http://www.zerohedge.com/news/2013-03-25/cyprus-delays-reopening-banks-again-here-are-longest-bank-closures-ever

As Cyprus Delays Reopening Banks Again, Here Are The Longest Bank Closures Ever

Submitted by Tyler Durden on 03/25/2013 22:12 -0400

With news this evening that the Cypriot banks will not now be re-opening tomorrow (as perhaps - as we noted earlier - a little more of those precious deposits leaked away during the closures than expected):

CYPRUS BANKS TO REMAIN CLOSED THROUGH MARCH 27: CENTRAL BANK

We thought it useful to consider Cyprus in relation to the longest bank closures in history. Cyprus has now shutdown its banking system longer than Argentina, Ecuador, and Uruguay and as far as President Anastasiades comments that capital controls are temporary - we can only hope for the depositors sake - that it's not as temporary as Argentina's 120 month 'restrictions' starting in 2001.

(h/t @faisalislam via Nomura)

and clear as mud from ECB , EU idiots ......

http://www.cyprus-mail.com/cyprus/all-banks-remain-closed-until-thursday/20130326

All banks to remain closed until Thursday

Published on March 26, 2013

ALL banks will remain closed until Thursday, the Minister of Finance announced last night.

Earlier it was just Bank of Cyprus and Laiki that were to remain closed for a further two days; the change was made last night for the smoother operation of the entire banking sector.

According to sources, the late night decision to stall the opening of the island’s smaller banks was taken following a disagreement between European Commission and European Central Bank (ECB) officials on how to adjust the banking system in lieu of the restructuring of Laiki and its partial merger with Bank of Cyprus.

In a separate communiqué, the Central Bank said the agreement at the Eurogroup meeting “ensures that Cyprus has avoided default and the associated consequences this would have had for the country. The agreement has also avoided the disorderly default of Laiki Bank”.

http://globaleconomicanalysis.blogspot.com/2013/03/regularors-prepare-for-run-on-cypriot.html

Monday, March 25, 2013 3:17 PM

Regulators Prepare for Run on Cypriot Banks; Two Largest Banks Remain Shut, Others Open Tomorrow

Most Cypriot banks will open tomorrow but capital controls remain and the two largest banks will remain shut while the ECB "monitors the situation" and regulators determine precise haircuts.

CNN Money reports Big Cyprus banks to stay shut after bailout

Most banks in Cyprus will open again Tuesday for the first time over a week. But the two biggest lenders at the heart of a €10 billion European Union rescue will stay shut for two more days to give regulators time to prepare for a run on deposits.

Deposits of over €100,000 at Bank of Cyprus and Popular Bank will be frozen until they have been restructured. Popular Bank will be split up, its viable assets and insured deposits transferred to Bank of Cyprus, and its non-performing loans moved into a bad bank that will be wound down.

Big depositors at Popular Bank face complete wipe out, along with shareholders and bondholders.

The losses facing big depositors as part of a deposit-equity conversion at Bank of Cyprus have yet to be determined but could be around 30%, a Cypriot government minister said Monday. Again, shareholders and bondholders will be tapped first.

The big unknown is how small depositors will react, or what restrictions they'll face when they try to access their money from Tuesday. The Cypriot parliament last week gave the government powers to implement temporary capital controls.

Cyprus will be ruined for a decade. Expect GDP to plunge by as much as 30%.

Since Big depositors at Popular Bank face complete wipe out, Cyprus may as well have done this on its own and left the Euro.

Mike "Mish" Shedlock

and Diesel - Boom .....

http://openeuropeblog.blogspot.com/2013/03/you-want-contagionill-show-you-contagion.html

You want contagion…I’ll show you contagion…

Everyone, including us, hascommented at some point this week about how calmly markets have reacted to the situation in Cyprus.

Cue Dutch Finance Minister Jeroen Dijsselbloem.

From his interview with Reuters:

"What we've done last night is what I call pushing back the risks…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?'… 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."

"If we want to have a healthy, sound financial sector, the only way is to say, 'Look, there where you take on the risks, you must deal with them, and if you can't deal with them, then you shouldn't have taken them on’”.

