Tuesday, March 26, 2013

A Haircut for Bank Depositors in Italy, Spain and Greece?

The Telegraph is reporting that "[s]avings accounts in Spain, Italy and other European countries will be raided if needed to preserve Europe's single currency by propping up failing banks, a senior eurozone official has announced." 
The euro fell on global markets after Jeroen Dijsselbloem, the Dutch chairman of the eurozone, announced that the heavy losses inflicted on depositors in Cyprus would be the template for future banking crises across Europe.
"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'," he said.

"If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders."

Ditching a three-year-old policy of protecting senior bondholders and large depositors, over €100,000, in banks, Mr Dijsselbloem argued that the lack of market contagion surrounding Cyprus showed that private investors could now be hit to pay for bad banking debts.
As an aside, the article also notes that banks in Cyprus will remain closed until Thursday. (See also here). My guess is that they want to avoid a bank run, and want the time to arrange the "capital controls" that will be imposed in Cyprus and, perhaps, throughout the EU, to prevent deposits being transferred to other countries.

No comments:

Post a Comment