Cyprus Deposit Levy Vote Delayed, Will Go "Down To The Wire" As Up To 70% Deposit Tax Contemplated For Some

Tyler Durden's picture

While GETCO's algos were poised to set off a buying tsunami yesterday the millisecond a flashing red headline hit Bloomberg with even the hint or suggestion that Cyprus is fixed, we said to sit back and relax because Cyprus "will get no resolution today, or tomorrow, and may at best be resolved on Sunday night following yet another coordinated global bailout, (although our money is on a last, last minute resolution some time on Monday when Cyprus is closed but the European markets are widely open)."

As it turns out, we were right, following reports by major newswires that the vote on the deposit levy will only take place (if at all) on Sunday night, after the Eurozone finance ministers' meeting on Sunday.

As it also turns out, and as noted previously, the votes taken yesterday were the easy ones - obviously Cyprus will now need capital controls in perpetuity to slow down the terminal unwind of its banking system which is now, for all intents and purposes, over and will only exist, if at all, entirely though ECB liquidity injections, but the difficult decision - to complete U-Turn on the Tuesday vote just saying no to deposit tax levy - has been delayed.

The reason for the delay? Deciding how to best bring the news to Russian, and other wealthy depositors, that not only will they not have access to their funds for a long, long time, the ultimate haircut on what they thought was safe, easily accessible cash as recently as a week ago, may be a stunning 70%!

From Xinhua:

The Cypriot parliament has postponed a debate on legislation imposing a levy on bank deposits until after a Eurogroup meeting in Brussels on Sunday, parliament sources said on Saturday.

 

The vote on the bill had been scheduled for Saturday, ahead of a finance ministers meeting to consider a revised bailout for Cyprus, following endorsement of nine bailout related bills at a day-long session of parliament on Friday.

 

The sources could not say if and when a deposits levy bill will be debated.

 

Troika technocrats representing the European Commission, the European Central Bank and the International Monetary Fund were at the ministry of finance early on Saturday discussing final details of the bailout.

 

Cyprus president Nicos Anastasiades was scheduled to fly to Brussels later on Saturday accompanied by leaders of parliamentary parties to plead his position on the bailout but plans may change depending on the outcome of discussions at the ministry of finance.

 

However his travel to Brussels has been throwing into uncertainty following the postponement of Saturday’s session of parliament.

Reuters has more:

Cyprus's bid to avert financial collapse will go down to the wire after the island said it would hold a crucial sitting of parliament only after finance ministers of the 17-nation euro zone meet on Sunday.

 

Cyprus faces a Monday deadline to clinch a 10 billion euro ($13 billion) bailout from the European Union or the European Central Bank says it will cut off emergency funding to the country's stricken banks, spelling certain collapse and potentially pushing the island out of Europe's single currency.

The way the deal is currently structured, all deposits that have EUR 100,000 and less in deposits, which in Cyprus amounts to 361,000 of a total 371,000, will not see a deposit tax, after last week's attempt to impose a 6.75% on all "insured" accounts. However, the same can not be said for the remaining 10,000 belonging supposedly to uber-wealthy Russians, but certainly to people from all over the world, and even Cyprus.

As a result, according to the rapidly shifting plan, depositors with the biggest local bank, Bank of Cyprus, may see losses up to 25%. Per Reuters:

Cyprus is considering a levy of about 25 percent on bank deposits over 100,000 euros ($130,000) in the island's largest local lender, Bank of Cyprus, Finance Minister Michael Sarris said on Saturday

 

Sarris told reporters that "significant progress" had been made in talks with officials from the European Union, European Central Bank and International Monetary Fund - the so-called 'troika' - and that the discussions may conclude on Saturday evening.

Cyprus' second largest bank, Cyprus Popular Bank, aka Laiki bank, where it appears the bulk of Russian cash is stored, will fare far, far worse with deposit haircuts up to a stunning 70% on the table, and that is after capital controls ease enough to allow for the deposit withdrawals!

