"Betray Your Bank Before Your Bank Betrays You"

Tyler Durden's picture


From Jonathan Weil of Bloomberg

Betray Your Bank Before Your Bank Betrays You

What’s a Slovenian with several hundred thousand euros in the bank supposed to do? Spread it out among at least a few different banks, that’s what. Or move the money out of the country, while it’s still possible.

Imagine what must be on the minds of any savvy depositors still left at Nova Kreditna Banka Maribor d.d., now 79 percent- owned by Slovenia’s government. It was one of only four lenders in October that failed the European Banking Authority’s latest capital-adequacy test, a ritual best known for how lax its standards are. One that flunked was Bank of Cyprus Pcl, where uninsured depositors face 40 percent losses as part of the country’s bailout terms. Another was Cyprus Popular Bank Pcl, also known as Laiki Bank, where uninsured deposits will fare far worse and the bank is being shut.

Cypriot banks’ customers were complacent after uninsured deposits went unscathed in Ireland, Greece, Spain and Portugal, the first euro-area countries to seek international rescues. Slovenians won’t have that excuse should their country be next.

The former Yugoslav republic needs about 3 billion euros ($3.8 billion) of funding this year, while its struggling banks need 1 billion euros of fresh capital, the International Monetary Fund said last week. Slovenia’s central bank this week urged the country’s new government to quickly carry out a plan to recapitalize ailing lenders. It’s a familiar pattern.


The way it’s supposed to work at failing banks is that shareholders get wiped out first. Next the losses go up the ladder from junior debt holders to senior bondholders, and then all the way to uninsured depositors, if need be. Taxpayers and insured depositors shouldn’t have to absorb others’ losses or put money at risk to spare them. Troubled banks should have to fend for themselves.

This was the approach imposed on Cyprus. In ordinary circumstances, it would be considered fair. The best argument for why it wasn’t is that Cyprus had been lulled into believing it would be treated just as well as Europe’s other bailout recipients. The entire country got hooked on moral hazard.


The Central Bank of Cyprus warned months ago that the country’s banks needed an infusion of 10 billion euros -- which is more than half the size of the nation’s economy -- largely because of heavy losses on Greek sovereign debt held by Laiki and Bank of Cyprus. It seems a lot of customers were oblivious to the banks’ deteriorating health, or were confident they would be cared for by somebody else. The country is getting a 10 billion-euro bailout, nine months after it first asked for aid, except none of the money will go to the banks.

Suddenly it should be dawning on a lot of Europeans that deposit-guarantee limits matter. In Slovenia, the maximum is 100,000 euros per depositor, the same as in Cyprus. (Deposit- insurance programs vary among the 17 countries that use the euro.) For a few days last week, it looked as if customers at Laiki and Bank of Cyprus would lose even some of their insured deposits, which would have been a sacrilege.

That plan was scrapped, but could resurface elsewhere for all we know should some genius at the German Finance Ministry insist upon it. The one constant among bailouts of euro-area countries is that there is no rhyme or reason, much less fairness, in the way many details get worked out.

Cypriots may bemoan the inequities of their rough treatment, as might a bunch of wealthy Russians who mistook the island for a reliable financial center and failed to yank their money when they could. For the rest of Europe, the implications should be obvious. Anyone who leaves uninsured deposits in a euro-area bank is on notice that their money can and will be taken from them, if that is what’s demanded by the troika of the IMF, the European Commission and the European Central Bank.

Uninsured deposits aren’t riskless. Nor should they be. Still, it’s unclear why the euro area’s central planners sought to create a precedent that encourages capital flight from weak countries. This could lead to more instability, not less.

So far, there have been no signs of a mass exodus in countries such as Italy or Spain. But deposit migrations can happen slowly, with lots of time passing before they appear in official statistics. Or maybe little will change and most bank customers will go on believing “it can’t happen here,” until one day it does.

