Cyprus - To Template, Or Not To Template: That Is The Wall Street Question

Tyler Durden's picture

After one of the most fabulous verbal faux pas in recent history was committed yesterday, in which the truth briefly escaped the lips of the new Eurogroup head who still has to learn from his masterful "when it becomes serious you have to lie" predecessor and ever since both he and all of uber-incompetent Europe have been desperate to put the genie back into the bottle to no avail, everyone has been caught in a great debate: to template, or not to template?  Below is a summary of Wall Street's thinking on this key for so many European (and soon global) depositors.

Deutsche Bank:

  • Damage from Dijsselbloem’s earlier message was done even as he tried later to clarify his Cyprus template remark, Jim Reid, head of fundamental strategy at Deutsche Bank, writes in note
  • Cat increasingly let out of bag in past week on different ways to resolve future banking and sovereign crises; comments yday add to risk nothing is off the table when it comes to future issues
  • Investors and creditors may also take the view that there’s increasing inconsistency about future rescues



  • Dijsselbloem’s comments reflect clear misalignment in views among Europe’s leaders on structure and timing of banking resolution, Fabrice Montagne, economist at Barclays, writes in note
  • Expect policymakers to clarify ESM role at upcoming EU summit in June; no clarity at the moment on whether ESM will take full responsibility for bank recapitalization for weak banks once the single supervisory mechanism is in place


Morgan Stanley:

  • Cyprus bailout shows increasingly apparent change in EU approach to place burden on investors and depositors rather than tax payers, Hans Redeker, strategist at Morgan Stanley, writes in note
  • Dijsselbloem’s comments of Cyprus template is consistent with with the change in approach to bailouts even after he back-pedaled; comments consistent with those of Merkel and recent bank nationalization in Holland
  • Investors who recently returned to peripheral mkts may be deterred by perceived change, increasing EUR’s downside risk



  • Dijsselbloem’s comments, together with the ditched plans to take on small deposit holders, show genuine change in approach to solve banking sector problems
  • In future, tax payers may not be the only source to absorb banking sector losses; re-fragmentation in
    Eurozone could be a consequence of Cyprus deal
  • Negative for Ireland if Dijsselbloem’s comments do point at a change in stance; inability to resort to ESM to take over recapitalization of Irish banks may complicate exit from bailout



  • Although Dijsselbloem’s comments were partly retracted, mkts have interpreted it as indication that private sector bail-ins will need to play a larger role in any future bailouts, Steven Saywell, strategist at BNP writes in note



  • Investors bought peripheral bank shares and corporate bonds in the belief Europe is heading towards a banking union with single supervision and an ESM-backed bank resolution mechanism, Valentin Marinov, strategist at Citigroup, writes in note
  • That belief is badly shaken; euro-denominated assets are vulnerable, adding to more EUR downside risk



  • Europe is establishing the principle that sovereigns will not bear the whole burden of bank bailouts, but sovereign failure is even less acceptable than before, Kit Juckes, strategist at SocGen, writes in note
  • Dijsselbloem’s timing was awful but there’s no point saying banks must not be too big too fail, and then bailing out all bondholders and depositors when they do fail
  • Bank regulators will be more conservative, savers more nervous and monetary transmission mechanism more broken



  • Eurozone bank stocks were hit hard yday on comments Cyprus is the new benchmark for bailouts; international investors will be monitoring deposit flows and Luxembourg and Malta, given that bank asset to GDP is now a popular metric, Chris Turner, strategist at ING, writes in note

Source: Bloomberg

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GetZeeGold's picture



This is a stickup....and today it's now legal.


Hand over your wallets.....and no one gets hurt.

mantrid's picture

no no no they've got the wallets already

hand over your mattresses

toys for tits's picture

The "Troika Template" will not go unnoticed by those with deposits at risk.

Ghordius's picture

LOL - funny if you think about the fact that Dijsselbloem has no "special powers" besides being the "first among equals" of a semi-permanent meeting of european finance ministers - and that truly important decisions are at most prepared by this group for the "summit" group of heads of government, the council

Wall Street loves power, and listens to every word of the "perceived powerful", and loves titles like "Mr. Euro"

sometimes I get the impression that even Gollum was made "President" so that Wall Street would have a term of reference in this "alien maze" that european political affairs are for NY

and sometimes I have the impression that it's an insider joke, in Brussels: "let's do again something our American cousins misunderstand"

it's committees, dammit. executive powers in europe generally (with some notable exceptions) come from parliaments through cabinets, not from an elected president

this guy Dijsselbloem is still the finance minister of the Netherlands and very little more than that

he and Olli Rehn don't even have a vote in this committe called "Eurogroup", for criminy

perhaps it's time for an Euro-Jawboning Tsar

Zer0head's picture

Olly Burrows, credit analyst at Rabobank

Bail-in or Special Levy (AKA stealing deposits) is part of the crisis management directive and investors should take comfort from Dijsselbloem's comments

go to minute 5:00 (worth watching the whole thing)

Ghordius's picture

+1 indeed excellent insight from Olly Burrows, he defines the "template" quite well - the whole interview is worthwile

Terminus C's picture

So you are saying that his comment about depositor theft means nothing because he is part of a committee...