Cyprus Popular Bank depositors with more than 100,000 euros will face losses, said Averof Neofytou, deputy president of Anastasiades’s ruling Disy party.

 

They will wait for many years before they see what percentage they will get back from their savings -- 30 percent, 40 percent, 50 percent, 60 percent, it will be seen,” Neofytou said during the debate in parliament.

 

He didn’t say what could happen to larger depositors of other banks.

Nothing good, that's for sure.

But at least the bulk of the population will be spared. The problem is what Russia will do, when the ball is in its court following a vote to impair its citizens which may or may not come, as all political leaders in Russia have made it very clear this is an outright political provocation by Europe targeting purely Russian wealth.

What is also sure, is that any bulk investments in Europe, be they held by Russian, Chinese, or any other oligarchs, will now scramble to get out, knowing quite well their cash is not only no longer welcome in the Eurozone, but most likely will be used to fund bailouts of assorted insolvent European nations. Such as all of them.  This could be a very big problem because according to JPMorgan, the share of large or uninsured deposits is about half of total deposits in Euroarea banking system including the peripheral countries.

Should a stealthy "uninsured" depositor run in Europe take place following this weekend, and up to half the funding of European banks go poof - that which until recently was generously provided by the same uberwealthy who are now the target of persecution seemingly everywhere - not all the ELA, LTRO, SMP, OMT, and any other acronym free ECB money in the world will be able to hold the Eurozone together.

In the meantime, those hoping for a Saturday resolution to the Cypriot expropriation of Russian wealth are urged to step back from the computer and go for a walk - it will take a while, and will likely be after the imminent onslaught of fire and brimstone from Russia which now does everything it can - including outright threats at this point - to make it clear that should Europe indeed go ahead and impair its wealthiest depositors by up to 70%, that the European winter 2013/2014 season, will be very long, and very cold.

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jeebus's picture

The drama in the financial system is wayyyyyyy better than any novel I can remember reading.

kliguy38's picture

Bullish for body bags............

UnpatrioticHoarder's picture

They just need a few days to get the Cypriot legislators new identities before they can flee to South America to evade the ex-KGB death-squads

flacon's picture

A group of Keynesians had to measure the length of a flagpole for evidence to support a bailout. They went out to the flagpole with ladders and a tape measure. They proceed to fall off the ladders and drop the tape measure - the whole thing was just a mess. 

An Austrian comes along and sees what they're trying to do. He walks over, pulls the flagpole out of the ground, lays it flat, measures it from end to end, gives the measurement to one of the Keynesians and walks away. 

After the Austrian has gone, one Keynesian turns to another and laughs. "Isn't that just like an Austrian. We're looking for the height, and he gives us the length."