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Sat, 03/30/2013 - 12:10 | 3391514 blindman
blindman's picture

Definition of 'Demand Deposit'
Funds held in an account from which deposited funds can be withdrawn at any time without any advance notice to the depository institution. Demand deposits can be "demanded" by an account holder at any time. Many checking and savings accounts today are demand deposits and are accessible by the account holder through a variety of banking options, including teller, ATM and online banking. In contrast, a term deposit is a type of account which cannot be accessed for a predetermined period (typically the loan's term).
Investopedia Says
Investopedia explains 'Demand Deposit'
M1 is a category of the money supply that includes demand deposits as well as physical money, such as coins and currency, and Negotiable Order of Withdrawal (NOW) accounts. According to the Federal Reserve's Consumer Compliance Handbook, demand deposit accounts have these characteristics: no maturity period (or an original maturity of fewer than seven days), payable on demand, may be interest bearing, no limit on the number of withdrawals or transfers an account holder may make, and no eligibility requirements.

Sat, 03/30/2013 - 12:15 | 3391525 BaBaBouy
BaBaBouy's picture

EU People And OTHERS ...........


Buy GOLD And RUN !!!

Sat, 03/30/2013 - 12:34 | 3391587 CH1
CH1's picture

Buy GOLD And RUN !!!

Good luck at the border. Thug Central.

Sat, 03/30/2013 - 12:40 | 3391603 Boris Alatovkrap
Boris Alatovkrap's picture

If cannot is afford gold, then silver, and to be assure, take physical delivery. Boris is not recommend card board or salt, especially if not have covered storage area.

Sat, 03/30/2013 - 12:55 | 3391621 Ahmeexnal
Ahmeexnal's picture

Silverdoctors.com website has been forced to a hair-y-cut. Articles have been 404'd.

SilverDoctors.com is currently down due to a server attack and we are working to get the site back-up as quickly as possible. It appears we may have ruffled someone's feathers with the most recent article titled "FDIC & Bank of England Create Resolution Authority for Unlimited Cyprus-Style “Bail-Ins” for Systemically Important Instutions!" Thank you for your patience! - Doc

Sat, 03/30/2013 - 12:59 | 3391636 GetZeeGold
GetZeeGold's picture



Might want to call KWN for some advice.

Sat, 03/30/2013 - 13:04 | 3391647 Abraxas
Abraxas's picture

Yes, Eeeeegon von Grayerrrrs should be able to tell you.

Sat, 03/30/2013 - 20:25 | 3392569 Ahmeexnal
Ahmeexnal's picture

Laiki Bank is on the top of the list.

Sat, 03/30/2013 - 20:46 | 3392591 Boris Alatovkrap
Boris Alatovkrap's picture

Now Boris is to very worried be! Top 6 banks is Canadia, but Canadia is prepare for it to "internal recapitalization" for bank... Is Canadia friend of fiend?  Why is state intention to pillage of depositor class (liability)?!

Sun, 03/31/2013 - 00:22 | 3392900 Panafrican Funk...
Panafrican Funktron Robot's picture

Still, it’s unclear why the euro area’s central planners sought to create a precedent that encourages capital flight from weak countries. This could lead to more instability, not less.

It's really not unclear at all.  Classic "Lehman margin call" play.  When the music stops (and real growth at this point is done), the name of the game is confiscation and consolidation.  

Sat, 03/30/2013 - 18:08 | 3392340 Cap Matifou
Sat, 03/30/2013 - 18:40 | 3392397 TraderTimm
TraderTimm's picture

Proof that any centralized service is prone to demands by tyrants.

Get rid of any centralized financial vehicles while you still can.

Sat, 03/30/2013 - 19:09 | 3392443 Buck Johnson
Buck Johnson's picture

They are running scared that they have been outed on what they intend to do.

Sat, 03/30/2013 - 13:32 | 3391706 PiratePawpaw
PiratePawpaw's picture

Boris is the good sense to be making. Also is the Pawpaw (being in Deutschland to be born) finding the grammar  for the reading to be gut.

The +1 Ich bin for the Boris to give.

Sat, 03/30/2013 - 16:30 | 3392115 Chuck Walla
Chuck Walla's picture

The +1 Ich bin for the Boris to give.

Sehr Gut!


Sat, 03/30/2013 - 17:21 | 3392246 kaiserhoff
kaiserhoff's picture

Hinterkante Verben werden in Englisch verboten.

Backwordation or Conspiracy?

Sat, 03/30/2013 - 20:40 | 3392588 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is trailing verb grammatical structure to understand!

