“My bank account's got robbed by European Commission. Over 700k is lost.”

https://bitcointalk.org/index.php?topic=160292

by heelhook • 13 years ago

135 164 13 years ago

bitcointalk.org

cinquemb6• 13 years ago

I wonder if the FDIC can cover US deposits with leverage of 371:1… :P

niggler2• 13 years ago

The unlimited FDIC protection ended December 31 2012. It's back to the 250K

cinquemb6• 13 years ago

Correct, and since MF global showed us where deposits lie on the totem pole compared to derivative exposure, i'm quite excited to see whats next when [insert bank here] needs to meet its margin calls :P

Samuel_Michon6• 13 years ago

Comment #7 in that thread says it all:

“So you trusted a small tax haven island with your money. The plan failed. Your next step: trusting even smaller tax haven island with your money. Pure logic.”

qdog5• 13 years ago

Yeah...funny thing is blaming the EU. The banks were lending out the money on what turned out to be bad assets, not sure there's any cure for that where deposits don't get wrecked.

Iceland before, Cyprus now, not sure what they think will happen to Carribean banks in the long run. Bitcoin might be an ok solution for people who don't care about earning interest, but if you still want the interest you have to deal with a lending institution.

natermer• 13 years ago

Most banks have 'negative interest'.

Not only because the interest rates they offer for savings and checking accounts no where near is able to keep up with real inflation (which means you lose money by saving, from the get-go), but they charge as many service fees as they feel they can get away with.

cinquemb6• 13 years ago

even funnier thing is thinking that these haircuts are gonna do much…

the template according to troika is to do more of the same :D

granted the only future i see in bitcoins is in actual business transactions and not earnings interests,which with typical fiat are subject to the whims of ZIRP and central m̶a̶n̶i̶p̶u̶l̶a̶t̶i̶o̶n̶ planning :D (which [number of business transactions with bitcoins for goods or services] has gone up these couple of years if you look beyond the hype)

and the fact that it would be pretty hard for .gov reallocate funds in a .dat :P

zwegner• 13 years ago

The OP seems to imply later in the thread that the company is based in Cyprus:

"I've already sold a part of my bitcoins to cover emergency needs. But I don't plan to recover my business in Cyprus. Instead, I'm moving to another country outside EU."

Samuel_Michon6• 13 years ago

In several comments he talks about Russians being victimized. He also states he'll be moving his company to a small Caribbean country, while he describes it as a “European medium size IT business”. So his company may be registered in Cyprus (and in the future, somewhere in the Caribbean), it's likely that that's not where the activity happens. (How large do you think the market for IT services is on Cyprus or on Caribbean islands? And if you had a medium size IT business, would you suddenly move all your employees to the other side of the globe, where you have no clients?)

jbellis2• 13 years ago

Looks to me more like 700k was blocked as part of the capital controls to prevent a bank run. The actual amount to be seized will be much smaller. Cold comfort, I know.

SoftwareMaven• 13 years ago

Doesn't sound like it[1]. It looks like it is 700k gone.

1. http://greece.greekreporter.com/2013/03/27/cyprus-finance-mi...

jbellis2• 13 years ago

Oops, you're right, this is CPB. He's screwed.

kyllo• 13 years ago

It appears that they are actually having a bank run, but they limited daily withdrawals to 300 Euros per person. The banks have been closed since the 16th and just reopened today with these new restrictions. Cyprus is in a state of financial emergency.

http://metro.co.uk/2013/03/28/gallery-people-line-up-outside...

niggler2• 13 years ago

This fellow is using Laiki bank, and the Cyprus Finance Minister said that they would be seeing an 80% haircut.

Relevant: https://twitter.com/finansakrobat/status/316813023639646208

gurvinder10• 13 years ago

Not 80% haircut. You will get only 100k Euros which is insured, rest is all gone. Bank is being dissolved.

uvdiv• 13 years ago

Cyprus's finance minister said Tuesday that large deposit holders at Cyprus Popular Bank PCL (CPB.CP), the island's second biggest lender, could face losses of as much as 80% on their deposits as the government moves to wind down its operations.

Speaking in a television interview with state broadcaster RIC, Michalis Sarris indicated that it could also take years before those depositors see any of their money returned.

"Realistically, very little will be returned," Mr. Sarris said.

http://www.foxbusiness.com/news/2013/03/26/cyprus-finance-mi...

Samuel_Michon6• 13 years ago

Apparently he didn't read up on deposit insurance. In most EU countries, anything over Euro 100,000 is not safe.

http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country

hackerboos• 13 years ago

Other than convenience why wouldn't you open several bank accounts?

pliny4• 13 years ago

>I'm not Russian oligarch, but just European medium size IT business

I fail to see the difference, honestly.

The OP, by running a business within a society where many services essential to that business are provided by the government and paid for by the citizens and businesses within that society, profited directly from other people's taxes - but refused to contribute.

I feel about as bad for him as I do for any of the other gangsters, Russian or otherwise.

mkdir• 13 years ago

I'm not sure why, but natermer's past several posts are all dead.

He wrote:

> The people running the government, which uses the taxes to secure loans that they have no intention on paying back, in order to prop up a failing economy that is failing because of the rules and regulations that are setup to maximize the illigit profit for said people running government.. those are the real gangsters.

> Most large state governments amount to little more then just legalized mafias. Ran by political and family dynasties serving the purposes of whoever is capable of providing them the most money and power.

