TMM's Radical Plan for Cyprus

TMM continue to be staggered by just how confused the Eurogroup policy response has been, with the Germans et al running away from the deposit levy on small depositors at an Usain Bolt-like pace. Last night's statement in particular smacked of the imperialist European leadership tampering with the evidence. TMM still cannot fathom how the Troika could not see that such a policy move would go down so badly both in Cyprus and internationally - even the German press utterly slated the deal. Another case of the Germans refusing to listen to anyone - TMM have personal experience in dealing with German Finance Ministry officials, to whom the term "arrogant" simply cannot do justice to their intransigence nor their complete inability to understand that there is no magic source of exogenous demand that will fill the gaps left by their nuclear winter-like economic prescriptions.

If the newly-elected Cypriot government were not clearly so inexperienced & naive, TMM could almost imagine that they have played the politics of this blindingly, by supposedly applying the tax to small savers, the Germans have been saddled with the blame. It is hard to imagine the political outrage being so vehement had the tax only applied to uninsured depositors, and no amount of finger pointing or insisting "it wasn't us" is likely to undo this.

But whatever. We are here now, and given the cries from both the Troika & various commentators pointing out that you can't solve a debt crisis without hitting creditors, TMM thought they'd have their own go at formulating a crisis resolution plan for Cyprus.

In the light of the EU using the explicit threat of Euro exit, and seemingly this threat not being a bluff - indeed threatening to cut off ELA access is akin to forcing Cyprus out of the Euro - TMM are going to invoke a strategy that they believe would be advocated by the great Paul Nitze who helped formulate Cold War policy. And this is to respond in a similar radical way, gradually increasing the stakes. So here goes:

Cyprus needs EUR 17.5bn - 10bn for the banks, 6bn for debt rollovers & 1bn for deficit financing. The EU/IMF will supply 10bn, but for the moment, we are going to assume they will supply nothing, as TMM believe that their plan will go down like a cup of cold sick in Brussels & Frankfurt. But hey, shit happens, and they went nuclear on Cyprus - you reap what you sow...

TMM are going to draw on a two bank restructurings that have taken place since 2008: the first, Wachovia, where creditors of the holding company were hung out to dry as Wachovia Bank was seized & given to JPM. The second, Bradford & Bingley, where the deposits of the bank were sold to Santander & the "bad" part of the bank nationalised by the British government. The reason TMM bring these two restructurings up, is that we believe that Cyprus can do something similar. And before you say "Ah... but the only creditors are depositors", this isn't entirely so: Cypriot banks have accessed the ECB's ELA to the tune of about EUR 9.2bn.

So TMM propose the Cypriot Government do the following  - they'll have to do it very quickly to avoid the ECB panicking and pulling back the ELA cash lent against dodgy collateral. Once done, the ECB will not be able to do anything about it.

  1. Transfer all bank deposits & unencumbered assets from the existing Cypriot banks to new bank holding companies: e.g. Cyprus Phoenix Bank. This should include the transfer of IT infrastructure, the branch network & any tangible assets like real estate (e.g. the banks' HQs).
  2. Let the old banks go bankrupt, leaving the ECB with EUR 9bn of losses and wiping out both the subordinated & senior bondholders (EUR 1.75bn).
  3. These new banks are now adequately capitalised & under EU law, the ECB will not be able to prevent their participation in Target 2 via the Central Bank of Cyprus. The ECB may well kick & scream, but there will be nothing they can do about it.
  4. Domestic Bills/Bonds haircut by 80% for non-Cypriot banks. Although their non-bank ownership is small, every little helps, & using JPM's ownership estimates, this would produce ~EUR 820m.
  5. The international bonds under UK (with a 75% CAC hurdle) are certainly tough to PSI, but let's all be realistic, there's no money left & government debt is at astronomically large amounts of GDP. TMM believe that Cyprus will be more successful than market punters reckon in restructuring this debt. And of course, they can also just unilaterally default on the debt. Again, an 80% haircut here sounds realistic, producing EUR 3.04bn.
  6. Adding the Gas reserve privatisation (which JPM estimate at EUR 4.2bn), TMM have found EUR 18.9bn. 
  7. Cyprus could also, of course negotiate with the Russians to restructure the EUR 2.5bn loan, and if they are able to get say 20% NPV reduction on this, they could make the terms on the international bond restructuring less-onerous.
So there you have it: EUR 18.9bn without recourse to the Troika.

