Crimea Bank Runs Begin As "Bail-In" Risks Arise

Tyler Durden's picture

While the sight of Russian flags, pro-Russian troops, and Russian navy ships in Crimea is now a day-to-day thing; this morning brings a new normal for the eastern Ukraine region - long lines at bank ATMs as the bank runs have begun. We noted last night the dreaded inversion of Ukraine's yield curve, the greater-than-50% yields on 3-month Ukraine government debt, and the pressures on local bank debt maturities as the ability to garner dollars cost-effectively was becoming a problem but on the heels of concerns by the head of the central bank that moving cash in Crimea was difficult, ATM withdrawal limits have been cut. People in long ATM lines are reported to be concerned because "banks are closing" but it is Deutsche Bank's comments this morning that raised many an eyebrow as they suggest that Ukraine's debt is pricing in a "burden-sharing" haircut for bondholders (which as we have seen in the past - in Cyprus - can quickly ripple up the capital structure and become a depositor haircut).

Quiet calm bank runs are beginning in Ukraine...

h/t @MarquardtA

 

As Deutsche Bank raises the prospect of bail-ins and Private-Sector-Involvement (PSI) in bailing-in the banks and government...

...given the recent experience of IMF programs it is natural to ask whether some form of 'private sector involvement' (PSI) will be proposed as part of any package of support.

 

 

The IMF itself recently published a consultation paper arguing that private sector debt restructurings had “often been too little, too late” and that the fund should look at ways to avoid its “resources eing used simply to bail out private creditors”. The ongoing consultation process which this paper nitiated is one reason why concerns over IMF-sponsored restructuring are more prevalent for Ukraine now than they have been in similar situations in the past. However, we think it unlikely that there will be  ignificant change in the Fund’s approach towards Ukraine, given that the consultation is still ngoing, views are divided and its outcome remains uncertain. Nevertheless, that does not mean that some form of PSI will not be considered, condoned, encouraged or even mandated and so it is useful to onsider the pros and cons from the perspective of the Ukraine (and its potential official sector inanciers) and the implications for private sector creditors.

[Of course PSI can take on many forms from debt-extensions to bondholder haircuts to further up the capital structure depositor haircuts]

...current market prices are relatively consistent with such a scenario of PSI-lite. Indeed, the current relative pricing of Ukrainian bonds are very unusual: the pricing of short-dated bonds are distressed, implying a relatively high probability that they won’t redeem at par, but on the other hand the narrow range of prices across the curve suggests that the market assumes a high recovery in the event of a default/restructuring.

Such pricing would be fair, considering a baseline scenario involving an IMF program and an orderly adjustment. However, it leaves little compensation for a more disorderly scenario. Tensions with Russia show no sign of abating and could escalate further. Also there is no guarantee that the new government has a strong enough popular mandate to carry through the necessary reforms. PM Yatseniuk has emphasized that the road ahead for Ukraine will not be easy, but only time will tell how united the country will be in following the path he intends to take.

We suspect a brand new populist PM is unlikely to remain in power long if depositor haircts were engaged - and would certainly not imbibe the eastern Ukraine region with the country's new leader.

 

It is also notable that these bank runs are focused on local Ukraine/Russian banks...

 

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IridiumRebel's picture

Come on you fuckin nazis! You gave the gold away now go get their money. my money would have been gone before Putin landed at Sevastopol.

nope-1004's picture

Insolvent banks.... huh, who knew?  Where is Geithner when you need him for another round of stress tests?

 

CH1's picture

Betcha they wish they had some Bitcoin now!

fonestar's picture

Anyone who keeps their "money" in a bank in 2014 is just plain stupid.  Sorry, but no sympathy.

IridiumRebel's picture

I agree with this...our medium of exchange may be different, but I agree. Get your buddies out here to downvote my posts too. Keep...whatever the hell you call stacking...bitcoins.

fonestar's picture

fonestar owns gold, silver, Bitcoins, weapons of all major calibers, ammunition, dried food, water purification, generator, tools and more...

IridiumRebel's picture

I knew I liked you.....

 

 

...when you post like a normal person without bitcoin rhetoric.

DoChenRollingBearing's picture

Got me beat.  I still need the generator, water purification gear and more tools.

I should get more ammo too.  They say that only a few thousand rounds is not nearly enough.

bluskyes's picture

got fuel for that generator?

fonestar's picture

Some, plus additives to prolong usefulness.

JuliaS's picture

And of course, foney's stash is 100% digital. Real stuff's for suckers, you see.

If you think that "real" is what you can touch, then, according to professor Fonestar himself, you are a "simple-minded idiot" (as oppose to a highly sophisticated one).

Kirk2NCC1701's picture

People are Sheeple in almost every country.  Only the experienced (old) ones, smart ones and distrusting ones will keep most of their money at home.

Kirk takes the Squirrel approach to risk mitigation:  Bank of this, Bank of that, Bank here, Bank there, Bank in Far Far Away, Bank of Certa & Sealy.  Thus covering every scenario/situation for acces to Cashish.   But then again, Kirk is not afraid to leave the village or country, the way most sheeple are afraid to.  ;-)

To use another analogy of "predictive bahavior", it is known that although a rabbit might zig & zag, he always runs a pattern around his hole: a rabbit runs in circles.  So do most people.  And we all know what happens to rabbits and sheep.  :-(

asteroids's picture

If I were evil, once Crimea joins Russia, I would simply default on Crimean debt/bonds. This would probably fuck up a lot of people Russia isn't too happy with.