> IMHO, paying as little taxes as possible is a moral imperative.

pliny4• 13 years ago

I don't know what country OP lives in specifically, but what you quoted is wrong for the majority of European countries, who are neither tyrannical nor are they run by 'political and family dynasties'.

Perhaps whoever you quoted was making a good case for not cooperating (taxes or otherwise) with tyrannical governments, but the situation in most European countries is that the government is democratic, progressive, and operates in the interests of it's citizens more than it does in the interests of the politicians themselves.

The OP, unfortunately, doesn't get a choice of operating within a system where he benefits greatly from other people's effort and also paying taxes OR doing neither, he only gets to choose whether to contribute to a system that profits him massively or not. While choosing not to contribute, which is what OP did, is not technically stealing, it's ethically equivalent - I present as rationale the Kantian argument - if nobody paid taxes it is obvious that (within European countries) everybody would be worse off than if everybody paid taxes, therefore it is unethical for a single person to not pay taxes.

sbierwagen• 13 years ago

  I'm not sure why, but natermer's past several posts are all dead.

He was hellbanned in this thread: https://news.ycombinator.com/item?id=4276766

gurvinder10• 13 years ago

"but refused to contribute." - Where did you get this? Why you say he refused to contribute?

He had operations in Cyprus with employees in Cyprus, He was not operating in one country while using bank accounts of Cyprus.

pliny4• 13 years ago

I read some other pages in that thread and I think you are right, I assumed that since he claimed he would move his money to an account in the Caribbeans that the Cyprus account was used for tax evasion.

If he is a Cypriot, or his account was used for managing a business in Cyprus rather than avoiding taxes in his home state, then he was just a victim of bad politics and bad financial management.

rayiner5• 13 years ago

Yes, blame Angela Merkel and not the bank executives at your bank that loaded up on Greek debt while Greece was careening towards insolvency.

I appreciate the PR nightmare here for the E.C. People are going to be madder at the E.C. for wiping out depositors at this unviable bank than they would have if the E.C. just let the whole Cypriot banking sector collapse and let everyone lose their money.

See: http://online.wsj.com/article/SB1000142412788732350100457838...

cynicalkane• 13 years ago

Blaming evil banks and profligate creditors while tightening the money supply wasn't a particularly fruitful thing to do the last time there was a global economic crisis, and a whole lot of modern macro was about not repeating that mistake.

Then the world goes around and repeats the same offenses, and the public once again buys the easy, moralistic stories. Bleh.

The fact of the matter is that the Eurozone is a bad idea, a lot of economists said it was a bad idea, and now they're seeing their predictions come true. For each European financial disaster it's easy to blame some convenient cause, but eventually you have to ask: what is it about the Eurozone that is so good at precipitating financial crises? As banks collapsed and massive financial contagion in America was uncovered, did anyone in 2007-08 (besides a small number of monetary-inclined economists) think the very Euro would be threatened again, and again, and again, as America lurched along in limp but definite recovery?

To paraphrase Bill Clinton: it's the money, stupid. The Eurozone is structured to suck the money out of peripheral economies in times of crisis, which then seize up like an engine starved of oil. The best banking system in the world cannot survive if all its money disappears. Cyprus does not have the best banking system in the world, so I guess they're worse off.

frozenport• 13 years ago

The Eurozone is structured to suck the money out of peripheral economies in times of crisis

It seems like Greece is doing much of the sucking, much to the chagrin of their stern German neighbors.

I don't see the Euro as structurally deficient, I really think this problem is a due to Greek culture in the early 2000s being incompatible with the EU. Remember that Cyprus is a very small country, being half the size of Pittsburgh.

I think many people forget why the Euro exists. It exists to grow trade and foster connections between European countries, and it serves to level them and their societies. This is a social agenda. If Greece stays in the Euro their culture will have changed for the better.

rmp21502• 13 years ago

The events unfolding in the Eurozone is the result of it being only a monetary union instead of a fiscal and monetary union. Milton Friedman predicted this would happen in '04.

MaysonL• 13 years ago

The euro crisis is in essence a balance of payments crisis: Germany persistently ran balance of payments surplus with its euro partners, and their banks kept lending the surplus to their peripheral neighbors to fund their balance of payments deficits.

Joeri• 13 years ago

The main problem of the eurozone is that debt is not centrally managed. If debt were centrally managed, it would be centrally regulated, and the current crises would have had a lower likelihood. Although to be fair, the U.S. debt is centrally managed, and that didn't seem to help much 5 years ago.

btilly• 13 years ago

Cyprus did not just load up on Greek debt because they were seeking risky loans. They loaded up back when nobody was particularly aware that there was a fundamental problem in Greece because it is easy for a country that is full of ethnic Greeks who speak Greek and are right next to Greece to be aware of opportunities to invest in Greece.

When the Greek problems became obvious, they had no easy way to divest themselves of that debt because nobody wanted it. And when the EU decided (without Cyprus having any say about it) that the bailout would involve a 50% haircut for privately held bonds, Cyprus was hosed.

It seems to me that the biggest sin that Cyprus committed was being in the wrong people (Greeks) in the wrong place (right next to Greece) at the wrong time (when Greece was diving off an economic cliff).

nekojima2• 13 years ago

These banks were paying unsustainable high rates of interest to depositors, and to earn enough to cover their obligations, the banks invested in higher risk government and corporate bonds paying higher rates of interest. The dangers of a Greek debt collapse have been known since before they joined the Euro, this is why Greece's interest rates were higher than Germany's for many years before the crisis.