Got it.






Oh!  Just one more thing....

Are you saying that his comment was not a reflection of the committee's will, nor the will of the leadership within Europe?

Ghordius's picture

LOL - I'm saying that one part of his comment has been taken out of context. meanwhile our parliaments can be... fickle. notoriously so

yet when the meeting with the Cypriots ended and they were still flying back to meet their parliament nearly all european parliaments were making resolutions and statements condemning any attempted grab at the under-100k deposit - while condoning the bail-in principle of involving all other internal bank assets, i.e. also the over-100k

so simplified: yes to "over 100k-depositor haircuts" in bail-in situations, and yes to bail-ins "using internal bank resources"

ZeroHead's analyst interview gives you more details, btw

Terp's picture

"executive powers in europe generally (with some notable exceptions) come from parliaments through cabinets"


So imposing bank holidays and raiding private deposits are some of those "notable exceptions", yes?

If that is the case I have the feeling those exceptions will likely become the rule in the not too distant future.

These are the final straws they are grasping at...not many more places to go after this I´d say.

Maybe the yanks have a hard time comprehending european politics, but folks here are increasingly getting the joke, and they are not laughing from what I´ve seen.

Ghordius's picture

the bank holiday in Cyprus is (and can be only) imposed by the governor of the central bank of Cyprus under the authority of the Cypriot President, who indeed is directly elected - a few weeks ago, btw

so yes, this is a notable exception to this rule, then it's an act inside his executive powers and the Cypriot parliament is out of it

don't ask me to defend his position, though, then imho it was utterly unnecessary - I still have the impression that he tried to force his peers out of their bargaining positions with that - among other things

JOYFUL's picture

I don't know who is the greater naif, Ghordius...."WALL STREET" or thee!

The gist of your argument is that these guys are not the real power...which you seem to believe is vested in some ceremonial abstractions called 'parliaments' and 'cabinets' and the like. Your passionate belief in the fable of European 'self-governance' is touching but antiquarian.

There's little doubt that, while the Dutchman and so on are not the real face of power, they are indeed the masks behind which that real power hides...their ditherings and deviations from the storyline are in exact accord with the way a puppet swings upon it's strings...and you can be sure it's not a 'committee' or a cabinet which is pulling them.

Ghordius's picture

the gist of my argument is that the typical NY analyst is used to US executive power, which flows in a different direction than european power

ergo he tends to see something familiar in the EU, and those guys in Brussels seem to cater to it - which is funny, imho

of course Netherlands-the-country is an actor in european affairs way beyond it's actual size, but again their finance minister cannot make decisions alone - has not the leeway a typical US "Tsar" has, and for sure not the power that any US secretary has. in fact, this particular Dutchmen was asking not long ago for a permanent team to the EuroGroup of... four empoyees

that's all, nothing more

meanwhile, of course, this European 'self-governance' is part of the Pax Americana - no doubt on this

Ghordius's picture

Joyful, btw, do you happen to remember the old "Hercules Affair"? The one that implicated several early Dutch Bilderbergers in NATO procurement schemes?

krispkritter's picture

It's a stick up at the Sealy Bank of Savings & Foam...when they break out the scuba gear, then I'll start to sweat...

sunnydays's picture

The comments from them saying how damaging it was that depositors instead of taxpayers were going to bear the brunt of future problems is hilarious.   Aren't depositors and taxpayers the same?   It is just they hide the cost on the taxpayer, but still take the same amount of money.  

They are just being more honest when they take the money out of the accounts.  The people still have to pay for the banks and governments high living and bad bets.   

duo's picture

Hmmm, soak taxpayers or investors/depositors to bailout the banks....How about both?

Vince Clortho's picture

Can't fault that logic -- the sheep deposited their money in the wolves bank.  They deserve to be robbed for being so gullible.  And the taxpayers meekly approve the felony.

- from "inside a Banker's Mind"

stocktivity's picture

I would think Jamie Dimon is very happy to see all this Cyprus mess take place in the same week the spotlight was on him and JP.

Dooud's picture

This aggression will not stand ! Man!

toys for tits's picture

"What the fuck are you talking about? The chinaman is not the issue here, Dude. I'm talking about drawing a line in the sand, Dude. Across this line, you DO NOT... Also, Dude, chinaman is not the preferred nomenclature. Asian-American, please."

therover's picture

Funny....I was watching Predator last night ! 

Iocosus's picture

Too late, he said it and cannot unsaid it. Freud was a fraud, but it was a Freudian slip nonetheless.

EUR/USD parity coming to a theater near you.

shovelhead's picture

Beware of banks offering free haircuts.

GetZeeGold's picture



But will also get a free Jim Carrey/Dixie Chicks towel.


Good while supplies last. At least one doner will win a our grand prize of a Spiderman towel.....act now.

hugovanderbubble's picture

Ibex Halted ...


