# Bank deposits get the "haircut" treatment in Cyprus. What happens next? **URL:** \ **Category:** Great Debates\ **Created:** [March 16, 2013, 1:51pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089 "2013-03-16T13:51:10Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [March 17, 2013, 9:45am UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/21 "2013-03-17T09:45:27Z")
> [@septimus](#): > > But the Cyprus crisis may have little relationship to investment in Cyprus. Doesn’t most of the affected money belong to Russian money launderers? Apparently a great deal, yes. But this affects everyone with savings there, including perfectly innocent people who are already living on the edge. > [@septimus](#): > > I don’t have the full story, but horrifying as “bank deposit haircut” seems _a priori_, might it have been a sound way to deal with a very peculiar situation? I really doubt that. As I said, at the very least I expect the banks of Cyprus to be largely destroyed by this. And it’s quite possible that banks all over Europe will take major hits if people decide it could happen there too and pull their money out of those banks too. ---
**Author:** ![Rune](https://avatars.discourse-cdn.com/v4/letter/r/e68b1a/32.png) [@Rune](https://boards.straightdope.com/u/Rune)\ **Post date:** [March 17, 2013, 12:50pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/22 "2013-03-17T12:50:53Z")
The EU minimum deposit guarantee is € 100,000. Everything above this should be lost. I don’t see why hardworking German taxpayers should pay for the losses of Russian mobsters and corrupt officials. ---
**Author:** ![Ramira](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ramira/32/344_2.png) [@Ramira](https://boards.straightdope.com/u/Ramira)\ **Post date:** [March 17, 2013, 1:58pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/23 "2013-03-17T13:58:52Z")
> [@Rune](#): > > The EU minimum deposit guarantee is € 100,000. Everything above this should be lost. I don’t see why hardworking German taxpayers should pay for the losses of Russian mobsters and corrupt officials. I do not think it would be helpful to destroy as well the honest companies in the cypriote banks, only because of this. That is what making all the deposits above € 100 000 lose would do. But I think the idea is right, it is not a good policy measure nor a just thing to bail out accounts that are principally black money. > [@Der\_Trihs](#): > > … And it’s quite possible that banks all over Europe will take major hits if people decide it could happen there too and pull their money out of those banks too. No it is not possible. Everyone in europe who cares to know has seen the bailouts again and again of the banks that have not touched any bank depositor, above all the small depositor. It is only in this one case and it is known why, because the Cypriotes turned for a very long time a blind eye to the dirty monies coming out of the Russia and the Ukraine. Huge amounts. Of five or more of bailouts, only one national instance, Cyrpus, has this presented and everyone knows the reason. Why should honest EU taxpayers monies go to bail out the dirty russian money and those who openly profited from it? ---
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [March 17, 2013, 3:32pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/24 "2013-03-17T15:32:00Z")
> [@Ramira](#): > > I do not think it would be helpful to destroy as well the honest companies in the cypriote banks, only because of this. That is what making all the deposits above € 100 000 lose would do. > > But I think the idea is right, it is not a good policy measure nor a just thing to bail out accounts that are principally black money. > > No it is not possible. Everyone in europe who cares to know has seen the bailouts again and again of the banks that have not touched any bank depositor, above all the small depositor. It is only in this one case and it is known why, because the Cypriotes turned for a very long time a blind eye to the dirty monies coming out of the Russia and the Ukraine. Huge amounts. Of five or more of bailouts, only one national instance, Cyrpus, has this presented and everyone knows the reason. > > Why should honest EU taxpayers monies go to bail out the dirty russian money and those who openly profited from it? Leaving aside the issue of the fairness of a bailout, generally in America, we are protected from this kind of seizure without due process. So, while you may be correct that it’s all dirty mafia money, I didn’t see any indication of a trial or judgment that would be necessary in America for the government to seize assets. So this is something extra horrible to us, as its a gross violation of a basic American right (there are some pre-conviction forfeiture laws, particularly drug forfeiture laws, that are applied, and those are bullshit too). ---