francis_sawyer's picture
Deposit Levy Vote Delayed, Will Go "Down To The Wire"

~~~

Translation: Give us enough time to get all the muppets rounded up on the wrong side of the trade before we flip the switch the other way & take you all to the cleaners...

Faithfully Yours,  The Squid

GetZeeGold's picture

 

 

may be a stunning 70%!

 

Cue up the righteous Rev. Wright's chickens coming home to roost speech.

BaBaBouy's picture

Minus 70%!

 

This Is Like Firing A FINANCIAL NUKE At Moscow.

 

PUTIN Not Like...

redpill's picture

It won't be so bad, Russian mafia are VERY forgiving.

lol.

Temporalist's picture

"It hurts doesn't it.  You can't believe what fell.  All your dreams...uuuhh...dashed.  Hopes down the facking drain.  Your fate is sitting right beside you."

http://www.youtube.com/watch?v=YFF3E0Aqdlc

BaBaBouy's picture

"" What is also sure, is that any bulk investments in Europe, be they held by Russian, Chinese, or any other oligarchs, will now scramble to get out, knowing quite well their cash is not only no longer welcome in the Eurozone, but most likely will be used to fund bailouts of assorted insolvent European nations. Such as all of them. This could be a very big problem because according to JPMorgan, the share of large or uninsured deposits is about half of total deposits in Euroarea banking system including the peripheral countries. ""

 

RUN To GOLDIE, My Little Bitchies...

AND ... The REAL GOLD, Not The Fantasy GOLD Allegedly At The LEMY Or FED ...


gmrpeabody's picture

If I lived in the EU..., I would be splitting wood this weekend, getting ready for next winter.

barliman's picture

 

Fuck NEXT winter !!!

Gazprom provides 30% of the natural gas to Europe all YEAR long!

http://www.bloomberg.com/news/2012-10-31/gas-golden-age-darkens-in-europe-on-u-s-coal-energy-markets.html

Even after a wave of renegotiations, most prices for gas from Russia’s OAO Gazprom (OGZD), which meets about a third of the EU’s needs through contracts tied to oil, were revised down no more than 10 percent, Bros said. Disputes remain with RWE AG (RWE), Germany’s second-largest utility, and Polskie Gornictwo Naftowe i Gazownictwo SA, the Polish gas company known as PGNiG.

How long does Europe survive WHEN, not if, Gazprom shuts down the pipelines?

If they go ahead with the Suicide Plan for Cyprus, then ...

"... the share of large or uninsured deposits is about half of total deposits in Euroarea banking system including the peripheral countries."

The ONLY problem remaining is the rest of EU BANKS can NEVER re-open without MASSIVE capital controls being put in place first.

Manthong's picture

If I was a Russian oligarch, I would be getting ready to make a real mess out of the EU.

But that’s just me.. we all know those particular Russians are languid and easily rolled..

BaBaBouy's picture

Be Ready For OVERNIGHT 2500. GOLD...

 

AND ... Ooops, Ben Shalom Can't Seem To Locate The GOLD Under NYC Street...

PiratePawpaw's picture

" the ultimate haircut on what they thought was safe, easily accessible cash as recently as a week ago, may be a stunning 70%!"

Is 70% still considered a haircut? At what point does it becoming a fleecing/shearing?

tarsubil's picture

10% is a haircut. 40% is a scalping. I believe the word you're looking for is amputation.

Carl Spackler's picture

Let's just say that when amputation occurs, especially with Russians, there will always be blood loss...lots of blood loss.

Longtermnotreally's picture

This whole debacle has had at least one advantage, the middle class in Europe is starting to get really worried now, at last... they might just have enough time left to withdraw their savings from the banking system and convert them to money you can't print... last one out is a sucker.

The Big Ching-aso's picture

I thought getting Corzined and Madoffed was bad enough but getting Cyprused takes the Kissel.

Bananamerican's picture

Pure, Naked, State sanctioned... Theft.

Only people who DONT want to be bankers should be allowed to be bankers...

Jesuits maybe...

jimmytorpedo's picture

Jesuits,...HA!

The only group more evil than the banksters.

You might create a new breed of arch villian jesuit bankers.

Pseudo Anonym's picture

no need for this:

You might create a new breed of arch villian jesuit bankers.

it's been already done and works great:

http://www.bibliotecapleyades.net/vatican/esp_vatican37.htm

Mordenkainen's picture

LOL you guys are living in the 16th century. Today's Jesuits are a joke. The order is gasping for its last few breaths, literally. The average age of its members is around 70, if not older. 

Pseudo Anonym's picture

today's vatican is a joke. vatican is gasping for its last few breaths, literally. the average age of vatican's members is around 70, if not older.