(No liquidity, no amplitude, ....End of Spanish Market)

hugovanderbubble's picture

Spanish Covered Bonds = all in default = ALL

dontgoforit's picture

War is the answer to all these questions.  Wag the dog - 'ts what they always do in a time of complete collapse - which is, as we have all noted by reading the tea leaves, just around the corner.

Downtoolong's picture

When all you banksters make up your mind and reach a consensus on this issue let me know. Meanwhile, I’ll make sure the current balance on the credit card you have issued me roughly matches the balance in my checking account.

Simon's picture

For those screaming against Diesel-Boom, what is wrong in his approach ? Please detail.


From what I see, he chose to make pay banks before all depositors, which is a good thing. Am I missing something ?

css1971's picture

Nothing is wrong. It's exactly how it's supposed to work. It's simply that your average muppet has no idea what a bank account is... No, really... Which I find amazing. I mean, WTF you put tens to millions in and you have no idea?

It's perfectly clear to me these days that 99% of the world population wander around in a completely deluded state. Delusion = normal. I no longer even know how to talk to people any more, the fantasy world they inhabit is grotesque.

Mark my words in the war of delusion vs physics, physics wins. There's a near extinction event heading our way.

Urban Redneck's picture

It doesn't help the dumb little muppets delusion when their elected and unelected leaders are OUTRIGHT LYING, CHEATING, AND STEALING every morning, noon, and night (not to mention claiming "banks are safe" and "we're looking out for you").


Radical Marijuana's picture

Unfortunately, ccs1971, I have to agree that, IN FACT, "99% of the world population wander around in a completely deluded state. Delusion = normal." Physics finally prevails, however, in the shorter term, backing up frauds with force has driven this situation where we live inside a Bizarro Mirror World, where everything is backwards, and proportionately distorted. Since people were rewarded for believing in bullshit, while they would be punished if they did not agree to go along with the biggest bulllies' bullshit, the whole world became dominated by Huge Lies, backed up  by Lots of Violence. The physics of enforcement was able to drive the situations of social insanity, whereby the vast majority of people became profoundly deluded, while at the same time, in their conditioned state of deliberate ignorance and fear, they DO NOT WANT TO UNDERSTAND THEIR DELUSIONS!

Urban Redneck's picture

The bigger picture.  The ECB is cutting a check for 10B to the largest debt and equity holder of the two failed banks, to cover that debt and equity holder's losses on the two banks and shore up its balance sheet, so that the ECB itself doesn't recognize (write-down) all the toxic crap paper of that largest debt and equity holder.

The ECB contributions to help the depositors of the two banks is EXACTLY 0, while its contribution to help itself is 10B.

Follow the money.


Simon's picture

Yes, the dream must go on ... Still the second plan is better than the first one.

Urban Redneck's picture

Only if you are willing to ignore that there are now overt capital controls within a currency union, and some sheeple are now more equal than other sheeple.  So much for the fungability of money- which is the very underpinning of the common market.

The Russian crackpot with his "dirty" joo-bux had a valid point, which the closed-minded Germans will to continue to ignore probably until Washington decides that dirty joo-bux from "red" states are not equal to non-dirty joo-bux from "blue" states in some fascist effort to extract the guns or gold that they covet in the former.

Radical Marijuana's picture

Indeed, Urban Redneck, "... so that the ECB itself doesn't recognize (write-down) all the toxic crap paper ..." which is a sort of sleeping pill, to make sure that most people will continue to not understand their real situation, and so, can continue being deluded.

Shooting Shark's picture

If the people who said this would all work out fine are WRONG, then what do we call the people who said this was never going to work?
That's right, racists. 

mantrid's picture

38 day ago ART CASHIN had noted that "Some Trader Has Made A Very Big Bet That Something Very Bad Will Happen Within The Next 60 Days":

and you know, but a mere coincidence, we had this "little" Cyprus issue just now
GetZeeGold's picture



Na na na.....I can't hear you....I don't know you!


Prank caller....prank caller!

dontgoforit's picture

If you're on the inside, or at least not 'on the outside,' then you must trust your gut that what you see as a crumbling facade of false hope and delerious spending and bail-outs and bail-ins which are not the solution to the interference in banks and free-exchange markets that has taken place in the last 4-1/2 years.  It's goofy to think the piper doesn't come to call.  He always comes for payment.  And let's face it, we're broke.

OneEyedJack's picture

Help me decide,

Am I watching "As the World Turns" or "Soap"


It seems to me that "Soverign and Union"  at the same time, doesn't work very well.

dontgoforit's picture

Soap-on-a-rope - of the noose type and our necks are in it.

css1971's picture

It seems to me that "Soverign and Union"  at the same time, doesn't work very well.

Exactly. You can be a sovereign nation or you can be a province.

DOT's picture

Der Spiegel says, "Nothing is safe".   Oh! the Humanity!

razorthin's picture

Fucking ridiculous.  Everyone knows it's all going to implode.  The only betting left is on which path to death and the timetable.  Anyway, the Street's gotta boogie until the lights go out.