Source via ZH is JP Morgan. So I can’t rate the level of bullshit myself as I am biased by how they treated Tesla via Westhinghouse.
With the Cypriot government still ‘undecided’ about what to ‘take’ and the European leaders very much ‘decided’ about what to ‘give’, the fact of the matter is, as JPMorgan explains in this excellent summary of the state of affairs in Europe, that because ELA funding facility is limited by the availability of collateral (and the haircuts applied to those by the central bank), and cutting the Cypriot banking system completely from ELA access is equivalent to cutting it from the Eurosystem making an exit from the euro a matter of time. This makes it inevitable that capital controls and a capital freeze will be imposed, in their view, but it is not only bank deposits that are at risk. A broader retrenchment in funding markets is possible given the confusion and inconsistency last weekend’s decision created for investors relative to previous policy decisions. Add to this the move by Spain, which announced this week a tax or bank levy (probably 0.2%) to be imposed on bank deposits, without details on which deposits will be affected or timing, and the chance of sparking much broader deposit outflows across the union are rising quickly.
zerohedge.com/news/2013-03-2 … l-controls
LMAO.
Let it go, OW.
Has anyone come across a story that the EZ has instigated or is looking to instigate capital controls between all banks over the weekends so as to avoid the money flow during this period to allow EZ meetings get on top of “things”?
Scaremongering.
Cyprus is less than 0.5% of Eurozone economic activity…
tulip
March 26, 2013, 3:31pm
#5
Will most of Christendom banking institutions be closed this long weekend what with it being the big lads big festival? It’d be a de-facto capital control for four days for most plebs in that case would it not?
Nope, I’m trying to track down the info to see if it’s a garbled recollection or actual story from the person who related it to me. I said I’d search on the net. I haven’t found anything yet.
It’s clear all members are not equal. That’s fine. As long as everyone is clear. The nature of things couldn’t be clearer if you ask me these last few weeks and days for those who have up to this point not believed. Another bubble just popped, a black bubble if you ask me the kind maybe created by a black swan farting.
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives 77/91/EEC and 82/891/EC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2010
eur-lex.europa.eu/LexUriServ/Lex … FIN:EN:PDF
(Search the above for bail-in)
CONSOLIDATED VERSION OF THE TREATY ON THE FUNCTIONING OF THE EUROPEAN UNION -> eur-lex.europa.eu/LexUriServ/Lex … 199:en:PDF
CHAPTER 4 CAPITAL AND PAYMENTS
Article 63
Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.
Within the framework of the provisions set out in this Chapter, all restrictions on payments between Member States and between Member States and third countries shall be prohibited.
Article 64
The provisions of Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment — including in real estate — establishment, the provision of financial services or the admission of securities to capital markets. In respect of restrictions existing under national law in Bulgaria, Estonia and Hungary, the relevant date shall be 31 December 1999.
Whilst endeavouring to achieve the objective of free movement of capital between Member States and third countries to the greatest extent possible and without prejudice to the other Chapters of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall adopt the measures on the movement of capital to or from third countries
Notwithstanding paragraph 2, only the Council, acting in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament, adopt measures which constitute a step backwards in Union law as regards the liberalisation of the movement of capital to or from third countries.
Article 65
The provisions of Article 63 shall be without prejudice to the right of Member States:
(b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security.
The provisions of this Chapter shall be without prejudice to the applicability of restrictions on the right of establishment which are compatible with the Treaties.
The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63.
In the absence of measures pursuant to Article 64(3), the Commission or, in the absence of a Commission decision within three months from the request of the Member State concerned, the Council, may adopt a decision stating that restrictive tax measures adopted by a Member State concerning one or more third countries are to be considered compatible with the Treaties in so far as they are justified by one of the objectives of the Union and compatible with the proper functioning of the internal market. The Council shall act unanimously on application by a Member State.
there is more
See article 63 and 65 of the Lisbon treaty above.
I’ve heard from two directions (one from within Latvia and one not) that Latvia has been warned not to accept inflows from Cyprus.
Political pressure used to influence the flow of capital. Well I never!
Good point!
From ZH taken from a Credit Suisse report
With the aforementioned template in place and the necessity of a second bailout looking likely as a result of the economic shock currently rippling through the country, depositors are strongly incentivised to take out their money as soon as capital controls were to be lifted.
more here >>> zerohedge.com/news/2013-03-2 … o-not-euro
Europe’s Disturbing Precedent in the Cyprus Bailout - George Friedman -> stratfor.com/weekly/europes- … us-bailout
The question, of course, is whether foreign depositors in European banks will accept that Cyprus was one of a kind. If they decide that it isn’t obvious,** then foreign corporations – and even European corporations – could start pulling at least part of their cash out of European banks and putting it elsewhere**. They can minimize the amount of cash on hand in Europe by shifting to non-European banks and transferring as needed. Those withdrawals, if they occur, could create a massive liquidity crisis in Europe. At the very least, every reasonable CFO will now assume that the risk in Europe has risen and that an eye needs to be kept on the financial health of institutions where they have deposits. In Europe, depositing money in a bank is no longer a no-brainer.