This approach also reduces the extremely negative economic effect that an upfront wealth shock imposes upon consumption, and also will to some degree reduce the ballcrenching tightening of monetary conditions as Cyprus' deposit base flees the country. Many have pointed out that inflation (e.g. in the UK) has the same net effect in terms of imposing costs on creditors, but this is not entirely true: moderate inflation & negative real rates as seen in the UK smooth the deleveraging process so that monetary conditions remain loose and the negative wealth effect is more gradual. The Troika's proposal for Cyprus does the complete opposite as it will ensure extremely tight monetary policy as the money supply evaporates, and provide a large one of hit to consumption via the wealth effect. In TMM's view this will merely result in Cyprus' recession becoming much deeper and its debt level blowing out once more to the point of needing a second bail out programme. Once again, this is the result of the Germans' inability to understand that there is no magical source of exogenous demand.
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Nic
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March 19, 2013 at 11:55 AM ×

Have you sent this to Anastasiades? Best idea I have seen

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Anonymous
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March 19, 2013 at 11:57 AM ×

#6 is risky. Just like the Greek bonds under UK law, it's a game of chicken in which the sovereign is virtually guaranteed to be the first to turn the wheel. Nobody wants to be the next Argentina.

The Greeks found a surprising amount of idiots who were willing to give up their money; I doubt the Cypriots will be as lucky.

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Anonymous
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March 19, 2013 at 12:25 PM ×

C Says'
Does your plan assume Cyprus remains within the EU with obviously the Euro has it's currency?

If so,then that is where it will fall down. The Eurogroup in this game are the 'house'.They make ,or 'bend' law and I have little doubt in the game of chicken you are putting together that in their place my countermove would be an immediate response based up ejecting Cyprus and I'm pretty sure I will find a law in the book somewhere that I can use for the purpose although it might take several moves to reach my preferred board position with it.

As to the subsequent threat of losses on ECB loans an ejection can also be acompanied by any number of 'leper' colony polices re trade that you wish to come up with in what is really a game of escalation which I assume is a game of seeing whose got the most bullets to fire. Of course such an ejection will also cst you a lot of utility value to your other benefactor Russia because you'd no longer by the route into Europe they value.
Which brings us right back to where we are in standoff and blink mode.

Let me be clear were I Cyprus I would have been out of the EU with all that implies. I recall telling a Cypriot MP 9 years ago that they were making a bad mistake trying to swap independence for a EU comfort blanket against a Turkish winter and the silly man laughed and shrugged his shoulders implying don't worry we Cypriots are horse traders of old and have nothing to fear from European politicians.

On this one I think you are a little guilty of putting together a plan that satisfies your ire on this issue and in doing so I think you are ommiting to really see what possibilities remain with the other player.

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Anonymous
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March 19, 2013 at 1:46 PM ×

In other words, point #2 would probably see the ECB's Blondie to Cyprus' Tuco:

"You see, in this world there's two kinds of people, my friend: Those with loaded guns and those who dig. You dig."

DD

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Anonymous
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March 19, 2013 at 2:26 PM ×

I'm sure there would be no run on the banks because hey, we just defaulted completely on all private sector bank debt, most government debt, pissed off the ECB but I'm sure the Russians will consider us just as safe as before.

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Anonymous
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March 19, 2013 at 2:28 PM ×

not to mention I don't think the collateral at the ECB is completely worthless so you aren't actually "gaining" 9bn by defaulting, it's probably close to a 4.5bn gain or similar.

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Anonymous
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March 19, 2013 at 3:01 PM ×

May seem appealing but in reality, this plan is likely to be effectively the same plan B as 'leaving the eurozone'. Whether through any existing rules - would for instance the ECB have to 'recognise' the new (good) bank before it is eligible for funding, and so be able to refuse to do so ? - or changes to existing rules (rules on collateral and anything else can be changed on the spot if the ECB board so decides), the nuclear option would just end up with no funding in return, so default exit it seems.

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March 19, 2013 at 3:02 PM ×

So the plan is:
* Take dodgy assets (Greek bonds is it?) held by Cypriot banks and swapped with ECB for not-so-dodgy ECB-backed assets and put them in a new bank because the ECB has cut off ELA access.
* Because existing ELA loans are for 3 years(?) and these dodgy assets probably havent all suddenly become non-dodgy and truly marked to market, let the new bank go to the ECB for additional ELA access to do the swap again after you've just screwed them.
* The liabilities at the bank are still not going anywhere because they are (mostly) in the form of deposits which no one wants to renege on.

Am I missing something about how this solves the problem?

Am I the only one who thinks that once depositor trust has been questioned, its game over for any entity that swaps low-interest, short-term, supposedly low-risk "loan" (deposit) for highly illiquid, high risk and long-term "assets"? Especially if these assets are probably worth much less than marked on the book? Thats why this hole exists in the first place. And these crises and liquidation fire-sales and depositor flights are going to make those dodgy-assets drop like a stone creating a vicious cycle.

While I know none of the above is helpful, neither is just kicking down the problem and pretending the problem is purely one of liquidity. Unless Germany is willing to take the pain for swapping employment/growth for dodgy assets (in other words, just shut up and pay), it isnt clear what a "good" outcome is.