Turkish Cypriots must be very happy now that the Greek Cypriots rejected the peace settlement in 2004. Otherwise, they'd likely be bankrupt too.

wladimir• 13 years ago

AFAIK that's already more than was lost in any of the bitcoin heists...

nateabele• 13 years ago

One possible upshot of this is that maybe people will actually start paying attention to how their home banks are capitalized. What's their reserve ratio? What are their major investments? Have those investments been rated by independent agencies?

Schemes like the FDIC (which, as mentioned in a previous comment, can change the rules at any time) only serve to dumb us down and encourage bad behavior; firstly by lulling depositors into a false sense of security, and secondly by eliminating the incentive to be prudent and appropriately risk-averse.

bayesianhorse9• 13 years ago

People don't actually need to pay attention to that. Most banks in the European Union are already watched and have regulations up their collective funnels to avoid exactly these kinds of problems. The only mitigation strategy neccessary is to split your cash assets in multiple accounts...

And of course, if you partake in a well-functioning state, which protects your rights against all sorts of problems, educates your workforce, regulates your food and healthcare, you might consider the taxes a bargain.

aaron695• 13 years ago

Putting money in an uninsured bank is an investment the same stocks or property.

If the asset you invest in fails you lose your money.

Don't see how this is the European Commission robbing anyone.

I thought (But could be wrong) without the bailout all the money would be lost. Isn't this them giving someone who's lost it all 20% of their money back?

brigade• 13 years ago

€100,000 was insured. If you want to go along that line of thinking, then he currently has access to less than 4% of the uninsured money.

gurvinder10• 13 years ago

As far as I understood , no part of uninsured money will be left for him.

Insurance is for Euro 100k, and he has a Dollar Account, that is why he will get only $128k based on the exchange rate.

gurvinder10• 13 years ago

So where you suggest people should keep their money if the only insurance they can get for their deposit is Euro 100k ? Matresses? Safes?

Bailout or no bailout, all money in Laikie is lost except what was insured.

Some interesting points 1) Laikie bank also had a loan of 9 Billion from ECB, that won't be written off , even though depositor's money is written off. That loan will be transferred to Bank of Cyprus. 2) Out of this 9 Billion half was used by Greek branches which are not effected as sold to a greek bank, even then Bank of Cyprus will have to pay full 9 Billion. 3) If you had a mortgage with same bank for 300k , and had 300k Deposit, only Deposit will be reduced to 100k , but you will still owe the bank 300k loan, as they are transferring all good loans to Bank of Cyprus.

I can go on with more points to prove that its unfair politics just to give a message to Rich Russians to send their money to Germany instead of keeping it in Cyprus.

After the crisis, German banks are trying to put full page Ads in Cypriot newspapers both in English and Russian saying that their money will be safer in Germany!!!

X-Istence• 13 years ago

The same thing is the case here in the US. FDIC insures up to 250k. After that you are liable to lose it if the bank goes tits up.

In this case, the bank went tits up, he got his 100k EUR back from insurance.

As for mortgages and loans, those aren't insured to the bank either (unless underwritten by the gov't ...), so if YOU go bankrupt the bank is out that money. In most cases you have some equity backing that loan so even if you go bankrupt some part of the money can be recovered by for example selling your house.

wmt• 13 years ago

What is the poster suggesting? EC should've stayed out and let the banks go bankrupt?

Oh I know, they should've just covered all the tax haven banks losses.

gurvinder10• 13 years ago

EC should have treated Cyprus in same manner they treat other countries which are part of Euro Zone. If they can bail out Greece without a haircut which actually caused crisis in Cyprus, why do this against Cyprus? Also it might be a tax haven for others , but for Cypriots its their country. And this haircut is applied to everybody who has deposits in the Cypriot branches of Laikie bank but Same bank has branches in Greece and people with deposits in Greek branches won't suffer.

bayesianhorse9• 13 years ago

Cypriots had continously higher interest rates on their deposits than other Europeans. The small levy wouldn't even have eaten up these profits which are essentially due to tax havenry and unsound business practices on a country wide scale. No pity there...

Even if the 7% levy was all hard-earned money instead of too high interest rate profits, this would have hardly bankrupted more than a few depositors which were in dire straits already.

megablast• 13 years ago

Why should they be treated the same when they are clearly not the same.

nekojima2• 13 years ago

It appears this is a current/chequing/checking account rather than the savings/deposit accounts that were originally reported to be subject to the special tax and which pay the ridiculous levels of interest (10%+).

The impact on local business is already being felt, both consumption & payment of supplies & salaries (and soon tax remittance), and imports will suffer significantly in the coming days and weeks too. Exports may well be paid for and the funds remain outside of Cyprus, further creating problems for the economy, as it goes almost all-cash and tax is evaded too. Credit card balances can not be paid off for now either.

It will be interesting to see how Russian mobsters (and various shades of business people) react to having millions/billions taken from them. I'd not want to be a Cypriot politician or banker having to say no to these guys.

InclinedPlane• 13 years ago

It's your fault for using such a bad bank. Just use paypal instead.