Today's Jesuits are a joke. The order is gasping for its last few breaths, literally. The average age of its members is around 70, if not older.

Mordenkainen's picture

No parallel. The Jesuits are a religious order, which needs new members to keep alive. It's not getting any new members, and so is dying. The Vatican is a bureaucracy, which can replenish itself from any number of sources.

Pseudo Anonym's picture

oh, i see. my bad.  according to you, the jesuits have not replenished their ranks since 27 September 1540 (472 years ago): http://en.wikipedia.org/wiki/Jesuit_order

The Jesuits today form the largest single religious order of priests and brothers in the Catholic Church,

Omen IV's picture

the Jesuits are not a joke. they are within the epi-center of this whole debacle -dont kid yourself - the same group since 1500's have destablized countries, started wars and left piles of dead people in their wake - they are aligned with Fascists the world over

Papal Nunzio to the German Nazi organization  - Monsignor Pacelli ( who then became Pope Pius XII)  -  in the 20/30s worked out the Ledochowski Plan with the Furhrer chamberlain Papen - Father Staempfle a Jesuit wrote Mein Kampf as the ghost writer for Hitler

the catholic church and Jesuits as their maurading band of merry men in particular have long history of alliance with Fascists - in Spain, Portugal, France, Germany, Italy, Croatia, Argentina and they hate democracy

with the acendancy of the new Pope  - a Jesuit with Fascist ties in  Argentina - just when the world order is in motion for the great restructuring is not by chance

DoChenRollingBearing's picture

Gold, silver, platinum, palladium...

"Diversification in Precious Metals"

 

http://tinyurl.com/awapx5l

Meat Hammer's picture

Bitchiez.

Clean it up!  This is Zero Hedge!

Cdad's picture

It won't be so bad, Russian mafia are VERY forgiving.

I wonder what percentage of the ECB bailout cash is going to have to be set aside to pay the security service bills of CY politicians and bankers?

toys for tits's picture

You don't think that the Troika are the ones needing protection?

Cdad's picture

I don't pretend to know how far and wide the spider web of professional and personal relationships extends in this case.  I'm simply pointing the the obvious front line actors in this dilemma.  My point, of course, is that I believe this situation is very dangerous, indeed.

Joe moneybags's picture

The ramifications of Cyprus to Russia is no doubt extremely complicated.  Putin and others may want to thwart the offshore flow and hiding of money.  Having that money in Russian banks could mean better oversight and control of it by the Russian government.  The ECB might be playing the bad cop, making Putin the good cop to many in Russia who are less than happy with the Russian mafia and the oligarchs.

grid-b-gone's picture

To finally stick to their word rather than lose all credibility, they will work through the logic and settle on 100% .... but remember, it's only a one-time confiscation.

Jobs in banking to spike for one month before sinking to multi-year lows.

Strange, how history repeats despite all today's electronic innovations. At the core of the system still resides trust and human nature. No wonder so many swore off banks after 1929. No wonder deposit insurance was created as a plausible reason to trust again ... reset the pins so the game can continue.

And you think 1/10 oz. of silver can never again represent one day's pay?

Bananamerican's picture

"Strange, how history repeats despite all today's electronic innovations"

it's one of the main reasons i like the Bible...It's like a manual for the human race

It's something about these "bodies" we walk around in that causes us to do the same stupid shit over and over, forever and forever...

the stomach? (gotta keep filled) the unit? (gotta keep filling)

NoDebt's picture

Technology changes, governments change, societies change, economies change, etc.  What doesn't change is human nature.  It's what stays constant when all the "expert opinions" contradict eachother.  Even if you understand no emotions besides fear and greed you'll still stand a pretty good shot and figuring out what's likely to happen (again and again and again).

Alexandre Stavisky's picture

"The fact had gone all abroad that the foreign crank who carried million-pound bills in his vest pocket was the patron saint of the place. That was enough. From being a poor, struggling, little hand-to-mouth enterprise, it had become celebrated, and overcrowded with customers."

Tailors, tinkers find the day to day fabrication of real goods tedious.  Rise with real fabrication.  Fractionalization, hypothecation, paper and digital unbacked and unredeemable money enforced by bully boys with guns and legal tender laws.  Presto Million pound notes.

