In “Big depositors in Cyprus to lose far more than feared, Reuters reported that,
“Big depositors in Cyprus’s largest bank stand to lose far more than initially feared under a European Union rescue package to save the island from bankruptcy, a source with direct knowledge of the terms said on Friday.
“Under conditions expected to be announced on Saturday, depositors in Bank of Cyprus will get shares in the bank worth 37.5 percent of their deposits over 100,000 euros, the source told Reuters, while the rest of their deposits may never be paid back.”
That description of the terms for ending the Cyprus Crisis is not absolutely clear. However, I read that description to mean that anyone with over 100,000 euros in a Cyprus bank may lose 100% of his savings, but will receive shares in the newly recapitalized bank (recapitalized with his savings) equivalent to 37.5% of the value of his savings. Thus, the depositor may be forced to buy stock he doesn’t want in his own failing bank with 37.5% of his savings, and then be forced to effectively donate the other 62.5% to capitalizing that same failing bank.
You can use all the fancy words you want to justify that confiscation, but the confiscation differs from outright theft only in the fact that the Cyprus government—being a co-conspirator in that theft—has sanctioned that theft by law as “legal”.
Does that taking inspire your confidence in your bank?
If bankers can seize depositors’ funds in Cyprus, can they do it here in the US?