Lessons from the Greek PSI

"Lesson 4 (Biggest Lesson of Them All): Prolonging an unavoidable debt re-structure makes the problem far, far worse, especially when a bailout is given in order to shift bad assets from the banks’ books to the taxpayers on condition of austerity that causes both the private and the public sectors to shrink. Introducing a PSI after this sinister error is implemented, while exempting the official sector that implemented it (including the ECB’s SMP bond purchases), is to add insult to injury. And to make a much larger OSI more pressing and more painful for future governments around Europe."

http://yanisvaroufakis.eu/2014/03/12/lessons-from-the-greek-psi/

The Death of Direct Bank Re-capitalisation: Europe’s (newest) day of shame

 "When a bank needs capital injections, the first thing that happens is that the national government provides the capital needed to raise the bank’s minimum capital ratio (T1) to 4.5% of its assets. After that, a sequence of haircuts must follow. First to be haircut are the shareholders and bondholders and then come the uninsured depositors (i.e. the Cyprus model is enacted). Beyond that, the ESM and the national government pout more money in the bank, with the latter participating at a rate of 20%, which can later be reduced to 10%. (...)

Mr Olli Rehn, the EU’s economic overlord, has said it himself, in describing this scheme as an attempt not to decouple the two crises but, rather, to “dilute the link” between them. It is like telling a hanging man that you will not cut the rope choking him but that you will remove a couple of layers of string from it."

http://yanisvaroufakis.eu/2013/06/21/the-death-of-direct-bank-re-capitalisation-europes-newest-day-of-shame/

The Real Story of the Cyprus Debt Crisis

"Why do the debt crisis in Cyprus and the subsequent "bail-in" confiscation of bank depositors' money matter? They matter for two reasons:

1. The banking/debt crisis in Cyprus shares many characteristics with other banking/debt crises.
2. The official Eurozone resolution of the crisis--the "bail-in" confiscation of 60% of bank depositors' cash in an involuntary exchange for shares in the bank (which are unlikely to have any future value)--may provide a template for future official resolutions of other banking/debt crises.

In other words, since the banking/debt crisis in Cyprus is hardly unique, we can anticipate the resolution (confiscation of deposits) may be applied elsewhere."

http://charleshughsmith.blogspot.com/2013/06/the-real-story-of-cyprus-debt-crisis.html (part 1)

http://charleshughsmith.blogspot.com/2013/06/the-real-story-of-cyprus-debt-crisis_17.html (part 2)

Projekt haircut'u depozytów w Kanadzie

"W Kanadzie, USA, UE przygotowywane jest ustawodawstwo mające na celu usystematyzowanie sposobu postępowania w przypadku zagrożenia bankructwa banku. Otóż gdy dany bank staje się niewypłacalny depozyty bankowe wejdą do masy upadłościowej. W zamian depozytariusze otrzymają akcje bankrutującego banku. W przypadku USA taka konwersja aktywów zdejmuje z FDIC (Federal Deposit Insurance Corporation), odpowiednik Bankowego Funduszu Gwarancyjnego, obowiązek wypłaty depozytów w wysokości do 250.000 USD. W uzasadnieniu czytamy, że ostatecznie klienci banku nie stracą depozytów, tylko zostaną one zamienione na akcje banku. Co oczywiste pieniądze stracą także właściciele obligacji wyemitowanych przez bank lecz jak się wynika z dalszych dokumentów dotyczy to tylko osób prywatnych.

Bardzo ważny jest fakt, iż w procesie upadłości nienaruszalne zostają zobowiązania wobec pracowników, organów podatkowych oraz uwaga wierzycieli komercyjnych."

http://independenttrader.pl/artykuly/108

The Real Cyprus Template (the one you're not supposed to notice)

"The Cyprus situation had been simmering for at least a year when in March of 2013 it finally broke; Cyprus had a week to take care of its banking situation or else face a cutoff of access to the eurosystem by the ECB. This brought matters to a head; the Cyprus Bail-In was finally settled upon, where uninsured depositors in the two largest banks in Cyprus took major haircuts, and must wait for return of their money until the assets of the banks are run down.

The banking problems in Cyprus had their roots in the Greek Sovereign Default, and were known by the general public for about a year prior to the recent default; a New York Times article dated April 11, 2012 lays out the particulars. (...)

Let's imagine you ran a German bank, and you paid very low rates to your overnight depositors. You have a great deal of really cheap money on your hands. What are your options to make money? You can either loan money to German homeowners one by one, but there are only so many German homeowners, and they only want to borrow so much money. So after loaning all you can loan, you search the world to try and find another bank that is advertising high rates for deposit money, and you stumble on the banks in Cyprus. (...)

Looking at the timeline, even as late as the end of 2011, when it was clear Greece would default and the banking regulator had to know the banks in Cyprus were doomed, the amount of Eurozone-bank derived deposits in Cyprus was over 20 billion euros, a good portion of which would be subject to massive losses if the Cyprus Template were to be applied at that moment. (...)"

http://www.oftwominds.com/blogapr13/Cyprus-template4-13.html