"The consequences may be that it's the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take."

"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".

We’ve bolded the key quote. Essentially, he saying the Cyprus deal might be a template for other bank restructurings across the eurozone (although he seems to be trying to row back from this a bit).

Now, we’re not saying we disagree with his points and we certainly agree with the sentiment of his comments – banks should be able to shoulder their own risks and if they can’t they should have plans for winding down and deleveraging. This is why we’ve long argued for things such as living wills for banks.

Let’s be clear, banks should be responsible for their own risks. That said, if you go round telling markets all week that Cyprus is unique and specific and all year that a banking union is on its way with an ESM backed recap fund, they aren’t going to take kindly to abruptly finding out otherwise.

It all just seems a bit strange and a bit clumsy - to put it mildly. Sometimes for better or worse, markets need to be handled with kid gloves.

Contrary to his expectation that markets would see it as “sensible”, they have reacted wildly. Spanish and Italian stock markets have swung into negative territory after being up for the day, led by their banks taking a hammering, figures via @suanzes:

Ibex35: -2,68%. BBVA (3.97%), Bankinter (-4%), CaixaBank (-2,44%), Banco Popular (-4.147%), Sabadell (-3,83), Santander (-3,27%)

As we have said before, we never quite bought that Greece, Cyprus or anyone was entirely unique, though with Greece eurozone leaders definitely could have got away with it.

Where does this leave plans for banking union and eurozone integration? We’re hesitant to say tatters, but it’s not looking great.

and more confusion......

http://openeuropeblog.blogspot.com/2013/03/let-guessing-game-continue-eurogroups.html

Let the guessing game continue: The Eurogroup's mixed messages on capital controls

As we have noted at length, the capital controls are a key part of the Cypriot deal and could have a huge bearing on how and when Cyprus recovers from this crisis. Unfortunately, as with almost all important eurozone decisions, this one lacks clarity.

The body of the Eurogroup statementsaid:

“The Eurogroup takes note of the authorities' decision to introduce administrative measures, appropriate in view of the present unique and exceptional situation of Cyprus' financial sector and to allow for a swift reopening of the banks. The Eurogroup stresses that these administrative measures will be temporary, proportionate and non-discriminatory, and subject to strict monitoring in terms of scope and duration in line with the Treaty.”

However, the Annex noted:

“Only uninsured deposits in BoC will remain frozen until recapitalisation has been effected, and may subsequently be subject to appropriate conditions.”

EU Internal Market Commissioner Michel Barnier added earlier today:

“Any measures to restrict or limit freedom of movement may only be enacted exceptionally and temporarily and that is what has been requested by the Cypriot authorities.”

Some pretty mixed messages. The first suggests that “administrative measures” (which is widely being taken as capital controls or related measures) will be generally applied.Bruegel suggests that this may not even need to take the form of full capital controls and could be limited to measures slowing down the movement of capital. This is contradicted by the second point which suggests they will only apply to the Bank of Cyprus uninsured depositors. Barnier’s point is closer to the first point but suggests actual controls will be needed.

FT Alphaville has an interesting run-down of the different type of capital controls and their implications. Paul Krugman makes the valid point that, if the trade-off of the single currency is reduced transaction costs in exchange for an overvalued currency, once capital controls are introduced, what is the motivation to stay inside? As he notes, wider points on the EU and access to ECB liquidity apply but it gets to the crux of the choice facing Cyprus.

As we have suggested, we find it hard to imagine that the banks could survive long without capital controls, while the economy would likely take an even bigger hit. As we have mentioned, it would fall on the ECB to continue to sanction ELA to keep banks afloat during deposit outflows, but this would amount to a large transfer of risk towards the Cypriot Central Bank (and therefore the Cypriot state, and therefore the eurozone). Meanwhile, access to the ELA is limited by the ECB’s view of bank solvency (one they have shown they may not stretch indefinitely) and assets which can be posted as collateral.