Samuel_Michon6• 13 years ago

By the by, doesn't that bank logo look kind of familiar? Engadget's logo was inspired by the RSS logo, but this one doesn't even try to be original.

http://i.imgur.com/WKZEMiQ.png

pbhjpbhj• 13 years ago

It's not an especially unique form http://www.gnsegroup.com/images/logo/TelemedLogo02_News.jpg. Do you think Engadget did it first?

JumpCrisscross4• 13 years ago

When you deposit money in a bank you become a protected senior creditor, but creditor nonetheleas, to the bank. The government insures the first €100 000 or $250 000 against losses, but that guarantee is only as good as the government.

Jeroen Dijsselbloem, president of the eurogroup, told the FT as the bailout was announced:

“If we want to have a healthy, sound financial sector, the only way is to say: ‘Look, where you take the risks, you must deal with them, and if you can’t deal with them you shouldn’t have taken them on and the consequence might be that it is end of story.' That’s an approach that I think we, now that we are out of the heat of the crisis, should consequently take." [1]

If you want a dollar asset as close to risk free as possible, buy Treasuries. If you are afraid of inflation buy inflation-protected Treasuries, TIPS.

Not Bitcoins? No, not Bitcoins. The purchasing power of your savings has a higher probability of being retained when backed by the full faith and credit of the U.S. government than a cryptocurrency. This may very well change, but it is not the case today, particularly if you pay your bills and buy your food in dollars. Speculate in Bitcoins, use them to transact if you must, and perhaps participate them as a form of activism, but do not convince yourself that you are George Sorosing the global financial system.

[1] http://www.ft.com/intl/cms/s/0/68c9c18e-955e-11e2-a151-00144...

cinquemb6• 13 years ago

so you must also think highly #DieselBoom and his templates? :P

adventured3• 13 years ago

No, don't buy treasuries. Getting back inflation destroyed dollars is not risk free, in fact you're getting defrauded because you're not actually getting your money back at all.

A quick check on what dollars will buy (the true judge of the value of a currency), spanning 10, 20, 30, 50, 100 years tells you everything you need to know about the destruction your capital will suffer while yielding almost nothing to offset the devaluation. And now the Fed is working harder than ever before to abuse the global reserve FRN standard.

Now is the absolute worst time possible to buy treasuries. The era of cheap money is coming to a close with a frantic flailing about of currency devaluations, binge stimulus, bailouts, and robberies. Anybody that claims hyper cheap money lasts forever, is selling a pipedream (which may be accompanied with the words: it's different this time).

bayesianhorse9• 13 years ago

That's plain wrong. You don't buy treasury bonds unless you know the interest rate. Even after all the bail outs, all the crisis and despite rising government debt there is no safer investment.

It's just usually not used as the sole investment, but rather the safest position in portfolio...

gurvinder10• 13 years ago

"When you deposit money in a bank you become a protected senior creditor, but creditor nonetheleas, to the bank."

This might be true when you put your money in savings account, and are earning an interest on it. But what if you are paying the bank for keeping your money safe, and paying them recurring fees to operate a current account which doesn't earn any interest? Most businesses need an operating account to pay for day to day expenses. And current account should be treated like SAFES, as bank is actually charging money for them and not paying any interests.

bitcartel2• 13 years ago

When push comes to shove, the deposit guarantee may not protect your money.

"Back in December 2012 the FDIC and the BoE published a joint paper outlining their new approach for how to resolve any future collapse of one of the Too-Big-To-Fail banks...

'deposit guarantee schemes may be required to contribute to the recapitalization of the firm'[1][2]

...the new system raids the Deposit Protection scheme, gives it to the bank instead of you and when that fails to save the bank…then what? The bank fails again and there is no money left in the Deposit Guarantee scheme."

[1] http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-b...

[2] http://www.bankofengland.co.uk/publications/Documents/news/2...

JumpCrisscross4• 13 years ago

"deposit guarantee schemes may be required to contribute to the recapitalization of the firm"

Saying the deposit guarantee scheme may have to contribute means the bank may not have sufficient assets to cover insured deposits and so deposit insurance funds may have to make up the difference. When your house in Staten Island gets razed by Sandy, the insurance company pays up. Similarly, if an insured bank is unable to come up with enough cash to cover insured deposits, the FDIC has to pony up.

The worst case for FDIC insured deposits is you getting a cheque from the FDIC. If JPMorgan Chase goes under with worthless assets and busts the FDIC, you're still in luck since the federal government backstops your deposit insurance, and unlike Cyprus, the U.S. can print dollars.

Shenglong• 13 years ago

Background and summary (forgive me if some details need correcting):

Cyprus is a tiny country with a GDP not much higher than Tim Hortons. Yet, it had something like 150 billion in private funds stored in two of its banks: the Bank of Cyprus and Lakie. Why? Because the majority of the funds (I am generalizing) belongs/belonged to Russians who took advantage of the people on the conversion out of communism (dirty money). As North Americans have Swiss bank accounts, the Russians have Cyprus. Obviously, other people have their money in here too.

Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece. As a result, the banks lost a ton of money, and are on the verge of making the country insolvent. The IMF said the government needed to come up with a large amount of money.

At first they tried to pass a bill that would skim 10% off all Cyprus bank accounts that had over 10k Euros. There was unimaginable outrage, because as you can guess, that affects a good portion of the population. In response, they changed the bill to only affect those with over 100k Euros. Interestingly, this time, mostly the Russian dirty money was affected, and there was not as much public outrage (stealing stolen money). As a result, now 30% of all bank accounts over 100k Euros are being seized.

