Posts from Monday Mar 18 2013

First they came for the deposits…

This won’t be popular.

But it’s an important alternative to the “it’s expropriation” view on Cyprus. Read more

Mind the sovereign, too

There are a couple of points worth restating about how peripheral euro zone depositors might come to think about Cyprus’s deposit tax.

First, even if they come to view their deposits as more vulnerable in light of the Cypriot precedent, they’ll also know that the justification for a similar wealth tax is much weaker in countries whose banks aren’t suspect Russian stashes have more typical rosters of depositors. Although the language in Monday night’s Eurogroup statement was ambiguous, its mention of the importance of protecting insured depositors reinforces the point. Read more

The Closer


FT markets round-up: “A wave of risk aversion rippled through financial markets on Monday amid concerns that the terms of a bailout for Cyprus, which include a levy on bank deposits, might signal the start of a new, possibly damaging phase of the eurozone debt crisis. In New York, the S&P 500 ended 0.6 per cent lower as the Vix index of implied US equity volatility – known as Wall Street’s “fear gauge” – jumped nearly 20 per cent. In Europe, the FTSE Eurofirst 300 fell 0.3 per cent, having been down 1.4 per cent earlier in the session. Peripheral eurozone equities were harder hit, with Milan’s FTSE MIB down 0.9 per cent and Madrid’s Ibex 35 falling 1.3 per cent. The Eurofirst 300 banking index fell 1.5 per cent as 10-year implied borrowing costs for Italy and Spain moved higher by 3 basis points to 4.63 per cent and 8bp to 4.99 per cent, respectively. Tokyo’s Nikkei 225, which had surged to a 54-month high on expectations that the Bank of Japan would continue to weaken the yen by aggressive monetary easing, thus bolstering the country’s foreign income earners, tumbled 2.7 per cent as the yen gained ground. The FTSE Asia Pacific index was down 1.9 per cent after Hong Kong’s Hang Seng fell 2 per cent.” (Financial TimesRead more

“The Eurogroup continues to be of the view that small depositors should be treated differently…”

Full statement by the Eurogroup chief after Monday night’s conference call on Cyprus..

I recall that the political agreement reached on 16 March on the cornerstones of the adjustment programme and the financing envelope for Cyprus reflects the consensus reached by the Cypriot government with the Eurogroup. The implementation of the reform measures included in the draft programme is the best guarantee for a more prosperous future for Cyprus and its citizens, through a viable financial sector, sound public finances and sustainable economic growth. Read more

Moody’s: US non-financial cash pile finished 2012 at $1.45 trillion

Moody’s has completed its annual review of the US corporate cash situation, and here’s the headline news: Read more

Snap Alphachat: Cyprus edition

This is an Alphaville experiment. Joseph and David had a quick chat about Cyprus, its bailout and the depositors being bailed in, the Russian connection and whether there is really a risk of contagion.

(As this is experimental here’s a link to the podcast if the embed isn’t working) Read more

Buiter: ‘Get in there, Cyprus!’

The Cyprus bail-in is qualified good news, in the eyes of Citi’s chief economist Willem Buiter.

Sure, it would be better if insured depositors on the island had been spared and it would have been nice if losses of uninsured depositors had reflected the recapitalisation needs of each individual bank. But first and foremost Buiter sees this as a decisive step in restructuring excessive debt across Europe, which is a necessity if the euro area wants to grow again. Read more

More on the Russian angle

The hunt for an accurate Russian exposure figure to Cyprus continues.

Here’s Danske Bank’s Vladimir Miklashevsky with the best estimate we’ve seen yet (our emphasis): Read more

The Russian angle

Paul Krugman thinks the Cyprus bailout is all about the Russians.

As he noted in his New York Times blog:

You can sort of see why they’re doing this: Cyprus is a money haven, especially for the assets of Russian beeznessmen; this means that it has a hugely oversized banking sector (think Iceland) and that a haircut-free bailout would be seen as a bailout, not just of Cyprus, but of Russians of, let’s say, uncertain probity and moral character. (I think it’s interesting that Mohamed El-Erian manages to write about this thing, fairly reasonably, without so much as mentioning the Russian thing.)

 Read more

Delaying the not inevitable [updated]

From the wires:


 Read more

Markets Live: Monday, 18th March, 2013

Live markets commentary from 

Contarian indicators

Thanks to reader Grumpy for mentioning this in the Long Room.

Remember this, from 2007? Read more

The (early) Lunch Wrap

FTAV on Cyprus || Cypriot authorities attempt to revise deposit levy deal || Osborne to concede another debt target delay in Budget || Paris house prices sputter || HSBC is gearing up to cut thousands more jobs || Insurers dodge bank-style capital surcharges || European parliament wants to restrict bonuses that exceed salaries for Ucits fund managers || Sweden laments crazy devaluations || Former PBoC chairman to be Chinese securities regulator || WSJ China bribery allegations || Markets roundup Read more

The fallout: Cyprus edition

As we wait to see if a revised deal to shift more of the burden on to deposits larger than €100,000, the markets are opening and it’s not pretty so far, but also not horrendous. As the FT reported the parliamentary passage of the levy is hanging in the balance. Read more

Further reading

Elsewhere on Monday,

Bad ECB behaviour.


– This had to happen. Read more

The Cyprus depositor pain-distribution ratio

Out of the aggregate €5.8bn to be raised from deposits, how much would come from smaller depositors, and how much from the €100,000-plus accounts? Clearly a bit of thought went into this when the bail-out was being discussed. Burden allocation, and all that.  Read more

The 6am Cut London

Asian stocks fall, euro weakens, bonds rise || Shock at Cyprus rescue deal || Cypriot authorities in talks to revise depositor bail-in || Osborne to concede another budget target delay || HSBC to cut thousands more jobs || Insurance companies avoid bank-style capital surcharges || EU may clampdown on fund manager bonuses || What happened in Brussels on Friday night…  Read more

The stupid idea, and the system

Famous last words and all, but it is hard to see the fear flowing from Cyprus to the average depositor in a Spanish or Italian bank. Not in the short term. As for Lehman II, well, come off it.

After all, that’s probably partly why this inequitable tax on small depositors across Cypriot banks could be put on the Eurogroup negotiating table on Friday. The systemic danger is absent. Read more

Teaching a lesson, lesson learned

Sometimes German doesn’t translate very well. Citi’s FX guru Steven Englander summarises the divergences between the intended and the interpreted as we leave a tumultuous weekend behind, and begin what could be a suspenseful couple of days:

The lessons that Germany and other northern euro zone countries thought would be learned from the Cyprus bailout: Read more