**Author:** ![even\_sven](https://avatars.discourse-cdn.com/v4/letter/e/dfb087/32.png) [@even\_sven](https://boards.straightdope.com/u/even_sven)\ **Post date:** [March 17, 2013, 3:51pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/25 "2013-03-17T15:51:12Z")
Meh. Ordinary people pay a disproportionate price for bad banking practices one way or another. There are about a hundred ways to take money out of people’s pocket to make up for bankers recklessness, many of which we have seen in the US. The only difference here is that everyone can see the bill directly, instead of seeing it through decreased buying power, market crashes, etc. In that sense, I’m all for it. People should see directly how much their financial sector is screwing them. ---
**Author:** ![Ramira](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ramira/32/344_2.png) [@Ramira](https://boards.straightdope.com/u/Ramira)\ **Post date:** [March 17, 2013, 4:01pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/26 "2013-03-17T16:01:22Z")
Cyprus is not a state of the United States. And the comments like those of Sateryn on this seem to be not very much tied to any real information about the operations or the laws, but only the headlines. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [March 17, 2013, 4:29pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/27 "2013-03-17T16:29:15Z")
> [@Rune](#): > > The EU minimum deposit guarantee is € 100,000. Everything above this should be lost. I don’t see why hardworking German taxpayers should pay for the losses of Russian mobsters and corrupt officials. One doesn’t fleece Russian mobsters and get away with it. When Bernie Madoff’s Ponzi-scheme investment trust collapsed, it was found that an Austrian Bank was heavily invested in his fund. This bank had large deposits from Russian investors..many of whom were suspected of being mobsters. I heard that the founder of the bank is in fear of her life, due to the unhappiness of some of her depositors.😉 ---
**Author:** ![DeptfordX](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@DeptfordX](https://boards.straightdope.com/u/DeptfordX)\ **Post date:** [March 17, 2013, 5:21pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/28 "2013-03-17T17:21:02Z")
I really can’t see what the hell anyone involved with this was thinking. As others have pointed out, this is going to _destroy_ their banking system. This isn’t shooting themselves in the foot, it’s shooting themselves in the face. ``` The news Tuesday morning is just going to show everyone in cyprus queing around the block to withdraw their money, we're going to see a bank run like we haven't seen in a hundred years. ``` ---
**Author:** ![DeptfordX](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@DeptfordX](https://boards.straightdope.com/u/DeptfordX)\ **Post date:** [March 17, 2013, 5:25pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/29 "2013-03-17T17:25:41Z")
Worse, is this not likely to cause bank runs all over southern europe, by people worrying their own goverment will follow suit. Seriously, how the hell did anyone persuade themselves this is a good idea? ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [March 17, 2013, 5:29pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/30 "2013-03-17T17:29:59Z")
> [@DeptfordX](#): > > The news Tuesday morning is just going to show everyone in cyprus queing around the block to withdraw their money, we’re going to see a bank run like we haven’t seen in a hundred years. Assuming its even limiteed to Cyprus. It’s going to be a very _interesting_ Monday and Tuesday in Greece and Spain. This could touch off a complete financial meltdown across Europe. I hope not, but Europe has done its level best to turn a big problem into a massive disaster time and time again, so it wouldn’t exactly surprise me. I’m more worried about what might come afterward - this would likely be the death knell of the Euro, and likely the entire European Union. And that leaves aside that Russia has a very unpleasant way of demanding repayment for the immediate injury (not to mention insult): GazProm. A significant chunk of Europe’s energy supply comes from Russia, and they can’t change that in a reasonably short time-frame. Russia has used that as a threat before, and I see every chance that they’d do so again. Even if Putin (& Co.) don’t care about the money itself, this is something they’re unlikely to let pass without incident - unless they’re offered some huge concession very quickly, which would likely be its own serious problem. ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [March 17, 2013, 5:43pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/31 "2013-03-17T17:43:04Z")
