The Irish Times has a special feature on this issue today – here.
Month: March 2013
Some comments made today by Eurogroup President Jeroen Dijsselbloem reported here are worth reading.
We should aim at a situation where we will never need to even consider direct recapitalisation…If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller
Now we’re going down the bail-in track and I’m pretty confident that the markets will see this as a sensible, very concentrated and direct approach instead of a more general approach…It will force all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realise that it may also hurt them. The risks might come towards them.
A subsequently released statement suggested some draw back from his earlier comments.
Cyprus is a specific case with exceptional challenges which required the bail-in measures we have agreed upon yesterday.
Macro-economic adjustment programmes are tailor-made to the situation of the country concerned and no models or templates are used.
Co-organizer John Cotter and I are pleased to announce a superb line-up of speakers for the FMC2 half-day conference on bank resolutions mechanisms on Thursday, May 23rd at the Irish Institute of Bankers. To sign up for attendance at the conference, please contact Irene.ward@ucd.ie. Admission is free.
A genuine question, to which many reasonable answers are no doubt possible:
If this is the cost of leaving the Euro, then what is the opportunity cost of Cyprus leaving the Euro now?
(I mean the opportunity cost to Cyprus, not the rest of us, which is the only thing that should concern Cypriots in a union where it is every nation for itself.)
The Eurogroup statement following last night’s meeting on Cyprus can be read here.
Laiki bank is going to put into resolution with shareholders, bondholders and uninsured depositors taking the hit. The losses for depositors will be determined over the coming weeks but could be up to 40%.
Insured deposits of less than €100,000 will be moved to the Bank of Cyprus. Bank of Cyprus will be recapitalised via a debt-for-equity swap with bondholders and uninsured depositors. Junior bonds will be cut.
The official loans to be provided remain at €10 billion though no contribution from the IMF is currently in place. Some financial assistance from Russia is expected. Capital controls will be implemented.
This agreement does not require a vote in the Cypriot parliament and, although not confirmed, it is likely that the amount to be raised from the banking measures is greater than €5.8 billion. All insured deposits of less than €100,000 will be protected.
So how does Plan B compare to Plan A?