Sudden Debt's picture

My money would be gone, and I'd be on a plane outa there like the very same day!

But as Ukraine still has it's own currency, it's actually VERY SMART TO TAKE OUT A BIG ASS LOAN, BUY GOLD WITH IT AND WAIT 2 MONTHS WHEN THEIR CURRENCY IS DEVALUATED BY 99% AND REPAY THE DEBT WITH A PACK OF SIGARETTES!!!

Luckhasit's picture

Since the Ukraine is going the Venezuela route, I would substitue cigs with toilet paper.

DoChenRollingBearing's picture

Depending on yoru culture, cigarrettes are very value dense.  Still having a few dozen rolls of TP tucked away does give one a little cusioning in case of supply interruptions...

Billy Sol Estes's picture

The American version is to:

 

  1. Change 401k contribution to 0%
  2. Take out a loan from your big corporate 401k
  3. Buy the dip in Gold
  4. Pay yourself back over the year
  5. Repeat every year till crash

In the event you decide not to pay yourself back, no one will arrest you or seize your assets.

symtex411's picture

I highly doubt that they would price any loans in the local currency. 

Independent's picture

Seen longer lines in other places in Europe like those Brits waiting to get stuff out of their insolvent banks a while back.  At least the Crimeans are joining back with a country with tons of oil and gas and they wont have to stand in line for those, while them Euros are screwed royally.  I dont care what the ruble does compared to foreign currency.  All I know is Mother Russia had BLACK GOLD and if you dont have the shinny yellow beauty the Black one will do just fine. And dont forget there is ton of oil and gas offshore in Crimea, ask Exxon about it, but they will have to get back in line now to see who will develop those goodies.  The west can say all the crap they want, Russia now has a piece of the pie, gorgeous subtropical weather with no visa required.  Life is GOOD Suckaz!!!!!!!!!!!

https://www.youtube.com/watch?v=emcZfU0IECc

https://www.youtube.com/watch?v=D--cwQ6gWbY

Crimea is like the Mediterranean all rolled up into one Gorgeous Peninsula.  Russians dont need Greece or Turkey Vacations anymore.  Now World Visit Russia.

European American's picture

"my money would have been gone before Putin landed at Sevastopol."

 

My devaluating fiat dollars have been (long) gone before The Mulatto landed in DC. Got Gold?

fonestar's picture

Hey moron, this effects Bitcoin how exactly?

Sudden Debt's picture

don't let them play with your balls man... that's gay...

WarPony's picture

Back at you Skippy - moron.  It's called non-disclosure of risk, moron.  As in it's risky, moron.  Now how that effects a MORON like you is your own damn business, moron.

fonestar's picture

At best this effects some(?) Bitcoin users in Texas who would volunteer to respect these "laws".

youngman's picture

I doubt the Ukrainian speaking Ukrainians are going to send more cash to the Russian speaking Ukranians....

Pure Evil's picture

I think what you really meant to say was that the Ukrainian Ukraines are not going to bail out the Russian Ukrainians with their new fangled IMF bailout package.

Ah, decisions, decisions. Which is the least evil, loans from the IMF or loans from Putin.

Oh well, since they've already raped the Ukrainian Ukraines dry by stealing their gold, they might as well endure the pain of getting a new asshole reamed with an IMF loan.

Tabarnaque's picture

Welcome to Eurozone Bitchez! Ukraine to be Cyprused.

sudzee's picture

Hyvna collapsing so grab some ruble while one can.

TheGermanGuy's picture

Local sources report that the number of boating accidents has increased sharply during the last days

Billy Sol Estes's picture

Want to get in on the action?

Yacht rentals out of Odessa starting at €488.

No need to worry about a deposit or returning the yacht to the port-of-call.

http://www.kazantipvoyage.com/rent-yacht-odessa.htm

Dr. Engali's picture

Keep your "money" in the system you stupid sheep. You deserve what you get. Look at those lemming standing in line to take back what they think belongs to them. 

MeMongo's picture

Ah look at all the nice, reserved, and overall calm demeanors of the sheeple in line, like there all waiting to sample some ale at the three Floyd's fesival:-) I get the feeling it won't be much like that if this shit starts in our inner cities!

fijisailor's picture

No kidding.  It took them this long to wake up?

fijisailor's picture

Since when did DB start calling the shots with Ukrainian banks?

Byte Me's picture

58% of Crimeans know that Vlad has their back. Eat yer cookin' bitches!!

Smiley's picture

Just cut the crap already and give us a number.  Everybody knows what this is:  How many hundreds of Billions are we being blackmailed for THIS TIME?

1stepcloser's picture

Cash going out the front door....gold going out the back?

Billy Sol Estes's picture

No, crates of wine and ammo boxes are going out the back door.*

 

**Au is concealed carry, duh.

astoriajoe's picture

Good thing there are instagram filters to make it all seem artistically retro.

geno-econ's picture

Largest holders of Ukraine bonds are Austrian Banks. Watch for Austrian bankers to spike their sacher torte with cyanide---an eligant way to go.
Rather than accept a haircut or confiscation, as in Cyprus, most Ukrainians would be wise to buy rubles in the East and US dollars or shekels in the West.

WhoIsJohnGaltCoin's picture

LOL MeMongo. what percentage of inner city dweller have over $1,000 in a checking account?

MeMongo's picture

Haha that's too true Galt! And foney don't call Me Tardo!

Billy Sol Estes's picture

I have a corporate job and my current statement is $120.