Sat, 03/30/2013 - 15:38 | 3391985 Antifaschistische
Antifaschistische's picture

This...is the history of wealth. In the long run, wealth is very hard to store. Through these short blips in history, we have been able to store wealth in fiat.   I'm not an anti fiat guy for the same reason i don't have anything against buying a gift certificate.  A gift certificate is, in fact, fiat.  And it serves a purpose.  The problem is if everyone collects best buy gift cards as a means of storing wealth...and Best Buy ends up with a net liability that 100x it's annual revenue then you may not have great confidence in your gift certificate if your plan is to hold it for 30 years until you retire.

This is our world.  People deluded into believing they can store ultimate amounts of fiat and that it will all be good forever.  This never has been and never will be true.

I'm not a believer that gold or silver is a key to wealth appreciation.  I believe it's a component of wealth preservation when fiat regimes fall...and they will..they always have.  But taking your fiat and cashing it all on on gold is not riskless either.

If you have 100,000 in a target bank in a target country what about this...just go borrow 70,000 and don't spend a penny of it.  Take it out and put it in your safe or your safe deposit box.   If they give your 100k a haircut, give their 70k a haircut.  This is easier if all your wealth is "under the table" and you can use bankruptcy to wipe the 70k note (since they don't know you've got the cash).

If you're in the US..you still have one last chance for the true riskless trade and that's buying 100k in nickels.  Nickels give you perfect dollar denominated preservation and a fiat fail protection with the copper/nickel contents.


Sat, 03/30/2013 - 17:22 | 3392248 graspAU
graspAU's picture

"On the other hand, if you're very safety conscious, you hold on to your gold bars"
-Evelyn De Rothschild, December 10, 2008. CNBC Interview

Sat, 03/30/2013 - 12:50 | 3391617 Lost Wages
Lost Wages's picture

The NWO gave the sheeple shitcoins so they won't flee into gold & silver anymore. Easier to sit on your ass & click. (Jokes on them, you can buy silver & gold by sitting on your ass & clicking too. The the final joke is on Bit Trolls when it goes to Zero.) At any rate, why bother driving to the coin shop when you can type your routing & account number into some strange foreign "exchange" and trade your money for nothing instead?

Sat, 03/30/2013 - 13:59 | 3391769 PiratePawpaw
PiratePawpaw's picture

Thought about the bitcoins for about 1 second, then decided to stick with silver morgans. I like the sound they make when you play with a stack. :)

Sat, 03/30/2013 - 14:01 | 3391771 q99x2
q99x2's picture

ZeroCoin is a different currency. It competes with BitCoin.

Sat, 03/30/2013 - 14:33 | 3391857 highandwired
highandwired's picture

I like silver too...




And, the best part is, I can buy it with those horribly inflated bitcoins!  Wow look at the price, only 40 cents. 

Sat, 03/30/2013 - 12:57 | 3391634 Professorlocknload
Professorlocknload's picture

The border? The line in the sand (water) across which flows narcotics, guns, stolen cars, ammo, currency, diamonds, fugitives, cigarettes, grape pickers and stray dogs?


Sat, 03/30/2013 - 13:35 | 3391714 FireBrander
FireBrander's picture

Those things only flow because TPTB want them too...if Big Business says to DC "We have more than enough Mexicans to exploit", the border is sealed the next day.

Sat, 03/30/2013 - 13:25 | 3391696 FireBrander
FireBrander's picture

The border?

You'll never make it out of your driveway. Driveway even seems a bit far to "make it"; odds are they'll take your gold and guns after they've BBQ'd you in your bunker.

Sat, 03/30/2013 - 13:36 | 3391720 dbarrett
dbarrett's picture

And this is the best place to get that gold....but can I run with the girl and will she take all my gold?


Sat, 03/30/2013 - 20:30 | 3392574 Ahmeexnal
Ahmeexnal's picture

In chinese, the world for girl is synonymous to "gold digger"

Mon, 04/01/2013 - 02:57 | 3395224 Kirk2NCC1701
Kirk2NCC1701's picture

LOL.  Historically and statistically, women marry up, men marry down.  Women (strategy of the egg) are attracted more to lifestyle and security choices, and men (strategy of the sperm) are more apt to be attracted to 'good genes' (trophy).  Nature is sneaky that way:  rather than duplicating strategies, it uses complementary strategies.  Fiendish!

