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From Blessing To (Soon To Be Confiscated) Curse: When Cyprus' Massive Deposits Were A Great Thing
In the aftermath of this weekend's earth-shattering developments out of Cyprus, in which countless people lost billions in savings, having forgotten their money is nothing more (or less) than a general unsecured liability of an insolvent banking sector which in the absence of the Bernanke and Draghi moral hazard-put are simply easy confiscation targets, it is difficult to conceive that having a massive surplus of deposits was actually a good thing. Ironically, this was precisely the case as recently as 10 months ago, as this May 2012 presentation from the Bank of Cyprus titled "International Banking Services: Strategic Business Crossroad - A Reliable Financial Center" (don't laugh) makes all too clear.
Behold page 11 of 33 - the first page highlighting the strength of the banking sector in Cyprus:
It is here that we read that the "Size and structure of the Cyprus financial system reflects Cyprus’ role as an international business centre" and that "This is reflected in the growing number of companies registered in Cyprus and the increasing size of the banking system" as measured by the record amount of banking deposits.
Ironically, these very deposits would not even a year later serve as the basis for the complete collapse of the same "strong" banking system, and lay the groundwork for the upcoming endless depression that the citizen of Cyprus will be subjected to for many, many years.
Because in the New Normal, what was recently a blessing, becomes a curse (literally, when one factors the earlier statements by the Church of Cyprus) in a few short months.
The full quite enjoyable "Cyprus - A Reliable Financial Center" presentation, which we urge everyone stuck in a cognitive bias box to read:
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Deposit this.
Cyprus crisis breakdown of deposits.
http://cdn1.spiegel.de/images/image-477020-galleryV9-kjam.jpg
Didn't look super-closely, but I'm pretty sure I didn't see anything about Greek bond exposure in that prezzo.
I don't even need to read it. When you entrust your money to the greedy bankers, you should not be surprised by anything they do to try and maximize their profit. Especially when you will be the one to suffer if they bet wrong. What a racket.
So much for that "well established legal system based on English standards"
It all sounds Greek to me...
They should have disclosed it right next to where they mentioned prop trading...
But as background - when that document was published the stock market had already crashed from 5000 to 200. The trip from 200 to 100 has been worse for the bank depositors, but no one with half a brain couldn't figure out there were some serious issues despite the happy speak from the desparate bank-
That is one ugly presentation.
Reliable=gold and silver and my dog.
And you can even eat the dog!
And buy a new dog afterwards.
They will only be depositing on soda bottles
"Size and structure of the Cyprus financial system reflects Cyprus’ [former] role as an international business centre"
Fixed it.
hey no one talks about monaco! what happens when those banks get raided!
The EZ members get "Princess Graced".
et voila! could that be the next chicken to get plucked?
No. It will be Slovenia
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/24/move-over-cyp...
Powerpoint has done wonders for bullshitting...
Great comment. I was in a members' meeting yesterday for a small non-profit, where I sit on the Board. Our treasurer presented our financials yesterday using Powerpoint for the first time. I would have given his presentation a "C" (no YTY comparison, no matching of the revenues and expenses specific to certain activities) but he received a round of applause from the group basically for using Powerpoint. I kept my mouth shut knowing the reward for giving advice would be a request to serve as treasurer.
I was removed from a board for pointing out such things. You don't understand the new mentality. An honest critique is now viewed as "being negative". The fuckers in control now have been raised in a society where "everyones a winner" and they have never even recieved a "C", ever. Nothing but glowing praise, their whole life. It's beyond stupid and just another reason why things are accelerating. The credibility and accountability in leadship across the fucking board is a joke these days.
Stress tests are for pussies
Unfortunately, now we get to watch the stress test on the Cyprus people.
I can see it coming: a monthly bank statement that is harder to read than an AT&T bill.
all so depressing- i'm newsworn...
"A well-established legal system based on legal standards." Lol
I hope some of the depositors sue the shit out of the EZ for the illegal confiscation without due process.
I see no picture of a giant spider web and ECB & IMF spiders waiting on the edges in that presentation.
And the rise in oil prices is a sure sign the end is nigh. They're going in for the kill.
Remember when oil was going to come down and the strategic reserves were dipped into and being anywhere near $100 was a bad thing?
What is hilarious and simultaneously terrifying, is this is not even a go go model like G Sachs or JP Morgan.
Their big mistake was concentrating their portfolio in a proximate European sovereign that they presumably thought they knew well. Compare that with gambling with a doomsday portfolio of derivatives.
Billy B -
Bullish! Bernak will rescue the world. Fuck you Ben
Another totaly shameless bare ass in your face closing ramp again.
Helped with those Cypriot bank stress tests, I'd wager. who was in charge of all those easily passed ST's? about 18 mths ago? any inquiries of that farce?
The biggest surprise to me is, NOTHING is on fire yet...
It's not the deposits that cause the problem per se.
It's what the banks DO with the deposits. Like making risky loans and buying Greek government bonds.