One thing that is for sure: this lack of clarity is certainly not helping an already messy situation.

http://www.cyprus-mail.com/cyprus/most-banks-reopen-tuesday-central-bank-source/20130325

Most banks to reopen Tuesday, Central Bank source

Published on March 25, 2013

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Cyprus

UK Laiki Bank customers told 'it is business as usual'

Savers with less than £85,500 on deposit in the UK are covered by the overseas compensation scheme, bank says, though it is unclear what happens to savings above that level

Hilary Osborne and Rupert Jones
guardian.co.uk, Monday 25 March 2013 10.56 EDT
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People queue outside Laiki Bank in Nicosia, Cyprus

Laiki Bank’s UK operation is set up as a branch of the Cypriot parent bank, which has seen large queues of people trying to get access to their money. Photograph: Petros Giannakouris/AP

Laiki Bank customers in the UK face no restrictions on access to their cash and have been told it is "business as usual" at the firm's four British branches, despite an overnight decision to close its Cyprus parent.

Under a bailout plan agreed in the early hours of the morning, Laiki Bank will be wound up and its €4.2bn in deposits of more than €100,000 will be placed in a "bad bank", meaning they could be wiped out entirely.

Cypriot savers with smaller deposits at Laiki will see their accounts transferred to the Bank of Cyprus; however, in the UK the two banks will remain separate.

Bank of Cyprus UK customers have been told they will be completely unaffected by the bailout, as the bank operates as a separate entity incorporated in the UK.

In contrast, Laiki Bank's UK operation is set up as a branch of the Cypriot parent bank, so the situation is less clear-cut.

Ruth Harvey of Laiki Bank in the UK said that although not all of the details of the impact of the agreement were known, there was no need for the 13,000 UK customers to panic. "We are open, it's business as usual, and there are no restrictions on our client's accounts," she said. "The message we want to get over to our customers is to keep calm and carry on."

Harvey said there had been a rise in inquiries from customers since news of a potential tax on Cyprus's savers first emerged 10 days ago, but there had not been a big increase in activity. "We are sitting on a sea of cash," she added.

Laiki Bank's UK customers are protected against losses under Cyprus's compensation scheme rather than the UK's Financial Services Compensation Scheme. This protects savings worth up to €100,000 (£85,500) on deposit in the UK.

Harvey said it was unclear what would happen to savers with balances above that level, and the bank was working with the Bank of England and Financial Services Authority to determine what might happen if the bank was unable to repay deposits.

Laiki bank employs 150 staff in three branches in London and one in Birmingham, and offers a range of savings accounts, credit cards and loans to private and corporate customers.

When the Guardian visited the bank's branch in central London's Mayfair, a stone's throw from Berkeley Square, a male employee told us it was "business as usual" before showing us the door. A small handful of employees and customers came and went; all declined to say anything.

The building carries no signage or anything else that would identify it as a branch of Laiki Bank. The bare-looking foyer features no promotional material and there were no counters to be seen. The only giveaway was a "customer notice" in the window stating that the bank would be closed on Good Friday and Easter Monday, and wishing customers a happy Easter, but making no reference to the latest events.

and......

http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus

Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus?

Submitted by Tyler Durden on 03/25/2013 17:00 -0400

European Central Bank

Latvia

New Normal

recovery

Reuters

Yesterday, we first reported on something very disturbing (at least to Cyprus' citizens): despite the closed banks (which will mostly reopen tomorrow, while the two biggest soon to be liquidated banks Laiki and BoC will be shuttered until Thursday) and the capital controls, the local financial system has been leaking cash. Lots and lots of cash.

Alas, we did not have much granularity or details on who or where these illegal transfers were conducted with. Today, courtesy of a follow up by Reuters, we do.

The result, at least for Europe, is quite scary because let's recall that the primary political purpose of destroying the Cyprus financial system was simply to punish and humiliate Russian billionaire oligarchs who held tens of billions in "unsecured" deposits with the island nation's two biggest banks.