Sat, 03/30/2013 - 13:37 | 3391722 Silver Bug
Silver Bug's picture

Honestly!! Why would you keep any more than you need in the bank, keep enough for capital flows and thats about it. Get the rest in gold or silver.



Sat, 03/30/2013 - 12:22 | 3391550 freewolf7
freewolf7's picture

What's a nice "incite to riot" meme?

Sat, 03/30/2013 - 12:36 | 3391590 McMolotov
Sat, 03/30/2013 - 12:53 | 3391625 blindman
blindman's picture

Money as Debt II Promises Unleashed (2 of 8)

Sat, 03/30/2013 - 12:30 | 3391575 Banksters
Banksters's picture

Most people have no idea...   

Sat, 03/30/2013 - 12:37 | 3391594 CH1
Mon, 04/01/2013 - 02:58 | 3395225 Kirk2NCC1701
Kirk2NCC1701's picture

Is BC for BJ next?

Sat, 03/30/2013 - 13:09 | 3391653 blindman
Sat, 03/30/2013 - 12:39 | 3391599 Ignatius
Ignatius's picture

Ah, we've found the worm at the center of the apple.

Fuck me, this is funny... 41 seconds...


Sat, 03/30/2013 - 12:47 | 3391615 formadesika3
formadesika3's picture

-- "You may give the whole system away... I'm sorry there's nothing we can do."


Sat, 03/30/2013 - 13:12 | 3391657 Professorlocknload
Professorlocknload's picture

Ha! The smiling local banker here told me "It's your responsibility to know when your debit card is compromised." But, it was compromised by a data breach within you bank. "Then you should have been notified."

I wasn't. "You should have been." I wasn't. "You should have been." I wasn't. "You should have been." I wasn't. You shoul"....Wait, I'll just go over to the teller window there and see if it's been compromised. "How much would you like to withdraw, sir?" All of it!

Sat, 03/30/2013 - 13:23 | 3391690 Svendblaaskaeg
Svendblaaskaeg's picture

thank! - I needed that - now back to worrying

Sat, 03/30/2013 - 12:40 | 3391607 spine001
spine001's picture

Wells Fargo used to require you a two day notification to widraw 10000 in cash. Then they went to 4 days in December 2012 they had changed it to 2 weeks. The 3xcuse is always the same, that they have to orde4 the cash and that they dont have it. 

You gals guys seem to be way behind what is happen8ng. In practice there are no ondemand account in the usa any more already. 

Mon, 04/01/2013 - 03:00 | 3395228 Kirk2NCC1701
Kirk2NCC1701's picture

Solution:  Wire the it out of WF and out of USA!  QED.

Sat, 03/30/2013 - 13:54 | 3391758 Cursive
Cursive's picture


That definition has about as much credence as Hitler's paper promise to Neville Chamberlain.  Two weeks before depositor savings were stollen, the head of the Cypriot Central Bank, Georgiou, wrote a letter declaring that it would be unconstitutional.  That was correct, but it didn't stop him from doing it.

Sat, 03/30/2013 - 14:04 | 3391778 blindman
blindman's picture

we should take it up with investopedia or the fed?
I just linked it, don't shoot the messenger bro.

Sat, 03/30/2013 - 14:30 | 3391843 Cursive
Cursive's picture


No shooting from this direction.  I agree with what you linked, it just doesn't mean much.

Sat, 03/30/2013 - 14:18 | 3391802 blindman
blindman's picture

The Gary Null Show – Derivatives Danger – 03/29/13
minute 42:30 . p.c. Roberts and ellen brown talk about
financial fascism that is our money/financial slave ship.
the system is like a pot roast, it has a shelf life. the time
is up and everything in the pot is garbage. don't blame me,
I didn't cook this shit up or order it.
I blame the mass murdering jekyl island criminals from
Europe and the usa.

Sat, 03/30/2013 - 17:11 | 3392219 kchrisc
kchrisc's picture

Yup, "legal" and "illegal." Always makes me laugh when I see or hear it. "That would be illegal, that's not legal," and my favorite, "that's not Constitutional." Blah, blah, blah!

Bastiat said in 1850, paraphrasing, that criminal institutions (aggress against Life, Liberty and Property), like governments, can only make, use and enforce law as an "instrument of plunder."

Since governments are a criminal mob organized to steal and kill, is it any wonder that they just pick and choose what "laws" they will and will not abide by?!                             hujel

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