Quite a lot to ponder really. Members of the IMF’s executive board were set to meet on Wednesday to discuss whether to approve lending to Cyprus, more or less behind closed doors.
But maybe not so much this time. It looks like Stockwatch in Cyprus has obtained a copy of the members’ comments on the Cypriot bailout — a rather high-level internal document to find its way to the public… and it makes for fascinating reading. Read more
Still time (at pixel) to listen to Eurogroup chief Jeroen Dijsselbloem defend the Cyprus bailout in front of some unimpressed European MPs on Tuesday. Click the pic for the feed. (Or here) Read more
Compare (Reuters, March 25):
“It was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus,” a euro zone central banker said.
Contrast (Mr Kristaps Zakulis — financial regulator, Riga, April 24): Read more
There’s been some thought-provoking revisionism floating around about Cyprus lately.
The gist seems to be this: Why not push bank bail-in policy in the eurozone much harder, right into uninsured depositors if need be, if Cyprus has not (yet?) budged most gauges of bank funding from their current calm. And more importantly, when there is a vicious circle to resolve. Read more
Click to enlarge. Hat-tip to the FT’s Kerin Hope and Sigma TV:
Please note the question-mark.
Our colleagues at FT Brussels Blog got their hands on the draft debt sustainability analysis for the Cyprus bailout and bail-in — click for the full doc: Read more
In continental Europe, we are witnessing the rather extreme outcome that results from having the provision of liquidity divorced from an ability to regulate banks…
– UBS analysts John Paul Crutchley and Alastair Ryan, 2009 Read more
Cyprus may not be a template but as Pawel Morski said, the actual template is probably not going to look all that different.
We’ve already written a little bit about this and on Thursday Barclays published a note suggesting the Cyprus mess, plus the incoming common resolution framework, might wipe €15bn annually from the profits of Europe’s biggest banks. The draft of said framework is scheduled to come into play by 2015 with the bail-in tool, which had been delayed until 2018, perhaps being moved forward. We await clarity from European legislators this summer
, if the summer ever arrives.
Concerning Barclays’ €15bn figure, it’s made up of a few different, but connected, elements. Read more
The ‘Cypriot precedent’ and experiment with capital controls, a first for the eurozone, are still reverberating around the EU. Gilles Thieffry, a Partner at GTLaw, Geneva, writes on possible legal implications.
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The public, as well as most of the financial commentariat space, seem mostly to be behind the amended terms and conditions to Cyprus’ Eurogroup bailout, believing them to be fairer for most concerned.
Unlike the original proposal, the new terms do, for example, discriminate between good and bad banks — lessening the burden on those invested in better banks. They spare insured depositors below €100,000. And they require greater participation from other uninsured parties and equity holders in those banks deemed particularly bad. Read more
The following is a guest post from Chris Cook, a senior research fellow at the Institute for Security and Resilience Studies at University College London. His work is focused on a new generation of networked markets – which will, in Chris’s view, necessarily be dis-intermediated, open, decentralised and, therefore, resilient.
The second attempt to resolve the unsustainable debt burden of Cyprus’s over-leveraged banks spreads the pain differently to the disastrous initial attempt, but looks likely to leave Cyprus as an economic wasteland for generations. Frances Coppola outlined brilliantly yesterday the sort of financial disaster zone which Cypriots can expect. Read more
Tonight’s extra dollop of mind-bleach, fresh from the Eurogroup. Read more
…and it’s really about time it cost you your job.**
The Eurogroup head was in triumphalist form on Monday, claiming direct credit for having sent Cyprus into a parallel eurozone (capital controls, economy obliterated). Clock the direct quotes in this interview with the FT’s Peter Spiegel and Reuters’ Luke Baker: Read more
Monday morning’s Eurogroup statement on Cyprus. You’ll want the details in the Annex.
This is being reported as the capital control bill that’s close to being enacted in Cyprus (Greek speakers do please step in if needed) and a very welcome translated list courtesy of Yiannis Mouzakis: Read more
Kinda strange that markets should get all a-jitter just as the Cyprus crisis is moving towards a resolution.
Simon Derrick of BNY Mellon asked on Friday: “The red pill or the blue pill.” The answer — choose reality — seems pretty obvious, but let’s first run through Derrick’s handy re-cap…
What’s the problem?
That’s Panicos Demetriades, Cypriot central bank governor, on national TV just a few moments ago. And there’s a Laiki banker next to him. He looks a bit unwell. Demetriades announced a “banking reform” bill that will guarantee deposits up to €100k, and put Laiki into resolution. Otherwise this bank’s a goner. Update – the only way this works, surely, is if uninsured large depositors are shoved to the bad bank and are left to try their luck on asset recovery.
OK, Felix already posted on this earlier. But in case you haven’t read Lee Buchheit and Mitu Gulati’s 3-page paper on Cyprus yet, we’d recommend reading it, or going back to it, given the likelihood of uninsured depositor flight whatever plan is now adopted.
We’re waiting for Plan B on Thursday. Meanwhile, various, erratic Hail Marys — Hail Vladimirs — were not looking good as Plan Bs as Wednesday closed. Read more
From the ECB on Thursday morning:
GOVERNING COUNCIL DECISION ON EMERGENCY LIQUIDITY ASSISTANCE REQUESTED BY THE CENTRAL BANK OF CYPRUS
The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013.
Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.
After that resounding no vote, what’s in the stars for Cyprus today?
Martina Stevis and Michalis Persianis write in the WSJ that there are short term ideas — basically, Cypriot and European officials are discussing capital controls for when banks are due to open next Tuesday.
Meanwhile the IMF is coming up with a plan to merge Cyprus’ two biggest banks into a ‘bad bank’, a source told the pair. The IMF wouldn’t be drawn on that.
Where does the ECB stand in all this? Read more
That’s the result of Cypriot MPs’ vote on the current version of the bank deposit levy, rejecting it as a condition of the island’s bailout. Note that the ruling party abstained. Still, that is the first no, after all these years and the bailouts, to the Troika. Read more
To be perfectly honest, trying to second-guess Cyprus isn’t gonnna get us anywhere. The situation at pixel time was moving too fast at too great a distance. While we wait for a tiny bit of clarity — whether this evening’s vote on the bailout will go ahead is till unclear, let alone what the outcome will be — a question being asked by Credit Suisse’s William Porter and team seems apropos: What if they’re not “stupid”? Read more
The ECB’s role in this eurozone crisis/saga has been complex.
Yes, yay for Draghi with the OMT/whatever it takes and before that, the LTROs.
But there’s a couple of other niggles that have been highlighted, yet again, by the Cyprus ‘bail-out’. Read more
Nicos Anastasiades is between a rock and a hard place.
On one side there’s Cypriot citizens and official creditors — all, it seems, not liking the levy on deposits below €100,000 — and on the other, Russia. Read more
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
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
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
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
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
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.)