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Nemo
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March 19, 2013 at 3:02 PM ×

I thought ELA was technically extended by the national central bank, not directly by the ECB?

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Nemo
admin
March 19, 2013 at 3:04 PM ×

See e.g. http://blogs.ft.com/money-supply/2012/05/16/qa-emergency-liquidity-assistance-and-greece%E2%80%99s-banks/

"For the central banks, the difference is that with ELA, the national central bank is on the hook for any losses. With ECB loans, any losses would be shared."

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Thorium238
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March 19, 2013 at 3:05 PM ×

Bang on brilliant reasoning stick it to the stupid Germans and for that matter the IMF for going along with it political expediency gone mad! Did Germany learn nothing from Creditanstalt 1931. Maybe the run starts on Thursday when banks open. If not it's only a matter of time I have already bought a safe!

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Anonymous
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March 19, 2013 at 3:05 PM ×

Away from "Panicos in the streets of Nicosia" because in the end it doesn't say anything about my life, we would like to report that various commodity vehicles continue to be taken out to the woodshed. Surely this is just the Great Decoupling.

DD

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cpmppi
admin
March 19, 2013 at 3:17 PM ×

UnderTheMicroscope,

Not quite - please re-read the piece.

Nemo,

Yes, but credit supplied is still denominated in Euros and the Cypriot central bank thus has a liability against the Eurosystem (Target2). What can the Eurosystem do about this? Not very much, as the Central Bank of Cyprus has already effectively printed Euros that the Germans cannot destroy.

Anon @ 2.28,

Good point - so Cyprus would indeed need to restructure the Russian loan to some degree. Also, worth bearing in mind that post external debt restructuring, both rollover & interest costs will be materially lower, so the true amount Cyprus needs is rather lower than 17.5bn.

Thorium,

Indeed, the runs will start as soon as online bank transfers can take place. 21st Century bank runs do not look anything like those of yore.

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UnderTheMacroscope
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March 19, 2013 at 3:36 PM ×

cpmppi -

Perhaps you would be kind enough to elaborate about the nature of these "unencumbered" assets you are transferring to the new bank that change this picture?

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cpmppi
admin
March 19, 2013 at 3:52 PM ×

Macroscope,

Sure - anything not currently pledged to the ECB. e.g - branch network, HQs, foreign subsidiaries etc. Repo with market counterparties (though this is minimal) could also be transfered.

Anything pledged via the ELA to the Central Bank of Cyprus could theoretically be transferred too, as it has not made it to Frankfurt.

Obviously this solution sticks black hole in the Cypriot Central bank, but the key here is that Cyprus ends up with hard (EUR) currency as a result. Were Cyprus to subsequently decide to exit the EUR (which, no matter how this deposit levy vote goes, still remains a highly probable outcome given the economic consequences of the plan), it would have passed on a significantly large share of exit costs onto the Eurosystem while preserving hard (EUR) currency to prevent a complete collapse of the New Cypriot Pound.

Cheers,
cpmppi

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Anonymous
admin
March 19, 2013 at 3:53 PM ×

@cpmppi -

Yes, but then the liabilities of the Cypriot central bank still exist. Does not that provide leverage either to get the money back or to kick Cyprus out of the EU?

I am no expert, but surely there was some reason the ECB chose to make this distinction between the ordinary discount window and ELA?

I think I agree with the earlier comment that this is equivalent to leaving the EU, albeit in a rather dramatic way. (Possibly the best way from Cyprus's point of view.)

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cpmppi
admin
March 19, 2013 at 4:07 PM ×

Anon @ 3.53,

Yes, those liabilities are against the Eurosystem. And as you point out, if Cyprus did this, the Eurosystem would now be Cyprus' largest creditor. This could provide significant leverage over the Eurogroup in that it now faces a loss of several billion Euros on an MTM basis.

As far as I'm aware, no mechanism exists for forcing the national central banks to immediately pay back Target 2 liabilities. This was a key part in the design of EMU to prevent Balance of Payments crises (and also probably intentionally to forceably tie together the members of the union given that the mechanism of Euro exit would impose large costs on intra-Target2 creditor countries [e.g. Germany]).

The Central Bank of Cyprus would of course be insolvent, but Central Banks are not banks in the "normal" sense of the word. By everyone just closing their eyes and carrying on, the liability against the Eurosystem can just stay there, and with it the Euros printed by the Cypriot central bank via the ELA facility. This of course is de jure monetisation that the Germans will be exceptionally pssed off with, but what can they do?

I believe the distinction vs. the ELA was probably as much for political reasons, as in Euro break up the losses on collateral held in ELA still show up as a default on Target2 liabilities. I am probably incorrect with this political assertion, but in Euro exit, as far as I can see, they have the same economic effect.

