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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

 

Barclays:

  • 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

 

Rabobank:

  • 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

 

BNP:

  • 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

 

Citigroup:

  • 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

 

SocGen:

  • 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

 

ING:

  • 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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Tue, 03/26/2013 - 07:51 | 3376030 GetZeeGold
GetZeeGold's picture

 

 

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

 

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

Tue, 03/26/2013 - 07:52 | 3376035 mantrid
mantrid's picture

no no no they've got the wallets already

hand over your mattresses

Tue, 03/26/2013 - 07:57 | 3376042 toys for tits
toys for tits's picture

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

Tue, 03/26/2013 - 08:21 | 3376104 Ghordius
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

Tue, 03/26/2013 - 08:26 | 3376128 Zer0head
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)

http://www.bloomberg.com/video/potential-bank-bail-ins-seen-in-spain-ita...

Tue, 03/26/2013 - 08:38 | 3376159 Ghordius
Ghordius's picture

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

Tue, 03/26/2013 - 08:28 | 3376130 Terminus C
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?

Tue, 03/26/2013 - 08:48 | 3376186 Ghordius
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

Tue, 03/26/2013 - 08:40 | 3376163 Terp
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.

Tue, 03/26/2013 - 08:55 | 3376205 Ghordius
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

Tue, 03/26/2013 - 09:06 | 3376245 JOYFUL
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.

Tue, 03/26/2013 - 09:20 | 3376301 Ghordius
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

Tue, 03/26/2013 - 09:41 | 3376410 Ghordius
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?

Tue, 03/26/2013 - 08:04 | 3376073 krispkritter
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...

Tue, 03/26/2013 - 08:07 | 3376085 sunnydays
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.   

Tue, 03/26/2013 - 07:56 | 3376040 duo
duo's picture

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

Tue, 03/26/2013 - 08:59 | 3376215 Vince Clortho
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"

Tue, 03/26/2013 - 08:15 | 3376100 stocktivity
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.

Tue, 03/26/2013 - 07:52 | 3376034 Dooud
Dooud's picture

This aggression will not stand ! Man!

Tue, 03/26/2013 - 07:59 | 3376052 toys for tits
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."

Tue, 03/26/2013 - 07:54 | 3376037 thatthingcanfly
thatthingcanfly's picture

Get to the choppa!

Tue, 03/26/2013 - 08:03 | 3376065 krispkritter
krispkritter's picture

Ben? Is that you?

Tue, 03/26/2013 - 08:21 | 3376118 therover
therover's picture

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

Tue, 03/26/2013 - 07:55 | 3376039 Iocosus
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.

Tue, 03/26/2013 - 07:56 | 3376041 shovelhead
shovelhead's picture

Beware of banks offering free haircuts.

Tue, 03/26/2013 - 08:45 | 3376075 GetZeeGold
GetZeeGold's picture

 

 

But wait....you 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.

Tue, 03/26/2013 - 07:59 | 3376049 hugovanderbubble
hugovanderbubble's picture

Ibex Halted ...

 

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

Tue, 03/26/2013 - 08:03 | 3376050 hugovanderbubble
hugovanderbubble's picture

Rajoy fired out¡

Tue, 03/26/2013 - 08:02 | 3376051 hugovanderbubble
hugovanderbubble's picture

Spanish Covered Bonds = all in default = ALL

Tue, 03/26/2013 - 08:00 | 3376056 dontgoforit
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.

Tue, 03/26/2013 - 08:02 | 3376061 Downtoolong
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.

Tue, 03/26/2013 - 08:03 | 3376064 Simon
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 ?

Tue, 03/26/2013 - 08:16 | 3376096 css1971
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.

Tue, 03/26/2013 - 08:21 | 3376112 Urban Redneck
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").

 

Tue, 03/26/2013 - 14:25 | 3378033 Radical Marijuana
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!

Tue, 03/26/2013 - 08:16 | 3376103 Urban Redneck
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.

 

Tue, 03/26/2013 - 08:38 | 3376154 Simon
Simon's picture

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

Tue, 03/26/2013 - 09:13 | 3376265 Urban Redneck
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.

Tue, 03/26/2013 - 14:30 | 3378051 Radical Marijuana
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.

Tue, 03/26/2013 - 08:03 | 3376069 Shooting Shark
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. 

Tue, 03/26/2013 - 08:06 | 3376079 mantrid
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": http://www.businessinsider.com/art-cashin-on-big-vix-bet-2013-2

and you know, but a mere coincidence, we had this "little" Cyprus issue just now
Tue, 03/26/2013 - 08:12 | 3376089 GetZeeGold
GetZeeGold's picture

 

 

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

 

Prank caller....prank caller!

http://www.youtube.com/watch?v=2nG7aix-VO4

Tue, 03/26/2013 - 08:30 | 3376099 dontgoforit
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.

Tue, 03/26/2013 - 08:19 | 3376111 negative rates
negative rates's picture

Problem is, he's says that every sixty days, somewhere. Eventually it had to come true.

Tue, 03/26/2013 - 08:12 | 3376092 OneEyedJack
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.

Tue, 03/26/2013 - 08:18 | 3376108 dontgoforit
dontgoforit's picture

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

Tue, 03/26/2013 - 08:20 | 3376114 negative rates
negative rates's picture

Looks awful cold up there.

Tue, 03/26/2013 - 08:22 | 3376123 css1971
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.

Tue, 03/26/2013 - 08:22 | 3376121 DOT
DOT's picture

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

Tue, 03/26/2013 - 08:25 | 3376126 IridiumRebel
IridiumRebel's picture

Oh the truthiness!

