The Cyprus Situation

cardigan

This may be an answer . . .

In most legal systems, a bank deposit isnot a bailment. In other words, the fundsdeposited are no longer the property of the customer. The funds become theproperty of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). Thatdeposit account is a liability of the bank on the bank's booksand on its balance sheet. Because thebank is authorized by law to make loans up to a multiple of its reserves, thebank's reserves on hand to satisfy payment of deposit liabilities amounts toonly a fraction of the total which the bank is obligated to pay in satisfactionof its demand deposits.

talexuser

newfoundglory wrote: »

That said, i've always wondered who pays up when a bank fails. If cyprus has deposit protection up to (euro) 100k, who has stump up savers cash if they simply let the banks go bust? The EU? The Government?

As I understand it here the Financial Services Compensation Scheme is a levy paid by AUTHORISED institutions like a kind of insurance policy if a firm goes bust. Like all insurances it would not have enough money after a certain amount of capital was required to pay out.

So big banks need government bailouts from the taxpayer - rather opposite to everything we have been told for 40 years about the superiority of free enterprise and risk taking, let alone that everything government touches is done better by private enterprise... It looks like taxpayers money is the only thing left to get private enterprise working nowadays :rotfl:

londonTiger

cardigan wrote: »

Can someone who can explain the law that makes it legal for a government to take money from a bank account?

Is that law specific to cash or can it be applied to savings in gold, shares etc.?

How does that law make it legal to take 20% off savers in bank A and only 4% of savers in bank B?

Is that law specific to banks e.g. if the savings were under the bed could they take 20% of that?

Is that law a Cyprus law, and EU law, a Bank law, a Global law?

when the ship is about to sink. the rulebook is thrown out the window. similar in wartime - you lose your freedom n stuff. you can be conscripted agaist your will.

Glen_Clark

newfoundglory wrote: »

Politics being politics, they have to protect their own !!!!

So they are. Their own will be invested in Land and property - The price of UK Agricultural Land has tripled since QE began.Or at least index linked cash. The Bank Of England quietly switched their pension fund into Index Linked Bonds before cranking up the printing presses and trashing ours.

atush

Ask yourself if you have 1 million in a cyprus bank (esp Bank A which is insolvent).

Would you rather lose 90% of your balance should the bank fail (the 100K guarantee) or lose just 40%?

sabretoothtigger

Even Lehmans did not lose all its money, thats the strawman argument tactic often used in politics. Absolute arguments are bad logic, delivering bad conclusions

My comparison was with the States with a written constitution and undeniably we have far less natural rights

We have the Magna Carta.
The USA constitution has been compromised by politics bypassed with the help of judiciary both aided with campaign contributions.
Every time the debt ceiling or other fiscal nonsense is passed by congress it is a requiem to the freedoms they once had.
They came close to passing a law allowing the death by air launched ballistic missile of any citizen in USA without trial or warning, they dont have rights
Out of fear, people will do anything then

Like all insurances it would not have enough money after a certain amount of capital was required to pay out.

So big banks need government bailouts from the taxpayer

Dont think thats really the case, banks do have a cap of what they would owe. Of course they could not always afford to pay

Each year they would have another bill to repay the next instalment but it would never fall on government or public in general to bail them out.

This really should not have occurred, the reason thats not a mean thing to say is that we rely on people even joe public to choose wisely. Capitalism needs good judgement and if failure then loss must adjust for that.
If people dont choose a bank wisely because its always safe, it means the banks dont care either and they act like Goodwin a complete pleb who lied about his jet, his fine art and wine collection expensed to the bank.
Why would you make a pensioner or whoever pay for Goodwin, it does not add up but now thanks to QE, it does great:T
http://en.wikipedia.org/wiki/Moral_hazard
risk and loss are essential to promoting successful business, its broken till that happens

arcadia00

atush wrote: »

Ask yourself if you have 1 million in a cyprus bank (esp Bank A which is insolvent).

Would you rather lose 90% of your balance should the bank fail (the 100K guarantee) or lose just 40%?

I'd be tempted to take the 90% hit and wait if I thought they had the assets that Icesave turned out to have.

Winding up these banks up wouldn't solve the sovereigns predicament anyway, only stealing does that.

grey_gym_sock

cardigan wrote: »

Can someone who can explain the law that makes it legal for a government to take money from a bank account?

i take it that cyprus' parliament is considering passing such a law. i.e. it doesn't have to exist already.

whether the parliament has the power to pass such a law is a question about cyprus' constitution. which may effectively incorporate some EU law, since they are a member of the EU.

but i'd be very surprised if their constitution didn't allow the parliament to pass something like this. constitutions can have protections against arbitrary confiscation of private property, but it isn't arbitrary. it's an attempt to come up with a least bad solution for some insolvent banks. you may argue that there are better least bad solutions, but it wouldn't follow that this solution is unconstitutional.

Is that law a Cyprus law, and EU law, a Bank law, a Global law?

the relevant systems of law are cyprus law and EU law.

EDIT: european human rights law also applies. but i can't see it ruling against this kind of thing, for the same reasons i can't see it being ruled unconstitutional.

kidmugsy

talexuser wrote: »

So big banks need government bailouts from the taxpayer -

No, there was no "need" about it; it was just that a socialist government lost its head, and consequently a pile of taxpayers' money.

jimjames

What the current Cyprus situation does show is that if a government did want to leave the Euro or was forced out then it is entirely feasible to shutdown the banking system for more than a week and only allow minimal cash point transactions.

Prior to this I don't think anyone quite believed that it could be done like that or would be so easy to switch off. The last week has shown that it is possible overnight and apparently without any new laws.