Cyprus cannot be de jure kicked out of the EU nor out of the EUR under European law, which can only be changed by Treaty (which Cyprus would surely veto).

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Leftback
admin
March 19, 2013 at 4:22 PM ×

US officially is still "decoupled" from Yoorp due to "the recovery" according to meeja, but the 10y is knocking on the door of 1,90% again and Spoos finally being dragged down as DX takes another look at 83.

Contagion has begun. GGBs falling sharply today, Spanish and Italian equities following suit and Spanish 10y poking the wrong side of 5% for the first time in a while. The genie is out of the bottle, going to have a hell of a time catching her and stuffing her in again.

Punters who fancied NBG as a cheap bank stock at $1.80 back in December must be loving her at $0.89 today. Sellers have guessed that there may be a lot of new smiling Greek shareholders one day in the not too distant future.

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Anonymous
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March 19, 2013 at 4:28 PM ×

Interesting. But ELA funding may well be provided by NCBs at their risk, but it is done so 'with ECB permission', is it not?

The ECB has already previously announced new rules limiting the use of additional new ELA funding 'except in exceptional circumstances', and given the way your plan pans out, can see no reason why ECB cannot entirely withhold permission full stop, not just on additional ELA

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Anonymous
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March 19, 2013 at 4:32 PM ×

You gotta love NBG. Two digit negative equity iirc but still trading above 5 cent. Wait a little longer and you can buy a bank just with your pocket money.

Eddie

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Anonymous
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March 19, 2013 at 4:36 PM ×

C Says
ELA can be curtailed by majority vote ECB.

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Anonymous
admin
March 19, 2013 at 4:48 PM ×

Okay, so your branch HQ+IT infrastructure+whatever EUR you can abscond with will support a depositor base of 66B? In a country whose GDP is suppose to be a fifth of that size? If the banks were so asset-rich (in real MTM sense), they wouldnt need a bailout.

And even if that worked, what next? The flow matters as much as the stock. Is the new Cyprus bank going to just use those EUR to pay back depositor and shut down Cypriot banking system? Or do you think ECB/Germany will continue with business as normal with Cypriot banks/Cyprus not caring about a precedent of a creditor nation getting away with default via some asset-transfer trick?

Cyprus isnt so self-sufficient that it doesnt care if foreign deposits disappear or this large banking sector disappears. (btw, sticking it to the Russian depositors is exactly what Germany was hoping for and what Nico was trying to prevent. Hence the "tax" on small depositors to keep the levy on tax-haven deposits to under 10).

The only remote thing any plan like this may do is the fact that they're talking about SOME plan may give markets a pause and allow some people to slip away with just a small drubbing on their GGB exposure that they have accumulated over the "ride the beta" wave.

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cpmppi
admin
March 19, 2013 at 5:38 PM ×

C et al,

The decision-makers for the ELA is not really relevant given that the money is currently in Cyprus.

Anon @ 4.48,

I am of the opinion that Cyprus' banking system is finished whatever they do. Paying back the depositors & shutting down is precisely what I would advocate - the branch network I am sure would have plenty of interested parties - eg Barclays & I would imagine the odd Russian bank.

Obviously, the deposit base of said banks is going to evaporate as soon as account holders are able to access their accounts.

I would imagine the ECB/Germany would be exceptionally pssd off with such a move, but under current EU law, there's not exactly much they can do about it. It may indeed provide the "shock" needed to finally force the Germans into implementing a full banking union (including legacy assets). After all, as you point out, the precedent this move might set has only losers in Northern Europe. Surely it is better to only be short a put on the peripheral NPAs rather than owning all of them?

In terms of "shock", I'm talking along the lines of the failed TARP vote fall-out.

There is no "good" outcome for any of this. But realpolitik would dictate that Cyprus play the hand it has been default, and minimising its NPV losses would argue slapping the Eurosystem with a good portion of the costs.

Indeed, I would not like to own GGBs...

cheers,
cpmppi

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Leftback
admin
March 19, 2013 at 5:50 PM ×

Many parallels with Iceland. Banking system bigger than economy, offshore deposits and hot money stoking the island economy. All ends in tears and whining foreign depositors.

The Cyprus banks are done. Refund the deposits*, sell the financial assets (GGBs etc.) and then have someone else come in and buy the physical bones, hence recapitalizing the system and allowing branches to reopen.

We would all be much better off if countries simply enforced the existing laws on the books, like the perfectly good bankruptcy laws, for example.

This is a dry run for Greece, which is much bigger. I think the markets realize that. If you have trouble imagining taking the Greek banks down, how about Spain? But we need to start somewhere, and Cyprus is as good a place as any.

* This assumes that it is possible to refund the deposits, without an injection..

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Nemo
admin
March 19, 2013 at 5:52 PM ×

Maybe they should pass the depositor haircut first, take the additional €10B, and then adopt this plan?