As it turns out, these same oligarchs may have used the one week hiatus period of total chaos in the banking system to transfer the bulk of the cash they had deposited with one of the two main Cypriot banks, in the process making the whole punitive point of collapsing the Cyprus financial system entirely moot.

From Reuters:

While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped , other depositors used an array of techniques to access their money.

No one knows exactly how much money has left Cyprus' banks, or where it has gone. The two banks at the centre of the crisis - Cyprus Popular Bank, also known as Laiki, and Bank of Cyprus - have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks' largest depositors.

So while one could not withdraw from Bank of Cyprus or Laiki, one could withdraw without limitations from subsidiary and OpCo banks, and other affiliates?

Just brilliant.

And if there was any doubt that the entire process of destroying one entire nation was simply to punish Cyprus, it can be completely cleared away now:

ECB officials contacted Latvia, another EU country that has received large Russian deposits, to warn authorities against taking in Russian money fleeing Cyprus, two sources familiar with the contacts said.

"It was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus," a euro zone central banker said.

If one thinks there is any material Russian cash therefore left in Cyprus with this epic loophole in place, we urge them to make a deposit in the insolvent nation. One person who certainly will not be allocating any of his money into Bank of Cyprus is German FinMin Schaeuble:

German Finance Minister Wolfgang Schaeuble said the bank closure had limited capital flight but that the ECB was looking closely at the issue. He declined to provide figures.

Perhaps because if he did, it would become clear that the only entities truly punished by this weekend's actions are not evil Russian billionaires, but small and medium domestic companies, and other moderately wealthy individuals, hardly any of them from the former "Evil Empire."

Companies that had to meet margin calls to avoid defaulting on deals were granted funds. Transfers for trade in humanitarian products, medicines and jet fuel were allowed.

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!

In other words, by now any big Russian funds in Cyprus are long gone, and the only damage accrues to the locals: for one reason because their money over the critical EUR100K threshold has been "vaporized", and for another because the marginal driving force and loan demand creator in Cyprus, the Russians, are gone and are never coming back again.

This is what passes for monetary real-politik in the New Normal - an entire nation becomes collateral when pursuing a wealthy group of people.

If we were Cypriots at this point we would be angry. Very, very angry.

and so it goes.....

http://www.zerohedge.com/news/2013-03-25/russians-are-outtahere-cypriots-killed-their-country-one-day

The Russians Are Outtahere: "The Cypriots Killed Their Country In One Day"

Submitted by Tyler Durden on 03/25/2013 13:46 -0400

It appears the Cypriots (or more clearly the European leaders) do not appreciate the extent to which Russia has propped up the local economy. “When the Russians leave who is going to stay at the Four Seasons for $500 a night? Angela Merkel?” one wealthy Russian asks rhetorically, as The FT reports, they are receiving a deluge of overseas phone calls from helpful Swiss bankers looking to swoop up the deposit transfers. "The locals should understand: as soon as the money leaves, the people who go to restaurants, buy cars and buy property leave too. The Cypriots’ means of living will disappear," and there are signs that the locals are getting how drastic this situation is, as a large billboard has sprung up at Larnaca Airport with a Russian flag and the words "Brat’ya ne predaite nas!" - "Brothers, don’t betray us!" Many Russian businessmen appear to have one foot out of the door already and are considering whih jurisdiction to move to as they await to see if Medvedev follows through on his threat to dismantle the double tax treaty with Cyprus.

And now the rumors are that billionaire Russian tycoon Roman Abramovich, owner of Chelsea Football Club, has been arrested in the USA.

Via The FT,

...

One Cypriot lawyer with Russian clients said he had already been approached by half-a-dozen European banks in locales ranging from Latvia to Switzerland to Germany, some of them promising they could open new bank accounts for his clients in under an hour.

...

“The Cypriots killed their country in one day,” says Mr Mikhin, referring to Friday March 15, when President Nicos Anastasides accepted the EU’s proposal to seize €5.8bn in emergency funds from Cyprus’s local and foreign depositors.

...

“The locals should understand:as soon as the money leaves, the people who go to restaurants, buy cars and buy property leave too. The Cypriots’ means of living will disappear,” he says.