All the North Americans probably don't realize why this is such a big deal. In North America, we have money in companies, hedge funds, etc. In Europe, from what I've been told, banks are the major (almost exclusive) depository. Thus, you can imagine that this is a much bigger deal.

pliny4• 13 years ago

>because a large portion of the Cyprus population are of Greek descent. Thus, when the banks were figuring out where to invest, a large portion of the funds went to Greece

What a responsible investment strategy.

'What should we invest all this Russian gangster money in?'

'Well, I like goat cheese.'

anigbrowl• 13 years ago

I suppose you think they should have sunk it all into aqueducts and amphitheaters.

fakeer• 13 years ago

So, if some country (and as you say Europe) where still primary mode of parking your earnings is banks what are other options to play safe in case such a seizure happens? Real estate is one I can see. What else? Gold, you will have to keep in a bank in the end. What about shares, aren't they somehow related to sth deposited in a bank? I mean, how do you safeguard your savings then?

fennecfoxen2• 13 years ago

You can always hold cash... of course, that's got its own risks (theft), and you're not immune from inflation...

Using something a store of value is essentially anticipating that someone will give you something valuable in the future. This holds whether that store of value is a promise from a bank (in your deposit account), or a government bond, or a commodity.

You can never be completely sure of the future. But some entities are much better about it than others.

qdog5• 13 years ago

There seems to be some confusion as to what a bank is on this board.

Every time you deposit say $1 with a bank, they lend out $.90 of it at interest for mortgages, payrolls, etc. It's these investments the bank makes that can (and do) wreck money. The government of the US and EU recognize this risk for most people is detrimental and offer insurance on the first 100,000 deposited.

The phrase "seized account" does not appear to be correct, more correct would be "The Cypriot banks lost something like 40% of all deposits and all depositors over the 100,000 insured mark have lost their investment."

Any deposit in a bank is still an investment, even if they don't pay interest, because banks don't just put all your coins and bills in a vault, they just mark you down as a number in their books. The risk you take is that government backing the deposit insurance AND the bank don't do something dumb. Banks are usually much more highly regulated than hedge funds, but a quick look at how often banks fail (the US has something like 800+ banks on the unnoficial FDIC watch list) should sober anyone up.

Hold physical money is the only not to be at risk of losing a deposit, and then you have to provide for security, and you sure aren't going to earn interest.

I'm not really enthusasiastic about bitcoins, but one could argue they solve the problem of trying to keep a bunch of wealth out of the risk of banks, without having to have a huge pile of physical currency/valuables.

rayiner5• 13 years ago

The idea of "safeguarded savings" is a conceptual abstraction. Think of a barter economy. I trade you a loaf of bread I baked for a haircut. Where did we get the idea that I should be able to bank that haircut, and come to you 10, 20 years later and still get that haircut? It's a view that comes from seeing money as something of intrinsic value, rather than what it really is: a proxy that decouples transactions in what would otherwise be a barter economy.

In nature, "savings" are subject to loss and decay. You "save" by building a house to live in or storing away grain--all those things are subject to deterioration, disaster, etc. Financializing it doesn't change that underlying fact.

auctiontheory• 13 years ago

> how do you safeguard your savings then?

If your savings are legal, and you don't mind paying taxes on them, you have many obvious choices.

If your savings are not legal, or if you want to escape paying taxes, then you have different choices and greater risk.

Finance is about one thing: risk versus reward, and in this case, the tradeoff was very clear. Any non-Cypriots who lost money in Cyprus are not as naïve as they would have us believe.

jlarocco2• 13 years ago

I haven't been following this too closely, but the impression I've got from the news media is that the vast majority of accounts with >100k Euros are there for tax avoidance and other shady purposes like you mention. It sucks that this guy's business lost money, but I have a hard time feeling too bad for him, if he (probably) only had the account there for tax avoidance purposes.

I'm curious what percentage of the accounts with >100k Euros actually belong to Cypriots. Those are the people who are really getting screwed.

NiekvdMaas• 13 years ago

It's true that the majority of these accounts are from foreign people, but that doesn't mean there is anything illegal with putting your money on a Cyprus bank account. Please note that Cyprus is part of the EU for a long time, and this way of tax avoiding (not evasion) is completely legal.

fennecfoxen2• 13 years ago

Cyprus's banks are more than just dumps for dirty Russian money. is a banking hub for a variety of entities who want to do business with Europe. They help western Europe and Russia (and, more recently, emerging markets) invest in each other, get stocks listed on each others' exchanges, comply with the applicable financial regulations, and things like that. They do lots of "financial services" and consulting.

Or they did, anyway.

Wikipedia: "As a result of the reforms in the past decade Cyprus has developed into one of the world's more important international business centers. In the years following perestroika it gained great popularity as a portal for investment from the West into Russia and Central and Eastern Europe."

vellum• 13 years ago

A lot of the Russians took their money out via loopholes.

http://www.spiegel.de/international/europe/cypriot-parliamen...

At the end of January, some 40 percent of all savings held in Cypriot accounts were on the books of those two banks. Since then, however, much of it has been transferred elsewhere, despite orders from the central bank that accounts at the two institutions be frozen.

...

Transfers for humanitarian aid were permitted which, while certainly an acceptable exception, opened a loophole for abuse. Many are also furious that the bank allowed "special payments," the definition of which was never adequately established.