(Note: not original)

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Anonymous
admin
March 19, 2013 at 6:15 PM ×

C Says
CP, yes ,I was just clarifying for the other poster that ELA derives from NCB,but ECB have the authority to stop it.

Anyway,I agree Cypriot offshore banking in it's current state is over ,but in fairness I think that it's been heading in that direction for years,because it doesn't fit at all with the EU mindset which loathes whatever it cannot control. It only needed a trigger and it now has one.
I think the rest now is a matter of mechanics only.

I came to love Cyprus so much I was that close to retiring there post millenium.I didn't because I saw the path their leadership had chosen and I didn't like it and I didn't agree with it in the longer term interests of the Cypriot people and their lifestyle.They let themselves be seduced,and any outcome now is going to be the bill arriving for that weakness.
On a positive note it might be the start of a long road back to the better place that it used to be.

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VandalsStoleMyHandle
admin
March 19, 2013 at 6:19 PM ×

While we're spending other people's money, couldn't The Bernank divert a measly smidgeon of the Fed's monthly QE to make Cypriot depositors whole, instead of using same to make Jamie Dimon holier-than-though?

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Anonymous
admin
March 19, 2013 at 6:24 PM ×

Oh and place you bets please that current restrictions on money withdrawals morph into ongoing wider restrictions into how money flows into and out of Cyrpus re qty etc.Both physically and electronically.
Thinking short odds here .

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UnderTheMacroscope
admin
March 19, 2013 at 7:49 PM ×

That is a given. One of the first tools in a bureaucrats toolbox is to put up capital controls.

Now that the levy on insured deposits is dead, the trick is how to:
- Convince the Russians to swap their claims into something a lot more illiquid.
- Not let it leak that capital controls are a-coming.
- Convince local Cypriots that they should still put their cash in the bank.

I'm most worried about #3. Regardless of who owns the bank: Cypriots, Barclays or the "Opulence, I has it" Russians.

None of this changes the endgame but everyone feels like they've done something.

Up/down bets on where Russian and periphery eq markets are headed next week?

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Anonymous
admin
March 19, 2013 at 8:02 PM ×

LB saves Stavros after all..!

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Anonymous
admin
March 19, 2013 at 9:31 PM ×




RANsquawk: #Cyprus and ECB officials working on capital control plans for when banks open, include limits on daily transactions

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Anonymous
admin
March 19, 2013 at 11:24 PM ×

C Says
I find the following comment from Schaeuble in response to the vote very enlightening;

Schaeuble added that it was a "serious situation" now in Cyprus and said the country had no one to blame for its situation other than itself. He said he doesn't think its "business model" works anymore"

I draw attention specifically to that last reference to "business model".

I referred earlier to a trend in Europe regarding offshoring and then again within the context that Europe does not like what it cannot control. I think he is confirming my view that he and his peers see this has yet another point at which they can continue a job they started quite a few years ago.

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The Original
admin
March 20, 2013 at 12:26 AM ×

And there is zero evidence that the Euro policy elites have carefully thought through the full consequences of their actions. "Stick it to those dodgy Russians!" might win you another round at the Hofbrau Haus, but what does it imply for the ability of Greek banks to retain, let alone attract, deposits? How about the likes of Banco Popolar, Bankia, Monte Paschi, etc?

On the one hand, you have the macroprudential boys and girls saying "fund through deposits, not interbank."

On the other hand, you have Schaueble, Djisselbloem, and the like saying "if we don't like you we will take some of your deposits while leaving bondholders and equity holders intatct!

This whole fiasco has been a veritable Yahtzee of Fail from our European chums.

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Anthony
admin
March 20, 2013 at 4:08 AM ×

Luckily, Cyprus' legislature voted against the proposal.

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jkiss
admin
March 20, 2013 at 6:45 AM ×

As others have said, they crossed the Rubicon.
The idea proposed (barely) comes up with the amount of Euros needed immediately, but does not assume any new Euros required to pay running depositors... and even if Barclays comes in, some money is determined to leave now and reflect later.

Also... bringing in Barclays implies the existing well-connected local banksters will be sacked, we can assume they and their bought legislators will strenuously resist.

And... we need a solution by next Monday, stores and consumers are both running out of cash plus companies must pay for critical imports, the luxury of time for the various bureaucracies to methodically weight the merits of competing concepts has passed.

Regardless of near term events in Cyprus, savers in the PIIGS will begin moving money to safer, if colder, climes... interested observers will note that not only might you get haircuts, you also lose access to the rest of your funds. IMO it's game over EMU...

OTOH, US dollar and bonds, in fact any developed country with their own printing press, plus gold, all look bullish.

