pulling out what they can with existing capital controls in place.

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