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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Pladizow's picture

Double D's - Is this Merkels Plan?

idea_hamster's picture

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

Thanks, you bunch of tool bags!


Abraxas's picture

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

max2205's picture

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

Buck Johnson's picture

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

glenlloyd's picture

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

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.

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.

HD's picture

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

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


maxmad's picture

"did you double-dip that chip?"

francis_sawyer's picture

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

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!

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...

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 !!

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.

Doubleguns's picture

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

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?





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?

Nobody For President's picture

This from someone you cannot spell Trader correctly?

Doubleguns's picture

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



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.


@Nobody  For President

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

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!"

Everybodys All American's picture

bank run full speed ...

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

toys for tits's picture

I prefer the ZH think tank.

Thanks Tyler(s).

Debeachesand Jerseyshores's picture

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

akarc's picture

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

GrinandBearit's picture

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


francis_sawyer's picture

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


The Week in Pictures [March 14-21]

eigenvalue's picture

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

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?

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?

akarc's picture

Just like America. They won't!

Mordenkainen's picture

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

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.

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?


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

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. 

Charles Wilson's picture

Next Up:

Cypriot Oath of Fealty.

Landed Gentry.

Nice Plantations.

Docile workers.

Dr. Engali's picture

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


plus it's lemon scented.

Cognitive Dissonance's picture

Is Plankton a blood relative of your avatar?  :)

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

Dr. Engali's picture

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

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.

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..

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!!)

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.


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....

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.


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