“They are saying we laundered all the money, but they lived on that money for 10 years and forgot about it.”

...

Says another Nicosia-based lawyer: “I don’t understand why it is money laundering when it’s in Cyprus, when in London it’s a perfectly respectable company.”

...

“If the double-taxation treaty is lifted there will be no reason for us to stay in Cyprus,” an oligarch’s Russian lawyer says bluntly.

Mr Mikhin complains that the Cypriots do not appreciate the extent to which Russia has propped up the local economy.“When the Russians leave who is going to stay at the Four Seasons for $500 a night? Angela Merkel?”

But there are signs that agrowing number of locals realise how drastic a mass emigration of Russian business would be.

Over the past week, a new billboard has sprung up on the highway between Limassol, the palm-treed beach town favoured by the Russians, and Larnaca International Airport.

Drawing on Russia and Cyprus’s shared Orthodox faith and deep political ties dating back to the Soviet era, the advertisement displays a massive Russian flag, with a desperate plea in Russian underneath: “Brat’ya ne predaite nas!”

“Brothers, don’t betray us!”

Russian are gone , bro........

http://www.zerohedge.com/news/2013-03-25/cyprus-church-loses-eur100-million-curses-those-responsible

Cyprus Church Loses EUR100 Million, Curses Those Responsible

Submitted by Tyler Durden on 03/25/2013 11:33 -0400

Perhaps it was their comment last week that"with the brains in Brussels... the Euro can't last," but the Orthodox Church of Cyprus has lost over EUR100 million reacted to its holdings in Bank of Cyprus. Church leader Archbishop Chrysostomos II, in comments on TV, noted that "Cyprus asked for 'crumbs' compared to large size of Europe’s budget," and that those responsible in Cyprus should be punished (he blames the outgoing government, Ministers of Finance, the Central Bank, and the Executive Directors of Banks) - "those that brought the place into this mess, should sit on the stool." He noted that people will lose jobs and the state will be poorer but that the Church is prepared to help; and his first step - to send invitations to the heads of various Russian companies on the island.

Via Church of Cyprus,

Heads of Russian companies operating in Cyprus will call a working lunch, next Thursday, March 28, 2013, His Beatitude Archbishop Chrysostomos Mr. to encourage them to remain in Cyprus.

Speaking to the media Sunday, March 24, 2013, the Archbishop said: "I think we should stand on our own forces. Do not expect any thing. Our people have unfortunately learned to live with the waste, but when the need to know and live with a few and I think he will live with the few. We will try as much as possible to open a business there that can help the state. We will do this with love, "he added.

He also said that "next Thursday I call - I will send invitations and of course - the heads of various Russian companies on the island, we come to the Archdiocese for a working lunch."

"I want to invite people to talk together, to encourage them to stay that benefit in Cyprus because Cyprus was the only country that gave interest to the Russian capital, and if they had their money in any other European country would receive or 0 or 0.5%, while here they get so much more. At last they have brought the place into this mess, should sit on the stool,"he said.

The Archbishop said that the situation blame the outgoing government, Ministers of Finance, the Central Bank, "which brought the top down, blame and Executive Directors of Banks."

"We all sit on the stool, of course, because they brought up - and found below this poverty of our people, so unexpectedly, without a consideration. It is not vengeful. We must punishnaughty, fiber and other fear shall have, "he added.

Replying to a question, the Archbishop said that the banks belong to the shareholders. "It is neither the Governor nor anyone. The Governor can not monitor, or orders appoint either cease or be closed banks. Unfortunately, they stayed with our own apathy. I've said to initiate treatment, "he said.

Wonder if the big two banks open Thursday.....

http://www.zerohedge.com/news/2013-03-25/next-cyprus-depression

Next Up For Cyprus: Depression

Submitted by Tyler Durden on 03/25/2013 08:40 -0400

Gross Domestic Product

Iceland

SocGen

From SocGen:

Depression for Cyprus: Our Cypriot GDP forecast entails a drop of just over 20% in real GDP by 2017. This forecast had already factored in much what was agreed, but did not account for the additional uncertainty shock generated by the past week’s appalling political mess. Risks are clearly on the downside and Cyprus will in all likelihood require additional financial assistance further down the road. Accounting for less than 0.3% of euro area GDP, any downward revision to Cyprus will be barely visible on the euro area aggregate.