Apparently this isn’t a done deal as yet. [Cyprus parliament delays vote on deposit levy to Monday](http://www.reuters.com/article/2013/03/17/us-cyprus-parliament-idUSBRE92G03I20130317) > [@](#): > > (Reuters) - Cyprus’s parliament has postponed until Monday an emergency session to vote on a levy on bank deposits after signs that lawmakers might block the surprise move agreed in Brussels to help fund a bailout and avert national bankruptcy. ---
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [March 17, 2013, 6:41pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/32 "2013-03-17T18:41:24Z")
> [@davidm](#): > > Apparently this isn’t a done deal as yet. > > [Cyprus parliament delays vote on deposit levy to Monday](http://www.reuters.com/article/2013/03/17/us-cyprus-parliament-idUSBRE92G03I20130317) Are they going to keep the banks closed? If not, then there’s no problem, as the money available for theft is going to be zero. ---
**Author:** ![Ramira](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ramira/32/344_2.png) [@Ramira](https://boards.straightdope.com/u/Ramira)\ **Post date:** [March 17, 2013, 6:45pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/33 "2013-03-17T18:45:47Z")
The American interpretations of EU. There is no need of any knowledge, only creations. ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [March 17, 2013, 6:47pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/34 "2013-03-17T18:47:50Z")
I would assume that they’d have to keep them closed until after the vote. It strikes me that regardless of the vote results, whenever the banks do open everyone will be trying to withdraw. ---
**Author:** ![Tom\_Tildrum](https://avatars.discourse-cdn.com/v4/letter/t/e95f7d/32.png) [@Tom\_Tildrum](https://boards.straightdope.com/u/Tom_Tildrum)\ **Post date:** [March 17, 2013, 7:06pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/35 "2013-03-17T19:06:05Z")
> [@Sateryn76](#): > > Leaving aside the issue of the fairness of a bailout, generally in America, we are protected from this kind of seizure without due process. So, while you may be correct that it’s all dirty mafia money, I didn’t see any indication of a trial or judgment that would be necessary in America for the government to seize assets. > > So this is something extra horrible to us, as its a gross violation of a basic American right (there are some pre-conviction forfeiture laws, particularly drug forfeiture laws, that are applied, and those are bullshit too). It’s just a wealth tax. Whether or not it’s a good idea, I don’t see why it couldn’t be done in the US. ---
**Author:** ![DeptfordX](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@DeptfordX](https://boards.straightdope.com/u/DeptfordX)\ **Post date:** [March 17, 2013, 7:10pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/36 "2013-03-17T19:10:29Z")
Agreed, they have totally destroyed their own peoples faith in their banking system. It almost doesn’t matter now, even if they vote the law down it’s going to be armageddon for their banks come their Tuesday reopening. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [March 17, 2013, 7:12pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/37 "2013-03-17T19:12:15Z")
> [@Ramira](#): > > No it is not possible. Everyone in europe who cares to know has seen the bailouts again and again of the banks that have not touched any bank depositor, above all the small depositor. It is only in this one case and it is known why, because the Cypriotes turned for a very long time a blind eye to the dirty monies coming out of the Russia and the Ukraine. Huge amounts. Of five or more of bailouts, only one national instance, Cyrpus, has this presented and everyone knows the reason. > > Why should honest EU taxpayers monies go to bail out the dirty russian money and those who openly profited from it? Are you trying to argue that every single depositor in Cyprus is a Russian criminal? Because they aren’t. This is screwing over everyone who deposited money in their banks; there’s not even the slightest attempt to spare the innocent. And it’s silly to complain about Russian criminals when indulging in what amounts to an enormous bank robbery. And I think you are being wildly optimistic about everyone in Europe buying the idea that this is necessarily a one off thing and not just the first of many such money grabs. ---