...

Much of the money was withdrawn from overseas, where Cyprus had no authority. Branches of Cypriot banks in non-euro-zone countries such as Russia and Britain do not answer to the European Central Bank. Their liquidity is controlled by central banks in those countries.

ekianjo• 13 years ago

> Interestingly, this time, mostly the Russian dirty money was affected, and there was not as much public outrage (stealing stolen money).

Huh? Sorry, do you assume that all savings above 100k euros were from the Russian Mafia ? That's a very serious claim to make. And even if it was indeed true there is due process to follow before confiscating the funds. You need tracability, trials and so on. And in case you do not seem to know that, bank savings should be protected by the law against confiscation - that is one of the most basic agreements in the property laws in every country. If that principle is violated, the consequences can be serious (bank run, more banks going bankrupt, lack of funds for private companies investment, etc...).

And there is still public outcry anyway because even people with savings less than 100k euros can only withdraw about 300 euros a day, cannot take their savings out, cannot transfer them anywhere. There is serious economic disruption going on because of this mess. If you think it only impacts the Russian Mafia you should travel to Cyprus and see for yourself.

mike_esspe• 13 years ago

I think here is a better explanation of what happened:

http://www.cyprus.com/cyprus-bailout-stupidity-short-sighted...

JumpCrisscross4• 13 years ago

"[Cyprus] had something like 150 billion in private funds stored in two of its banks: the Bank of Cyprus and Lakie"

As of today, deposits stand at €68 billion [1]. The peak was €73 billion in May 2012 [2].

[1] http://www.ft.com/intl/cms/s/0/f13edbfc-9780-11e2-b7ef-00144...

[2] http://www.centralbank.gov.cy/media/xls/2nd_MFS_January_2013...

_b8r06• 13 years ago

> Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent.

Just to add a little context to this. Cyprus is a divided country, as a result of a conflict in 1973 between Turkish Cypriots (and Turkey) and Greek Cypriots (and Greece). The Greek Cypriots favoured unification with Greece (Enosis) whereas the Turkish minority felt threatened by this (due to various times in which sectarian violence had spread on the Island, and also due to fears of reprisals for anti-greek pogroms in mainland Turkey). The whole thing is really complicated and basically no-one wins.

Fast forward to 2004 and a referendum is held on whether Cyprus should unify. The Turkish north votes yes, the Greek south votes no and Cyprus enters the Euro leaving Northern Cyprus out in the cold.

The people with over 100k Euros that are being affected the most aren't the Russian depositors but older Cypriots who rode the tourist property boom. There was a vote on this and it was turned down, and then the Troika (of the Eurozone countries, ECB and IMF) decided they'd sidestep the whole thing and re-arrange the country's banking system for them.

The amount the troika were looking for was not a great deal of money to the EU or IMF, about €6 billion. This represents less than the amount spent on administration or internal policies in the last budget, and would be less than a fifth of the Common Agricultural Policy (CAP) budget. This figure was also arbitrarily decided by the troika not based on what Cyprus could actually afford (given the size of it's collapsing economy) but for political reasons because it's politically unacceptable for Germany to be seen by Germans to provide no strings bailouts to another Greece, and the IMF wanted to restructure Cyprus' banking system.

The big problem is that with this intervention it sets two extremely dangerous precedents. The first is that exiting the Euro (which would've been better for Cyprus) is not an option for bankrupt Eurozone countries. It's not even on the table. The second is that what's happened in Cyprus this week can happen in Greece, Italy, Spain, Portugal, Luxembourg (where the real Russian money is) or Ireland next week or at any point in the future, and as Shenglong said, banks are the major savings depository for most of Europe. If that doesn't scare my American friends then nothing will.

danmaz744• 13 years ago

You forget that Cyprus' banks are bankrupt because the did bad investments; it's not as if "the IMF wanted to restructure Cyprus' banking system" because they woke up one morning and just felt like that.

coldtea• 13 years ago

>Fast forward to 2004 and a referendum is held on whether Cyprus should unify. The Turkish north votes yes, the Greek south votes no and Cyprus enters the Euro leaving Northern Cyprus out in the cold.

This sounds like a mysterious outcome, given what you said above, but one can add that the "unification plan" was to create an old-style colonial protectorate, which, besides giving foreign powers the power to meddle with the new "state" affairs, gave equal political power to the Turkish minority (the majority of which came post-invasion in order to take control of the Turkish side) and to the Greek majority (instead of using legitimate elections). And of course it didn't address any of the violations of lots of UN rulings by the occupying force.

So mainly it was just perpetuating the occupation and the injecting, and saying "ok, now you both have half-half stakes at a new country".

jacquesm2• 13 years ago

Cyprus is historically a part of Greece but on a map it is closer to Turkey, Syria, Lebanon, Jordan, Israel and even Egypt.

It is just like the Falklands in that respect, an outpost of one nation that is going to be geographically contested and eventually (just like the Falklands) it will probably be annexed by one of the countries above (most likely Turkey).

The only reason these situations persist is because the nations involved are still able to wage war at a distance, if Greece should go bankrupt (or even if the Greek-Cypriot part of Cyprus would go under) there would likely be a re-alignment of interests such that the cost of maintaining the outpost by force no longer outweighed the benefits.

Cyprus is also one of the reasons why Turkey has not been added to the EU, and why their relations with Greece are as poor as they are.