So much for the hope of recreating Iceland, and actually growing in 2-3 years. Congratulations Cyprus - you may have a depression for the next four years, but at least you have the € (and helped Merkel win the September election).

and....

http://www.zerohedge.com/news/2013-03-25/goldmans-cyprus-post-mortem-and-review-forced-depost-equity-conversion

Goldman's Cyprus Post Mortem And A Review Of The Forced "Depost-To-Equity" Conversion

Submitted by Tyler Durden on 03/25/2013 07:04 -0400

Bank Run

Creditors

European Central Bank

Greece

Gross Domestic Product

Ireland

Market Sentiment

From Goldman's Francesco Garzarelli

In the early hours of Monday 25 March, Cyprus and the Eurogroup have reached a deal on a financial support package.

As before, the Eurogroup will contribute, via the ESM, up to EUR 10bn (roughly 60% of Cyprus’ GDP), the bulk of which is to be used to cover debt roll-overs and the primary deficit now that the country has all but lost market access.

The idea of using a one-off levy on all bank deposits to cover the hole (estimated at EUR 5bn) left in domestic banking institutions by exposures to Greece has been ditched. Instead, Laiki Bank will be immediately resolved, with a ‘good’ bank carved out and folded into Bank of Cyprus, and a ‘bad’ bank run down over time. The ECB will provide liquidity to the new recapitalized institution, which will inherit the Emergency Liquidity Assistance positions of Laiki.

The restructuring of the two banks will be conducted under the new and extensive bank resolution authority conferred to the Central Bank of Cyprus last week, and will not require parliamentary approval. The operation will involve losses being inflicted on the (few) junior and senior bank bondholders of the two institutions and, more crucially, on deposits above the EUR 100K threshold (a communiqué by the Eurogroup talks about a deposit-to-equity conversion, but no details are provided).

From a markets standpoint, our reaction is as follows.

(i) A policy preference for not transferring banks' liabilities onto the government sector where possible has once again transpired, increasing the policy ‘distance’ between Ireland on the one side, and Spain and Cyprus on the other. This was one of the two main ‘read acrosses’ we mentioned in a note published last Sunday (see Market Views Two Lessons from Cyprus). On the expectation that public debt held by private hands will be mutualised onto the Euro area’s balance sheet, short-dated Cypriot debt has rallied. But with large uncertainties over what the economy will do over coming years, longer-dated Cypriot bonds trading at yields below their Greek counterparts offer little value.

(ii) The restructuring of the two main Cypriot domestic banks seems a big task to take on, going by what happened in Ireland. More generally, ahead of the deployment of a common bank resolution framework steered by a central European authority, the winding down of insolvent banks appears to be conducted on a case-by-case basis, with all the associated uncertainty. All else equal, this should be detrimental for creditors in weaker banks in other Euro area countries, particularly those in the fiscally weaker states.

(iii) On broader market sentiment, investors had anticipated that a resolution in Cyprus would ultimately be found. This was the line we also held coming into last week. But reaching a deal has raised awareness that inter-country fiscal transfers in the Euro area remain a messy business, leaving public opinion damaged. In the European macro space, the spread between Italian 10-year BTPs and German Bunds now looks too wide relative to what would be justified by macro and fiscal factors, according to our models (we mentioned that the spread should be around 275bp, and fair value is currently 225bp). Until more clarity emerges on how Cyprus will settle after the banks re-open, however, and with an attempt under way to form a new government and find a new President, we prefer to stay on the sidelines until the dust settles.

and.....

http://www.zerohedge.com/news/2013-03-25/merkel-very-happy-russian-pm-furious-stealing-what-already-been-stolen-continues

Merkel "Very Happy", Russian PM Furious: "The Stealing Of What Has Already Been Stolen Continues"