Now we must ask ourselves why the Germans would have created this risk. One answer is that they were confident they could convince depositors that Cyprus was one of a kind and not to be repeated. The other answer was that they had no choice. The first explanation was undermined March 25, when Eurogroup President Jeroen Dijsselbloem said that the model used in Cyprus could be used in future bank bailouts. Locked in by an electorate that does not fully understand Germany’s vulnerability, the German government decided it had to take a hard line on Cyprus regardless of risk. Or Germany may be preparing a new strategy for the management of the European financial crisis. The banking system in Europe is too big to salvage if it comes to a serious crisis. Any solution will involve the loss of depositors’ money. Contemplating that concept could lead to a run on banks that would trigger the crisis Europe fears. Solving a crisis and guaranteeing depositors may be seen as having impossible consequences. Setting the precedent in Cyprus has the advantage of not appearing to be a precedent.
there is more
MORGAN STANLEY: Cyprus Is No Longer A Full Member Of The Eurozone -> businessinsider.com/morgan-s … one-2013-3
In a note, Morgan Stanley’s Daniele Antonucci makes the same point:
“On the probability of eurozone exit: In turn, this has implications for the probability of a eurozone exit. It looks like the eurozone policymakers are keen to keep Cyprus in the eurozone, even though, as a result of these capital controls,** Cyprus is effectively no longer a full member of the eurozone**. In other words, while it formally stays within the currency union, a euro in a bank deposit in Cyprus is not the same as a euro in another member country. Only once all capital controls are lifted again will Cyprus’ full euro membership be restored. Just to make a parallel, in the case of Greece at the worst of the crisis after the first, inconclusive political election last year, we roughly estimated the probability of a eurozone exit at around 30%.”
Deposit Flight from Cyprus Continues – despite Capital Controls - -> navigator-consulting.com/art … ontrols/28
Navigator Consulting is a Bank of Cyprus customer, and I can confirm from personal experience (and the experience of some friends) that:
International visa payments on items like hotel bills have been permitted in full
Cash withdrawals in certain countries, such as Germany, have been permitted apparently without restrictions.
ZeroHedge provides the best conclusion , with its customary candor:
*The stealth withdrawals by Russians of course means that the two megabanks are now utterly drained of capital, and that the haircuts on those who still have unsecured deposits with the two banks will be so big it will likely mean a complete wipeout of all deposits. As in 0% recovery on your deposits! *
there is more
dipole
March 28, 2013, 9:27am
#16
At the moment I am earning .4% on my deposits and my Sparkasse rep is trying to get me to move to another account which will pay the princely sum of .6%askaboutmoney.com/showthread.php?t=101813 and I see PTSB is offering 3.06%.
If capital controls became commonplace, not just in exceptional circumstances then my money could be stuck in Ireland and I could only watch on helplessly as Noonan, Kenny and Gilmore manoevered to steal it from me.
I’ve ordered an extra few Grannies from ebay to increase my short term capital flow handling capacity.
Statement by the European Commission on the capital controls imposed by the Republic of Cyprus - -> europa.eu/rapid/press-release_IP-13-298_en.htm
The Commission takes note of temporary restrictions on the free movement of capital, including capital controls, imposed by the Republic of Cyprus as part of a series of measures to prevent the significant risk of uncontrollable outflow of deposits which would lead to the collapse of the credit institutions and to the immediate risk of complete destabilisation of the financial system of Cyprus.
As guardian of the Treaties and to safeguard the integrity of the single market, the Commission made a preliminary assessment of the Cypriot law and relevant decree under the rules on the free movement of capital set out in Articles 63 et seq. of the Treaty on the Functioning of the European Union.
Member States may introduce restrictions on capital movement, including capital controls, in certain circumstances and under strict conditions on grounds of public policy or public security. In accordance with the case law of the European Court of Justice, measures may also be introduced for overriding reasons of general public interest.
Such exception to the principle of the free movement of capital must be interpreted very strictly and be non-discriminatory, suitable, proportionate and applied for the shortest possible period.there is more
tulip
March 28, 2013, 11:00am
#19
On another thread, I think it was BoyRacer posted a link saying that CFOs in Irish multinationals have been doing the Russian Granny for a while now every Friday.
Tolka
March 28, 2013, 7:02pm
#20
Member States may introduce restrictions on capital movement, including capital controls, in certain circumstances and under strict conditions on grounds of public policy or public security. In accordance with the case law of the European Court of Justice, measures may also be introduced for overriding reasons of general public interest.
OK, let me see if i got this straight. The Public wants their money back, and we need capital controls to protect the public from themselves.
