If past history is anything to go by, Cyprus' really big depositors and alleged crooks and money launderers will have got wind of the coming changes and shifted before the Argentina-style "corralito". I should certainly not like to be a Cypriot banker or politician trying to explain to a Russian mafioso why his money has gone.
Now the Daily Telegraph, quoting Reuters, explains the new arrangements. Depositors in Laiki Bank "stand to lose up to 80pc of their money" and those with the Bank of Cyprus "will receive shares in the lender worth 37.5pc of any savings over €100,000,
while the rest may never be paid back... Of the 62.5pc of uninsured deposits not converted to bank shares, about 40pc
will continue to accrue interest but will not be repaid unless the bank does
well, while the final 22.5pc will cease to attract interest."
That Telegraph headline, though: "Big depositors..." Let's illustrate "big" with a little hypothetical situation. Assume you've been dutifully caring for a loved relative who has recently passed on, leaving you her flat in Streatham (SW16), where I used to live. The average sold price for a residence in one of the streets there is £247,362 according to NetHousePrices. That would convert to €293,064.
So you decide it's time for your place in the sun in your declining years. You sell your house, swapping it for a place in Cyprus, and the proceeds of Aunty's flat are banked to create an income.
And now... only €100,000 (34%) is accessible. Of the rest, €72,400 has become "bank shares" (shares in an all-but-bankrupt enterprise, so don't expect dividends), €72,400 is inaccessible AND earning no interest, and €48,266 is inaccessible but interest-earning.
Assuming that any interest at all is being paid (how? from what profits?), in the above example only €148,266 is earning it. That is, only 50.6% of your original capital is yielding any income (however derisory).
You have also lost control of 66% of your capital, and may turn out to have lost the lion's share of that portion altogether. Quite possibly all your shares are worth is some part of the buildings, fixtures and fittings of the bank branches, assuming they haven't been looted and burned. For I cannot see how anyone in their right mind would deposit another cent in these banks, or how they could be persuaded not to get everything they can out of their accounts, as fast as humanly possible.
I think these banks are dead, if still twitching.
The question of contagion remains - will those in charge stop a Europe-wide series of bank runs? I'm no longer even sure about keeping what we have in sterling in a British bank. And I'm constitutionally sanguine and cautious.
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