The near-ZIRP of the ECB is largely responsible. These deposits would earn next-to-nothing if placed into the inter-bank lending market.
It's a classic case of "too much money chasing too few good investment/lending opportunities".
+100
It's called greed. Bankers don't need to invest in risky assets, they chose to. There is no downside (because they get bailed out when they fail) and nothing but upside in their pockets. With the rate spreads, there should never be "too much money", only too much temptation.
The problem is that under ZIRP, there is virtually no "spread".
The Fed attempts to compensate for this by paying the banks interest on their excess reserves, but it doesn't come close. So the bankers are tempted to gamble. And gamble they will, because it's OPM.
If Cyprus banks had lent to the Germans instead of the Greeks there would be no crisis. If they had simply diversified into different EU, USA and Japanese bonds there would be no crisis.
ECB (and Greece to some extent) put a headlock on the Cypriots and 'convinced' them to lend to Greece instead. Cyprus even kicked in 3b euros toward the Greek bailout! Draghi was all over this ... he let Cyprus drown.
The Henry Kissinger of central banking. He should be taken out and shot.
It seems that the rating agencies failed even more when rating the stability of countries.
Perhaps they should include the GDP / Goverment Spending ratio as a basis for rating goverment bonds....
The German newspaper "Die Welt" has two very interesting articles:
1. (My loose translation)
Headline: German savers must act after the Cyprus deal
subtitle: The Cypriot rescue [agreement] bears consequences for German savers: you must adapt to face the new reality - and adjust yourself (your views)
when dealing with savings, fixed interest and daily market accounts as well as when dealing with life insurance.
http://www.welt.de/finanzen/article114763148/Deutsche-Sparer-muessen-nac...
2. Headline: Big depositors lose up to 90% on Cyprus
subtitle: New details on Cyprus rescue agreement: well-to-do depositors must be held liable with their money, the banking sector will be cut down to half. Now people dread the panic reaction when the banks open again.
http://www.welt.de/wirtschaft/article114760715/Grossanleger-verlieren-au...
"The economy is going through a shallow recession and is expected to return to growth in 2013". LOL
Lending beyond the capacity to repay, then bankrupting the borrower is the Troika's strategy, but the people of Cyprus are aware of their own role in the tragedy.
Here's what the Cyprus Mail says about how the island has paid the ultimate price for avoiding responsibility.
"perhaps, we were squarely to blame for putting ourselves in the position of needing a €17bn loan to save our economy from bankruptcy.
It was not the Eurogroup who told us to live beyond our means for years, building up the public debt as the state gave annual pay rises of six to seven per cent, outrageously high pensions and obscene retirement bonuses to public employees who were constantly growing in numbers.
It was not Germany’s fault that our populist politicians, whose only concern was their re-election, happily sanctioned this profligacy because it also benefited them, politically and financially."
The Germans have robbed Cyprus banks in order to prop up their own profiligate and corrupt banks and politicians. And the Troika has destroyed confidence in the banking system worldwide, but the corrupt politicians in Europe have been supported by greedy electorates.
This from December 5, 2011, take a look at the bottom of the article. So, ZH saw it coming.
http://www.zerohedge.com/news/here-comes-sp-downgrade-barrage
Cyprus made the best wine and was the staging ground for the world's greatest swine : Saint Louis's VII crusade that ended in disaster.
So its a land of contrasts always colonised by the ambitious oligarchs : the list is long : Byzantine swine, Abbassid wine (yes Shiraz was embarrasing as source to Haroun and he delocalised it for a time to Cyprus), then Comnenos outpost, Plantagenet kingdom, later Templar domain and Lusignan princedom, then part of Latin Kingdom, then Greek, then alternatively Genoese and Venetian domain, then Ottoman, then Greek again, then British, then Greek and Turk and now Russo greek...Mosaic and not prosaic always a place of grace, as land of Venus.
With a pedigree like that its not going to end for EZ scum or mafioso bums. Play on Cyprus...
Laundering money for Russian Oligarchs since 2002.
Is that presentation going to be a template for other banks....it was pretty.....
Easy to attract depositors with 6% savings rate. I wonder how many borrowed in the UK, Germany, Russia and deposited into Cyprus to bank a return on the Draghi/King vig?
They had matched the 6% savings rate against Greek bonds paying 8.5%.
I am almost certain that GS set up that "matched" structure with managed convexity based hedges. Oops.....
Boy I can't wait for the US to go after the Mexican Cartel money. Now I know why the 1.6 billion bullets.
How does the so called market ramp up in the last minutes both Friday and today? Do they really think we all are that ignorant? Fuck you Ben
The Church of Cyprus said to have 100 million euros of "capital" that will be toast. I wonder what form this takes? If it is as bondholder to the troubled Cyprus banks - seems to me that the Archbishop didn't exercise his authority and rights to keep the bankers on the straight and narrow. Or ... maybe he was part of the problem?
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