**Author:** ![grude](https://avatars.discourse-cdn.com/v4/letter/g/e47774/32.png) [@grude](https://boards.straightdope.com/u/grude)\ **Post date:** [March 17, 2013, 7:12pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/38 "2013-03-17T19:12:59Z")
> [@Mosier](#): > > I would absolutely lose my shit if this happened to my bank. There’s no fucking way I’d ever put money in a bank ever again. Remember all those stereotypes about old people with mattresses stuffed with cash, because they didn’t trust banks? Yep America may not have seen this in a while, but people who have lived through something like this don’t ever forget it. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [March 17, 2013, 7:58pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/39 "2013-03-17T19:58:21Z")
> [@Der\_Trihs](#): > > And I think you are being wildly optimistic about everyone in Europe buying the idea that this is necessarily a one off thing and not just the first of many such money grabs. Speaking of which, [here’s](http://news.yahoo.com/official-eu-not-working-private-150614212.html) an article from last month someone on another forum found. > [@](#): > > **Official: EU not working on private Cyprus haircut** > > Senior EU official: No plans to force private depositors in Cypriot banks to take losses > > BRUSSELS (AP) – For a second day in a row, the European Union’s top financial official sought Tuesday to quash speculation that private bank depositors in Cyprus might be forced to take losses as part of a bailout deal — a suggestion that’s fueled fears of large-scale withdrawals from the country’s troubled banks. > > The new head of the euro area’s 17 finance ministers stoked concerns Monday about the security of uninsured private deposits in Cyprus when he declined to rule out such a step following repeated questions from reporters. Instead, Eurogroup chief Jeroen Dijsselbloem, who is also the Dutch finance minister, said the matter had not been discussed at the meeting he’d just chaired — his first. > > Olli Rehn, the EU’s monetary affairs commission, stepped in then to say that the European Commission, the union’s executive arm, was not working on any such proposal. They said they wouldn’t do it, they denied they were even considering it - and then they did it. So why should anyone take seriously assertions that they aren’t going to do it again? They’re proven liars. ---
**Author:** ![twhitt](https://avatars.discourse-cdn.com/v4/letter/t/87869e/32.png) [@twhitt](https://boards.straightdope.com/u/twhitt)\ **Post date:** [March 17, 2013, 8:12pm UTC](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089/40 "2013-03-17T20:12:36Z")
There’s a lot of talking past each other here. First of all, this is a tax, and almost every reasonable person understands that governments have the power to tax. In particular, it’s a kind of wealth tax, similar in kind to property taxes in most US localities. You have some asset, the government determines the value of that asset, and you are taxed based upon that amount. In this case, the wealth tax is not on real estate but on deposits. It’s legal, it’s not ridiculous, it’s just uncommon. As for whether it’s an appropriate action, Cypriot hands are tied on the issue. The government does not have surplus funds with which to pay deposit insurance assuming these banks fail. They would need to go to Europe at large for the money to do so, and that means they would need to ask Germany. Rightfully, Germans are getting a little exhausted at repeated bailouts, and they’re unlikely to be especially generous this time around, so the money has got to come from somewhere else. Cyprus could tax its people, but this tax falls more heavily upon foreigners who do not have a voice in Cypriot government, and that makes it a superficially appealing choice for the politicians. Yes, it’s a bit ugly and does tax natives as well, but no solution was going to avoid that problem. We should be more concerned about why Europe generally does not have the sorts of pro-growth moderate inflation that would allow all the economies of Southern Europe to grow their way out of this mess over the next decade. Moving from crisis to crisis, shuffling money around and demanding growth-crushing austerity programs while doing nothing about the jobs problem is going to kill the Euro. [Previous page](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089.md?page=1) [Next page](https://boards.straightdope.com/t/bank-deposits-get-the-haircut-treatment-in-cyprus-what-happens-next/653089.md?page=3)