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Anonymous
admin
March 20, 2013 at 9:32 AM ×

C says
Orig,
I think it is oncorrect to assume they did not think the consequences through afterall they were fairly obvious.No,I think they knew what the consequences were and thought they would be manageable and certainly worth the risk in pursuing what is a long run aim to close down offshore activities in Europe.
I suspect the issue of deposits below 100k was something of an unforeseen wrinkle that raised it's head late in the game and was an unwelcome entrant for them.Comments since make me increasingly sure this was Cypriot self interest...they still think they have a future as an offshore finacial centre..LOL.

As it stands it comes down now to a straight tradeoff for the EU of perceived benefits of closing down the wart on it's periphery vis a vis containment to that country of capital flight issues. I don't pretend to know how that is exactly going to work out.Too soon to tell.

Wolf gave an informative discussive piece in the FT.

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Anonymous
admin
March 20, 2013 at 10:16 AM ×

c SAYS

http://www.marketwatch.com/story/cyprus-is-euro-zones-very-own-lehman-moment-2013-03-20?siteid=bigcharts&dist=bigchart

This chap is nothing if not consistent in churning out garbage.Indeed is this the definitive contrarian buy signal on any 'crisis' event?

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Anonymous
admin
March 20, 2013 at 11:44 AM ×

C says
Well if as some wag implied the EU crossed the Rubicon (I think it was more like the local beck) then FedEX just put forward earnings under Niagra Falls.
You see isn't that strange, falling International freight,and decreasing capacity to and from Asia ? I thought that side of the Rubicon was where the growth action was supposed to be ;)

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Leftback
admin
March 20, 2013 at 1:41 PM ×

NO worries, lads. Market is up. I hate FED days.

Btw, whoever suggested this:
- Not let it leak that capital controls are a-coming.

Good luck with that...!!!

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Leftback
admin
March 20, 2013 at 1:49 PM ×

The fact that the US market is screaming higher today after the FED EX earnings just serves to confirm what we have known for a few weeks now. This market has become dissociated from economic data, earnings and almost all forms of risk. It is trading solely on the utterances and body language of one Benjamin S Bernanke, and looking to balance sheet expansion to be a perpetual source of liquidity to fuel its ever more irrational exuberance.

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Anonymous
admin
March 20, 2013 at 1:53 PM ×

C Says
Post UK Budget over here on that side of the Rubicon are we're feeling inspired?Are we working hard and getting on? Are we beavering away like our Cypriot brothers who even now are looking for somewhere to bury their pensions funds out of sight.

Thinking about VTB and size of deposits I wonder if Cyprus VTB is about to become a new legal identity in exchange for..well you name it ...psudeo deposit haircut and an extra contribution to the EU bail-in bucket.....and what a save that was!The crowd goes ecstatic,but the Germans are waving their hands in the air appealing to the ref that 'it was an hand god' moment!

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Anonymous
admin
March 20, 2013 at 2:20 PM ×

On this note, a good moment to rewatch some philosophers football ...

"Merkel is arguing that the reality is merely an a priori adjunct of non-naturalistic ethics, Weidmann via the categorical imperative is holding that ontologically it exists only in the imagination, and Schauble is claiming it was offside."

DD

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Leftback
admin
March 20, 2013 at 2:24 PM ×

In other news, the Troika appear to have their own problems today. Wonder if the French police union have an account in Cyprus?

Lagarde Home Searched

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Anonymous
admin
March 20, 2013 at 2:43 PM ×

C says
I get it.It's one of those Dan Brown codes where IMF stands for In My Flat .

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Anonymous
admin
March 20, 2013 at 3:13 PM ×

OK ... bit more effort into it since the portfolio is bleeding anyway.

Announcer
And we'll be bringing you back to this exciting contest the moment anything interesting happens.

Football Commentator
Well there may be no score, but there's certainly no lack of excitement here in Nicosia. As you can see, Weidmann has just been booked for arguing with the EcoFin. He accused Juncker of having no free will, and Juncker he say, "Name go in book". And this is Weidmann’s third booking in four meetings.

And who's that? It's Die Linke, Die Linke is warming up. It looks as though there's going to be a substitution in the German side. Obviously the manager Helmut Schmidt has decided on all-out attack, as indeed he must with only two minutes of the match to go. And the big question is, who is he going to replace, who's going to come off. It could be Rosler, Merkel or Steinmeier, but it's Sarrazin! Sarrazin, who saw his aunty only last week, and here's Linke. Let's see it he can put some life into this German attack.

Evidently not. What a shame. Well now, with just over a minute left, capital controls on Thursday look absolutely vital. But here’s Orphanides, and I think he's had an idea.

Orphanides
Eureka!