A good commander keeps his core well-defended with best troops.  Outer ring of defence is manned by mediocre warriors and pickets.  Hence EU project was intended to fail.  Pushed forward to absorb the first shocks and protect more vital interests.

 

http://www.eastoftheweb.com/short-stories/UBooks/MilPou.shtml

gould's fisker's picture

I concur; but the way things are going maybe the Russian oligarchs should take the deal, because if this goes on for another couple days they are going to owe the Cypriot banks instead of getting a haircut.  Still, that haircut has risen by well more than 50%, smells like a little payback from Frau Merkel.

AlaricBalth's picture

Repost from late last night. Would appreciate some help on this.

I'm curious to find out what is the status of offshore and domestic Investment Companies doing business in Cyprus. There are many European, Ukrainian, Russian, Jordanian and American funds and investment trusts that have exposure to the Cypriot crisis. Billions have been invested in these funds. Will they be subject to capital controls as well? Will they experience any impairment? In order to do business in country, a Cyprus domiciled bank must be used as custodian and/or pay agent. I am sure there are some offshore fund company execs who aren't going to get a whole lot of sleep this weekend.

Contagion anyone?

Below is from the Central Bank of Cyprus with links to all IF's doing business in Cyprus.

It must be noted that the Central Bank of Cyprus recognises, for the time being, only Private Investment Schemes which have up to 100 investors. Such Schemes must appoint a Custodian which must be a Cyprus bank, unless specifically exempt by the Central Bank of Cyprus. It must also be noted that Private Schemes which do not have a physical presence in Cyprus, must appoint a company to carry out the administration work of the Scheme. The said company must be based in Cyprus and be approved by the Central Bank of Cyprus.
The IF sector in Cyprus comprise of all International Collective Investment Schemes (ICIS) which are regulated and supervised by the Central Bank of Cyprus, investment companies which are listed on the Cyprus Stock Exchange and any other investment fund resident in Cyprus.

The List of IFs maintained by the Central Bank of Cyprus, which is updated on a quarterly basis, can be found below.

http://www.centralbank.gov.cy/media/xls/LIST_OF_IFS_FOR_PUBLICATION_REF....

And here

http://www.centralbank.gov.cy/media//pdf/CLSE_LIST_20_03_13.pdf

gould's fisker's picture

There have been several comments, probably more, on ZH the last couple of days noting that one of the last cards Cyprus has left to play is pulling the derivatives trigger by not taking the EU deal; now that Putin has left the table (at least on the deal at hand) they can't play the EU off Russia, so they're left with lighting that fuse.  And you'll need time and boatloads of lawyers to figure out which entities are under capital controls, and the markets won't wait for those ultimate judicial dispositions.  The question is, is Cyprus a Lehman model for the EU or is it not?  The next question is, can anyone really know the answer to that question until the EU pulls the plug?  So how can the EU not do the deal in the next 72 hours? It's another existential burp in this sorry shit parade.

Cdad's picture

If by contrived you mean intentional, then I might agree.  If by contrived you mean fake, well that's were we part company on definition.

Ultimately, this is about CDS, and NOT triggering it.  That is why banks don't fail these days, but rather they are bailed out, and the value of their shares are reduced to .01 and then reverse split 100:1.  You see, bankers in Brussels sprout have determined that it is not fair for them to have to pay out on the $200 trillion in derivatives that they have sold, and that it is moar fair for selected classes of people to bail out each and every bank that tanks.  In this case, the EU has decided that fair is ex KGB agent billionaires paying for it all, when usually it is EVERYBODY THAT CARRIES CURRENCY IN THEIR POCKET that has to pay the bill [via dilution and inflation].

And while everyone talks about Cypriot depositors and protecting them, the real depositor outflow has almost certainly already begun, those outflows being of very rich people who are clicking away with their mouse to move their money out of Europe.  Later on, we will get to the story about depositors fleeing banks as seen through cameras at cash machines ...but that will more likely be the end of this story...not the beginning.

So is it "contrived."  Maybe.  This is a test of the system to see if it can handle a nation leaving the Eurozone, and further a test to see if banks will EVER have to pay out on mountains of CDS sold to unsophisticated corporations and banks.

 

Tao 4 the Show's picture

Good post.