If Greece and/or Cyprus would end up being unable to maintain the status of the Greek portion of Cyprus Turkey would have to weigh the advantages of going all in on Cyprus versus the disadvantages of cutting a lot of ties with the EU, which arguably has been stringing along Turkey with the promise of membership without the intention of actually following through on that promise for a very long time now.

Turkey is a very important country in the sense that it is the European gateway to the middle east, it has been instrumental as an ally in many military operations over the last two decades and there are large numbers of Turkish emigrants living all over Europe, which means any decision going against Turkish interests has the possibility of mobilizing a substantial number of people in other member states. But there are a large number of member states that do not actually wish Turkey to join the EU on equal terms, at the same time they don't want to see Turkey join the middle-East.

lazyjones• 13 years ago

> Because the majority of the funds (I am generalizing) belongs/belonged to Russians who took advantage of the people on the conversion out of communism (dirty money).

You are not generalizing, you are just making this up. Only about 20% of the deposits in Cyprus belong to Russians.

> Greek's insolvency impacted Cyprus greatly, because a large portion of the Cyprus population are of Greek descent.

Nope. It impacted Cyprus because it participated in the Greece bailout and lost 4.5 bil to the haircut that followed.

argonaut3• 13 years ago

> You are not generalizing, you are just making this up.

Calm down. Firstly, one number states that 30% of deposits are foreign owned [1]. Secondly, the accurate description of Shenglong's error would be "exaggerating."

> Nope. It impacted Cyprus because it participated in the Greece bailout and lost 4.5 bil to the haircut that followed.

You just attacked a straw man by quoting Shenglong out of context.

[1]http://www.nytimes.com/2013/03/27/business/global/bailout-gr...

fab13n• 13 years ago

> In North America, we have money in companies, hedge funds, etc. In Europe, banks are the major depository.

But then, banks put those deposits to work in companies, hedge funds etc., so it amounts to the same, with an intermediate which mitigates risks (not perfectly as illustrated here) and takes a fee.

mbreese2• 13 years ago

So, the system worked and he gets to keep €100K? Because his bank is insolvent and that is the amount of money that was insured?

I'm not saying this doesn't suck for him and his company, but €100K is better than €0.

fsniper• 13 years ago

Keeps €100K but can not withdraws or transfers €300 daily.

trhtrsh• 13 years ago

That's effectively a 1 year freeze.

radicaldreamer• 13 years ago

I'm not sure why people think investing above the insured deposit ceiling in a badly rated bank is risk free. If you have that much cash, you certainly can do (or pay someone to do) some due diligence and store your assets in a safer way.

gregsq• 13 years ago

Very true I think. When the banks started to fold in the UK I split my cash into units of up to £35000 each into different banks. The guarantee was per institution, not individual. It certainly made more sense to me to fit within the guarantee limits, though there was no absolute guarantee that even those limits would hold.

ansgri• 13 years ago

Is the EU EUR100k guarantee per person and not institution?

skrebbel• 13 years ago

Oh boohoo.

The OP appears to forget that without the European Commission, all of his money would be lost.

It's like getting mad at the guy who chainsaws you out of the car that you folded around a tree because he sawed your car into two pieces.

SODaniel• 13 years ago

Not to mention that it seems like in this case the person in question may be whining about untaxed funds that he skimmed of his company. Oh no, I am being robbed of money that wasn't mine!!

bobsy• 13 years ago

If anything he should be angry at his accountant. I assume he has one if he has 800k. How many wake up calls does someone need. In the UK when banks were failing, before there was a solution the Government said they would guarantee the first £50k of savers. It might have then gone up to £100k.

My parents who have a fairly large sum of money hired a decent accountant to mitigate a large portion of the risk. Spreading their money between a fairly large number of bank accounts.

You then look at when Iceland banks failed. Lots of people lost money.

The Cyprus banking sector size was ridiculous. It was 7x Cyprus GDP. If the sector failed it was fairly obvious Cyprus would be unable to save it. You have no idea what the terms would be of a bailout or if a small country like Cyprus would get one..

So back to my main point. Get a decent accountant. Understand where your money is going.

Guthur2• 13 years ago

It amazes me how many people mention tax evasion, and other excuses for apportioning of liability.

The liability should lie with the people who bought the Cypriot/Greek debt in the first place. They are the ones that in essence lent the money to these two tiny countries when it was obvious it was out of control and would blow up.

But where is the incentive not too when the liability is offloaded to people who had no part in the debt transaction; either the citizens or other third parties.

To me these risk balances are way out of whack and are just asking for the irresponsible fiscal activities we are seeing.

Paradigma112• 13 years ago

the cypriot banks bought the greece dept, that is the problem.

Guthur2• 13 years ago

And the Greeks bought the Cypriot debt maybe; humour attempt.

This doesn't really change my assertions, the Cypriot debt holders should take the hit first, let the pain filter through the whole rotten trail.

bayesianhorse9• 13 years ago

Basically, someone deposited his money in a tax haven, with patently risky banks. Then the banks went into trouble. The European Union tries to help them avoid total loss, and now that same someone blames the EU for the partial loss.

Total loss was the alternative to the bailout...

jcr• 13 years ago

In one sense, this submission really is politics and I feel bad about up-voting it, since politics are against the HN site guidelines.