Football Commentator
Orphanides out to Anastasiades, Anastasiades back to Orphanides, Orphanides out to Siluanov, he beats Merkel. From Siluanov a little flick, here he comes on the far post, Shuvalov is there, Shuvalov heads it in! Shuvalov has scored! The Cyprussy-riots are going mad, the Cyprussy-riots are going mad. Shuvalov scores, got a beautiful cross from Orphanides. The Germans are disputing it. Merkel is arguing that central bank liquidity is merely an a priori adjunct of emergency liquidity assistance, Schauble via the categorical Target 2 liabilities is holding that ontologically the exit exists only in the imagination, and Die Linke is claiming it was offside.

But Juncker has answered them with the final whistle! It's all over! Germany, having trounced PIIG’s famous midfield trio of Papandreou, Zapatero and Il Letche in the semi-finals, have been beaten by the odd goal, and let's see it again.

There it is, Shuvalov, Shuvalov heads in and the Troika doesn't have a chance.

DD

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Leftback
admin
March 20, 2013 at 7:01 PM ×

Classic, DD. Can tell you have watched a few FA Cup giant-killings in your time. Much better than the recent crop of Mr Shouty Men on TV. Worthy of John Motson, Tony Gubba and the great Kenneth Wolstenholme ("there are people coming on the pitch, they think it's over.... It is now...")

Btw, the US "housing recovery" (aka Blackstone buying up thousands of piece of shit housing units and hoping to flip them or turn them over quickly for rental) is becoming similar to China's "ghost cities". We have a boom in everything, except people to buy, and even renters are hard to find in places like Phoenix:

US Housing: Lots of Units. No People

This is the danger in looking at the world from the perspective of Manhattan. It's like those places at the fair with the funny mirrors, makes all VC guys look very tall, slim and intelligent. Until they go outside and discover they are just another bunch of bald fat guys who bought houses they can't rent.

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Leftback
admin
March 20, 2013 at 7:55 PM ×

In the orgy of FOMC liquidity betting and SPX cheerleading today, did anyone else notice FDX posted absolutely horrible results? Given CAT is struggling as well, and these are big players in the "real economy" that are exposed to a slowdown in RoW, how long will it be before earnings start to matter again?

Even Bernanke gave us a hint today, that he was worried about a "Spring Slump". Still, not to worry, with The Bernank at the helm, just buy more homebuilder and social media stocks on margin.....

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Anonymous
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March 20, 2013 at 8:37 PM ×

C Says
Oracle didn't exactly shine much either did it?
Let the moneyflow is my motto.More that flow up the more to mop up on the way down and it usually happens faster.

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Anonymous
admin
March 21, 2013 at 8:43 AM ×

C Says
Despite ongoing cries of an own goal the net remains suspiciously empty.However, a quick review confirms that the match really has not started yet backedup by the fact that the crowds are still locked out awaiting a ticket to get in. Due to crowd control measures it is highly likely that fans will only be allowed in very very slowly and indeed so slowly that some may not even gain entry before the game is actually over which is likely to lead to increased requests for ticket refunds and angry protestations that they will never again buy a ticket for this stadium. Unfortunately,they probably do not realise that for many of them they have by default been awarded a lifelong membership subscription taken by direct debit.

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Anonymous
admin
March 21, 2013 at 10:54 AM ×

C Says
Talk about ugly European PMI and the French..hello is anyone still in there?

If Cyprus really sees any benefit to being part of that then they deserve what they will get.

If you want to see a Japanese style deflation you don't need to look any further.

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VandalsStoleMyHandle
admin
March 21, 2013 at 1:12 PM ×

Picking up on C's points, Cyprus was only admitted to the EU in 2004 on the clear understanding that they would ratify the Annan Plan.
http://en.wikipedia.org/wiki/Cypriot_Annan_Plan_referendums,_2004#European_Union
So Cyprus pulled a swerve, and the Cypriot elites probably thought that they had out-traded their naive counterparts. I'll bet that manoeuvre still rankles in the European corridors of power.

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Leftback
admin
March 21, 2013 at 1:42 PM ×

It's a bit yennish out there this morning. Latest data shows Japanese exports falling and import prices rising. Talk about an own goal..... probably time for the BoJ to cool the rhetoric for a while. Funny thing, if the customers are not buying anything, torching your currency doesn't stoke demand.

The Chinese Flash PMI number served mainly to squeeze shorts and give the AUD a bump for about 6 hours, but looking at electricity consumption and metals prices suggest it is Porkies time in Beijing.

The European Flash data was awful. With the Cyprus bank holiday persisting until next week, I am more and more concerned for the fate of Stavros, hard working London-based tile installer, his Nicosia taxi driver father Dinos, and his grandmother Eleni, widow to the late Limassol baker. It's not going to be pretty, however it comes out.

US still decoupling, as of yesterday, safe in the embrace of The Bernank. Earnings and data from CAT, FDX and ORCL not important. It's Morning in America. DX touched 83 again today, I think that is three times, so a push on to 84 looks likely.