Here's a theoretical way out for Cypress:

A. If someone wants their funds immediately, 70% loss

B. If they are willing to wait X months, 50% loss

C. Wait Y months, 25% loss

D. Wait Z months (with a trickle withdrawal rate for living expenses), 0% loss

I don't know the needed values for X,Y, and Z, but the idea is that if the banks are anywhere close to solvent, it should be possible in theory to unwind their derivatives over time to refund depositors with some modest level of bailout from a third party. If this is not possible, it simply means (reveals) that the zero netting concept is false (as ZH has suggested) and the world is insolvent.

In that case, all the talk is just delay: Let the games begin!

NoDebt's picture

I wouldn't blur the lines between contrived and inevitable too much.  The Euro experiment is failing but the reason is not likely that someone is actively sabotaging an otherwise good system.  The system was flawed from the beginning.  The outcome, therefore, is much more a case of inevitability than contrivance.

 

zorba THE GREEK's picture

To Nodebt...Since when did they start allowing concise, intelligent introspect to be posted here on ZH?

All Risk No Reward's picture

The system is working perfectly - exactly to specification as engineered!

This is, after all, the only outcome of Debt Money Tyranny weaponized with fractional reserve lending and then blown to bits with derivatives.

Detb Money Tyranny

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

This is a Sun Tzu Art of War operation to use financial fraud to conquer the Western nations as they use our wealth and name to conquer nations that don't allow Debt Money Tyranny within their borders.

In terms of those WHO set this system up, it isn't a flaw, IT IS SPECTACULAR SUCCESS - INCLUDING THE FALSE NARRATIVE THAT IT IS A "FLAW."

The Big Bad obviously has a self interest in being known as the "Big Dope," because society's don't hang dopes who looted than and destroyed liberty within their boarders.

The solution is intellectual self defense on a mass scale - a so called mental anti-virus that goes viral.  Anything short of that is the seal to our doom.

The first step is to clearly understand the WHO, the WHAT and the WHY of how our "schooling" system was engineered to removed education and critical thinking and to socialize us into relying on authorities financed by the Debt Money Tyrants.

John Taylor Gatto is a diamond in this regard...  a true American hero.

Another Brick in the Wall #1

http://www.gnosticmedia.com/john-taylor-gatto-interview-another-brick-in...

Another Brick in the Wall #2

http://www.gnosticmedia.com/john-taylor-gatto-interview-another-brick-in...

Once one realizes one has had their intellectual abilities systematically yoked such that one doesn't possess the tools to consistently distinguish between reality and unreality, the next step is to find a systematic method for separating reality from unreality.

That's the first three of the classical liberating (free!) arts...  the Trivium.

http://triviumbinder.blogspot.com/

Audio section

http://triviumbinder.blogspot.com/p/audio-section.html

Reality: Base Data known, Logic known, Contradictions identified and removed, fallacies identified and removed.

Unreality: Base Data unkown or hidden, Logic unkown or hhidden, Contradictions not identified nor removed, fallacies not identified nor removed.

Anytime someone seals off the prerequisite data and logic...  a red flag should go up indicatiinng potential deception in progress and the knowledge that what is being claimed can't be known by the hearer.

"If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be. The functionaries of every government have propensities to command at will the liberty and property of their constituents. There is no safe deposit for these but with the people themselves; nor can they be safe with them without information. Where the press is free, and every man able to read, all is safe. "   Jefferson, Thomas   

You have the tyrant blue print right there:

1. Produce functionally ignorant people - the schooling system is working wonders...  Even high IQ people have been duped into believing things they've never researched on their own...  and once emotionally invested, they lack the integrity to question their prior commitment.  A+ grade

2. Transfer power to the federal government for centralized control.  Take away the rights and liberties of the people.

3, Withhold information - especially how to think critically and the key mechanisms used to control populations (debt based monetary fraud).

4. Enslave the press by buying it up with Debt Money Tyranny proceeds.

5. Passive reading is what the mental slave does - read the manual of his master and do the bidding.  Active literacy, though, that is what Jeffersion must have had in his mind.