In another sense, this is also about tech, specifically, bitcoin. The desperate people in Cypress may turn towards alternative currencies as a way to escape their situation.

I know there are a lot of folks around here who vocally support bitcoin or other alternative currencies. For me the idea is very interesting, but the reality makes me nervous. There are one of two possibilities; either (1) I know bitcoin well enough to never trust it, or (2) I don't know bitcoin well enough to make an informed decision.

I'm still betting on the latter. ;-)

None the less, there's a lot of negative bitcoin news that never makes the front page of HN, and I wonder why. The most recent was:

https://news.ycombinator.com/item?id=5459304

http://www.youtube.com/watch?v=7fvSYT7vhQY

The worst part of the above could the sensationalism, but in my opinion, it's my inability to verify the veracity of the claims. Are they just muckraking to (successfully) cause "Fear, Uncertainty, and Doubt" (FUD)? --Sadly, stuff like this makes us already skeptical and squeamish folks even more nervous about it.

Market manipulation is a very real problem in all markets, so even if the above is entirely true, it's merely one instance of graft against bitcoin, when there are countless instances of corruption in all the other markets.

oellegaard• 13 years ago

While I would probably have the same reaction if I was living in Cyprus, important points are missing here.

The way I understand it: Cyprus failed to control their economy and required the help from the European Union. In order to lent them a crazy amount of money, they wanted some guarantee. They could not provide anything, so their government had to use the peoples money to pay for the governments previously bad judgement about not saving up for bad times.

danmaz744• 13 years ago

So, you deposit your money in a bank with very high interest rates - very high because they invest in risky Greek bonds. If everything goes well, you keep the interests. If the risky investment of the bank goes bust, we (EU citizens) should pay you the risk, even beyond the insured 100k. Is that correct?

im3w1l• 13 years ago

>ZERO INTEREST!

>I've already explained that it's CURRENT ACCOUNT (transactional account).

>Not bank paid to me, but I was paying annual fee to the bank in order to maintain this account and debit card.

>Current accounts are usually not affected even if bank goes bankrupt. Upon liquidation, current account holders are paid first, as money on this type of account cannot be gambled by bank. It's most liquid assets, like cash.

danmaz744• 13 years ago

It's VERY hard for me to believe that anybody would keep a balance close to a million euro in a bank with zero interest. Even I get a small interest on my current account...

dgregd• 13 years ago

Could someone please tell me, who is going to make money during this fuss?

jgeerts• 13 years ago

This is just undermining the bank system. There is no reason big enough to do something like this and it appals me that some people are saying that he had it coming.

A part of it is 'dirty' and that argument is being used to validate the confiscation of working people's money and company's money which the EU's economy is based upon.

The fact that they announced this before taking a decision is just beyond stupid, any normal thinking human being knows that it's a bad approach given that they want to prevent a bank run. People in other countries are fearing that the same procedure will happen to them. This has a way bigger impact than just some companies and some rich people and some bad russians, they are just harming the image of banks in whole Europe.

Next to that fact, OP has a medium sized business, people work there, wages can't be paid, this has a major influence on companies all over Europe and everyone who works there. OP put his money in Cyprus because it was profitable, is that a bad thing? You have to choose paths that are most profitable for your company and he didn't put it in some obscure market, it was backed by a bank, we generally trust banks.

Now they want to prevent a bank run, this is just a ticking timebomb. Whenever the 300 euro/day rule doesn't apply anymore, there will be a bank run. No money will be going into the bank anytime soon. They are going to regret this.

sbank• 13 years ago

Thanks for speaking up against those in this thread who virtually blame this guy for the wrongdoing of others around him.

ptaipale2• 13 years ago

The OP does not seem to understand that the bank account was not robbed by European Commission, it was just lost because it was a bad investment.

He put money in a bank that failed. Presumably, he made the investment for reasons of convenience of operating the capital in Cyprus, but also because the particular bank he chose was paying high interest rates. It was paying high interest rates because everyone knew the risk was high. The risk materialised. Who is surprised?

EU helps a bit but is not prepared to compensate him for losses; this is not a fault of the European Commission.

I'm a bit short of sympathy because of this blaming of Merkel, Rehn et al. They're not perfect, but they are not culpable for this loss.

Cyprus has had tax as percentage of GDP at below 40 %. Northern Europe is closer to 50 %. If you had wanted buffers provided by the state, you should have collected taxes to do so. Alternatively, you could have stayed out of the euro, and then the government could just print money and rescue the banks. Of course, outside the euro you wouldn't have been such a great haven for grey and black Russian money.

calleskonto• 13 years ago

The EU has nothing to do with it it's cyprus that can't keep it's economy afloat.

If i got to decide the EU should have let your contry go bankrupt fall in to civil war, but hey we decided to lend you money to stop that.

But yes blame the very people that helped you from loosing all your money. That seems like a good idea....

edwinjm• 13 years ago

The alternative is that the bank goes bankrupt and you lose everything. Be glad.

vvllddrr• 13 years ago

I don't really see how the EC is robbing when it's actually lending Eur 10bln. Without the loan, all banks would have collapsed and you'd have lost the first 100K as well.

The initial proposal was to only tax a percentage of the saved amount. That was rejected by the cypriotic people/govt.

jacquesm2• 13 years ago

If and when those banks reopen there will be a bankrun and they will both go bust. It's only a matter of time.

“My bank account's got robbed by European Commission. Over 700k is lost.”

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