Tue, 03/26/2013 - 08:24 | 3376125 razorthin
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.

Tue, 03/26/2013 - 08:31 | 3376142 dontgoforit
dontgoforit's picture

Like it's 1999, baby!

Tue, 03/26/2013 - 08:36 | 3376151 blindman
blindman's picture

the fraud in money creation cannot be identified or recognized
so the solution is to confiscate the accumulation of "it".
"what a country" (banking system) !
prosecute the saver and move on ......

Tue, 03/26/2013 - 08:40 | 3376161 Quinvarius
Quinvarius's picture

Arbitrary is the template.  That is worse than anything else.  Will they take it all?  Will they take 10%?  Will they accuse you of crimes as they take it?  It is a loot riot over there.  Christine Legarde is sure to get a lot more free dinners out of this.

Tue, 03/26/2013 - 08:42 | 3376164 Super Broccoli
Super Broccoli's picture

Cyprus problems are now solved, their banking system is stronger than ever, eurozone is safe and recovery around the corner :-) Man i should be that eurogroup pres. !

Tue, 03/26/2013 - 08:42 | 3376169 NoDebt
NoDebt's picture

"but sovereign failure is even less acceptable than before, Kit Juckes"

Best comment of the bunch.  Up till now the sovereigns and the banks had their interests aligned almost perfectly- free money for the banks, endless bid for soverign debt to support government over-spending.

Now you have BANKERS looking at this situation and saying "Wait one damned minute.  This isn't cool."  In case you hadn't noticed, guarantee of deposits is one of the big things banks have going for them in the broader market.  Its one reason they can offer 0% interest and tell everyone to take it or leave it- because those deposits are totally secure.  Now they might not be.  This is a PROBLEM for them and they know it.

The first divergence between banks interests and sovereign government interests is what just happened here.  And the banks lost.  Diesel-boom just rubbed their nose in it.

Tue, 03/26/2013 - 08:55 | 3376204 Winston Churchill
Winston Churchill's picture

Bingo.

The realization that the the banks are too big to save has dawned on the politicos.

With the added bonus of being able to welch on the soveriegn debt held by those banks.

The Cypriot banks were double crossed after being forced to buy Greek bonds.

The theives are falling out.

Tue, 03/26/2013 - 10:42 | 3376724 falak pema
falak pema's picture

ah the penny drops in Blenheim palace; when thieves fall out! 

The statists' counter reform of oligarchy world! 

Will POtus and Ben change their tunes...zat eez zee kestione...

Tue, 03/26/2013 - 11:27 | 3377132 Winston Churchill
Winston Churchill's picture

Actually Falak,

I have a portrait of an ancestor hanging in that palace.One of the Venetian merchants.

Genes will tell,very amazing resemblance to me ,same nose chin,eyes ,and forehead

but 500 years later.

 

Tue, 03/26/2013 - 08:54 | 3376200 NoWayJose
NoWayJose's picture

Of course this is a template, as one of the biggest liabilities on a bank balance sheet is actually paying back their depositor's money. The bailout math is a lot cleaner when you can grab depositor money, transfer it yo cover the loans issued from the big EU banks, and then stick on IOU onto the people of a country without any legislative approval!

Tue, 03/26/2013 - 09:10 | 3376263 dunce
dunce's picture

I was struck by the term "single supervisory mechanism". When you break that down, single  means centrally planned. Supervisory means control, and a mechanism is a device for the application of directional force. Does the world need another example of the failure of dictatorial central planning? What is left out is leadership and democratic principles like the consent of the governed.

Tue, 03/26/2013 - 09:13 | 3376277 Diogenes
Diogenes's picture

Work is for suckers. Governments can borrow money, spread it around to their constituents and never have to pay it back.

There is the root of the problem. Everything else is a desperate attempt to keep the Ponzi going.

Tue, 03/26/2013 - 09:41 | 3376409 100pcDredge
100pcDredge's picture

So... no more superpositions for W$ then?;)

Tue, 03/26/2013 - 10:44 | 3376730 WallowaMountainMan
WallowaMountainMan's picture

"ever since both he and all of uber-incompetent Europe have been desperate to put the genie back into the bottle to no avail,"

inaccurate.

'he' (Dijsselbloem) is still publicly advocating a necessity good bank/bad banks solutions to bank insolvency. to focus ad hominid attacks on him for 'template' misses the point.

to illustrate, change the dialogue to the accurate:

"those bums at the ecb et al are trying to get back at the guy who dared to speak the truth that bad banks/good banks for the bank insolvency is the right way to go. hell, even after they told him to shut up (not use 'template'), he's still calling them out on it."

imo.

:)

 

Wed, 03/27/2013 - 08:45 | 3380661 WallowaMountainMan
WallowaMountainMan's picture

back from the future:

" A day after sending markets into a spin Eurogroup President Dijsselbloem reiterated that “risks (of bank failures) should fall on those who take the risks, and not the taxpayer”. Interestingly, Mr Dijsselbloem said that he didn’t regret his comments earlier in the week and that Cyprus “does fit into the new approach towards bank rescues that is gradually evolving” (WSJ). Officials at the ECB seem to hold a slightly different view though with Beniot Coeure from the ECB’s executive board commenting that he thought Mr Dijsselbloem was “wrong to say what he said”. Those comments were echoed by Ewald Nowotny who stated that Cyprus is special case and is "no model for other instances". '

from:

http://www.zerohedge.com/news/2013-03-27/cyrpus-contagion-spreads-europe...

 

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