European Finance Ministers states Cyprius bailout now a template

ILW

CLAPTON wrote: »

Once upon a time there were places that would look after your money for you.
They would simply lock it up in a safe.
They would charge you a small fee for keeping your money safe.
The depositors could always guarantee getting their money back because this place didn't lend out the money; they simply stored it in their safes.
They had a name called Trust Banks.


After a while they changed and offered to pay interest on the money rather than charging a fee.
So now people lent the bank the money and received interest.
The bank then lent out the money for interest to other people.
Of course the bank could no long guarantee to be able to return all depositors money as it was lent out to other people

So we maybe need to reinvent trust banks that simply hold your money and charge you a fee.

Safety deposit boxes are still available at many banks.

Rotor

I think the word that has been missing from this discussion is CONTAGION.
There can't be many banks on the planet that can survive if depositors withdraw their money yet, if this becomes a blueprint for the future, this will shatter the confidence of depositors and encourage volitility.

it is a prescription to reward those most trigger happy because those who act fastest get their money out, the rest lose.
A maliciour rumour would be more than enough to start a run which then becomes self fulfilling as people withdraw 'just incase'.

This is the justification for taxpayer guarantees; the alternative could cost society far more.

grizzly1911

ILW wrote: »

Safety deposit boxes are still available at many banks.

Do the high street ones still do it, on site?

Those that did used to charge a fee to use them.

grizzly1911

CLAPTON wrote: »

Once upon a time there were places that would look after your money for you.
They would simply lock it up in a safe.
They would charge you a small fee for keeping your money safe.
The depositors could always guarantee getting their money back because this place didn't lend out the money; they simply stored it in their safes.
They had a name called Trust Banks.


After a while they changed and offered to pay interest on the money rather than charging a fee.
So now people lent the bank the money and received interest.
The bank then lent out the money for interest to other people.
Of course the bank could no long guarantee to be able to return all depositors money as it was lent out to other people

So we maybe need to reinvent trust banks that simply hold your money and charge you a fee.

Trustee Savings bank was effectively underwritte by the government. Cheap source of funds of government?

No public shareholders to satisfy.

wotsthat

grizzly1911 wrote: »

Do the high street ones still do it, on site?

Those that did used to charge a fee to use them.

I looked a couple of years ago but high street banks have effectively exited the market.

Metrobank have them available but London only

There are private operators too - I was less than convinced.

CLAPTON

Rotor wrote: »

I think the word that has been missing from this discussion is CONTAGION.
There can't be many banks on the planet that can survive if depositors withdraw their money yet, if this becomes a blueprint for the future, this will shatter the confidence of depositors and encourage volitility.

it is a prescription to reward those most trigger happy because those who act fastest get their money out, the rest lose.
A maliciour rumour would be more than enough to start a run which then becomes self fulfilling as people withdraw 'just incase'.

This is the justification for taxpayer guarantees; the alternative could cost society far more.

This is of course correct. It now seems very likely that now one rumour will move the market as happened when Northern Rock failed ( and before we believed the government would always bail us out).

Unfortunately issues with Cyprus were left to vester until something had to be done.
Basically Cyprus turned itself into a vast money laundering operation for the Russian mafi a and then had the audacity to go bankrupt.

The EU ought to have confronted the situation long ago; it was hardly a well kept secret.

But they didn't do that so we are now where we are.

Rotor

I'm not sure where the money came from had any effect on Cyprus ; a deposit is a deposit. It was the bank's investments ( particularly greek bonds and the associated haircut)that skewered them

CLAPTON

Rotor wrote: »

I'm not sure where the money came from had any effect on Cyprus ; a deposit is a deposit. It was the bank's investments ( particularly greek bonds and the associated haircut)that skewered them

The main effect on the inflow of money was lots of jobs and lots of money for investment so everything was rosey for a while.

However the EU didn't like all that laundered money but did nothing until the opportunity arose.

Of course it was the bad loans that brought down the whole ediface but the laundering was probably why the EU didn't bail out a small little country.