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Leftback
admin
March 21, 2013 at 2:40 PM ×

I get the feeling that Ze Germans want to "make an example" of someone by expelling them, perhaps for electoral purposes, and the Cypriots might just choose to go along with that, knowing they can turn to the Russian bear for a warm embrace in exchange for all of their reservoirs of Natty.

That might just turn out to be a very expensive mistake for the EU. Bailing a really really big bank somewhere else in the EU will cost a lot more than bailing Cyprus.

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Anonymous
admin
March 21, 2013 at 3:52 PM ×

C Says,
Vandal, indeed.
Europe was played.I was driven from Nicosia to Nrthrn Turkey for a lunch time beanie. On route my 'host' who shall be nameless drove me around a couple of small villages pointing out the property that was owned by his family,but of course was now occupied by Turks. Had the EU been in the back seat listening to the passionate conversation they would have had no doubt whatsoever that the Annan agreement was never going to be airborn.They have no idea how recent 1974 still is in Cypriot minds.It's like yesterday, and for many of them that part of the island still belongs to them.

Again I have to stress never confuse what a Cypriot politican is saying with what he is thinking and what he will ultimately do.In their minds they have a 1000 years of horse trading experience behind them.

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leftback
admin
March 21, 2013 at 5:35 PM ×

Perhaps the Cyprus bank investors need to put the pants on and bend over, in an effort to achieve transparency:

LULU Quality Control

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leftback
admin
March 21, 2013 at 5:52 PM ×

Song of the Day for Cyprus:

Should I Stay or Should I Go?

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Anonymous
admin
March 21, 2013 at 8:18 PM ×

C Says
I'm a sucker for happy endings so I prefer this song albeit it doesn't translate well into German.
Do watch the video for the subliminal messages.

http://www.youtube.com/watch?v=oXEMZSqJtfk

My version of the lyrics.

Europe is just a great big onion

And banking and finance are the spices that make you cry

And the only way to get rid of this great big onion Is to plant love credits until debt dies, uh, huh

Hey, europe, we got a great big job to do, yeah We need you and everybody who loves debt

You know we got to clean up this place And reach far higher (than deposits), oh, yeah, yes, we do now We gotta be headstrong about rightin' the wrong And make a mountain of happy credits, oh, oh


Baby, europe is just a great big onion And 'I don't care' is the face people like to wear, yes, it is now And the only way to get rid of this great big onion Every one single soul's got to do their share, tell about it, baby


So come on, let's knock on every door Tell them love credits is the answer Whether they're rich or poor, oh, yeah

And we don't care what you do How you look or your status claim, baby No, no, because 'Stavros and Heidi' From now on is gonna be everyone's name, oh, oh

Europe is just a great big onion And banking and finance are the spices that make you cry, yes, it is And the only way to get rid of this great big onion Is to plant love credits, now everybody got to plant love credits Come on and plant love credits until it dies

Europe is just a great big onion





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Anonymous
admin
March 22, 2013 at 7:36 AM ×

C Says
A limited amount of commonsense appears to be on the way regarding one aspect of the Cypriot farce.
As the week closes out though I am more interested now in seasonality and ultimately whether you ;
Fink ,or FedEx.I'd generally want to go with the latter to get a more objective view of where the economic outlook is heading.

Trade you one Cypriot account for a 20x20 lockup in a London back alleyway ;)

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Anonymous
admin
March 22, 2013 at 9:49 AM ×

C Says
There s one other goog thing going to come out of Cyprus.It is going to rebalance perception of risk and reward.
One of the outcomes so far of central bank shovelling policy is the 'normal' boundaries of risk and risk premia have been distorted.At least imo.

After this I think many people are going to take a much more considered look at what are they getting for the risk they are taking.

The costs to the finance sector look like getting adjusted.Obviously I hope it takes it's usual track and overshoots mixing good with the bad.

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March 23, 2013 at 3:41 AM ×

We, the citizens, refuse to allocate our own funds in any form to bailout the gambling debts incurred through the financial speculation of investment banks.

Sign : https://www.change.org/fr/p%C3%A9titions/a-tous-les-d%C3%A9put%C3%A9s-chypriotes-chypre-doit-scinder-les-banques-en-deux-cat%C3%A9gories-bonne-mauvaise-banque

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April 1, 2013 at 7:22 PM ×

I'm starting to put my tax brackets together now and looking for ways to reduce earned income. Good thing I can contribute to an IRA until April.

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john carter
admin
June 19, 2013 at 7:59 AM ×

The Central Bank of Cyprus has released the publication “Monetary and Financial Statistics” for the reference month of April 2013 (http://www.centralbank.gov.cy/nqcontent.cfm?a_id=12820). The data reflect the provisions of the “Bailing-in of Bank of Cyprus Public Company Limited Decree of 2013

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