Submitted by Tyler Durden on 03/25/2013 07:46 -0400

First, it is Merkel's turn, which last week was furious at Cyprus for daring to reject the first flawed Eurogroup plan impairing insured depositors, only to praise it for now... rejecting said plan. To wit: Chancellor Angela Merkel, "as well as the government, is very happy that the troika, the euro group and Cyprus were able to reach an agreement," German government spokesman Steffen Seibert says in Berlin. He added that difficulties will arise in the short term because of measures aimed to scale back Cyprus’s banking sector, "but in the long run it will lead to a healthier” industry. That remains to be seen, especially when factoring in the Russian response.

Which wont be pleasant.

The official Russian line is one of a typical professional chess player - calm, cool, collected: Russia doesn’t see need to take any additional steps now, may still agree to restructure loan, First Deputy Prime Minister Igor Shuvalov told reporters earlier. Shuvalov, unlike Merkel and ECB's Mersch who sees nothing but green shoots (literally) everywhere in Europe, said that Russia is concerned Cyprus crisis may have negative effect on euro. The deputy PM says that he has no estimate for Russian losses in Cyprus but added that Russian money in Cyprus is "legal."

The unofficial line comes from former president, and current PM and Putin mouthpiece,Dmitry Medvedev. From Reuters:

Moscow reacted with anger on Monday to a European Union bailout of Cyprus that will result in heavy losses for foreign depositors at the Mediterranean island's banks, many of which are Russian.

"The stealing of what has already been stolen continues," Prime Minister Dmitry Medvedev was quoted by news agencies as telling a meeting of government officials.

Russia turned down desperate appeals for financial aid last week from the Cypriot government and the final bailout was likely to be more painful for its depositors than an initial rescue plan rejected by the Cypriot parliament.

Speaking after the meeting, First Deputy Prime Minister Igor Shuvalov said losses to Russian investors in Cyprus were not yet clear.

He also said that the Cypriot unit of state-controlled VTB, Russian Commercial Bank, would not be affected by measures taken by the government.

"What is happening is a good signal to those who plan to move their capital to ... Russian banks," he was quoted as saying. "We have very stable banks."

Russians are believed to account for most of the 19 billion euros of non-EU, non-bank money held in Cypriot banks at the last count by the central bank in January. Of 38 billion euros in deposits from banks, 13 billion came from outside the EU.

In other news, we are closing our Belgian Caterer 3x long ETF, and opening a new 3x levered ETF in Belgian Bodyguards and Polonium 210 "tasters." We expect it to hit our price target of "more" shortly.

http://www.cyprus-mail.com/atm/further-limits-atm-cash-withdrawals/20130325

Further limits on ATM cash withdrawals

By Poly PantelidesPublished on March 25, 2013

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ATM, banks, Cyprus,daily withdrawal limit

The best early reaction

Joseph Cotterill of FT Alphaville has written the best detailed analysis of the Cyprus deal: Scratch one stupid idea [Updated]:

Here are the key points (head over to AV for the full read (then come back!))

1) In case you didn’t get the memo the first time, this still isn’t about spanking money-launderers. (because there's no differentiation between foreign and domestic customers with over €100k)

2) It’s a depositor bail-in — for two specific banks, one of which is in full resolution. (rather than forcing all customers at all banks to contribute, as in the first - hated - bailout plan)

3) It’s also a senior bank bond bail-in. (Holders of Laiki’s senior unsecured debt look fully wiped out - those at Bank of Cyprus will take a brisk haircut)

4) Emergency Liquidity Assistance. -- Was this the week we found out that ELA will be protected from default no matter what? (under the deal, the assistance supplied by the European Central Bank to Laiki is now transferred to Bank of Cyprus)

* * * * * *

And over at Reuters, Felix Salmon points out that the winding-down of Laiki is a rather big deal for a rather small country:

The resolution of Laiki is going to give the world a very real example of what happens when a too-big-to-fail bank is allowed to fail.

Laiki is small by global standards, but very large by comparison with Cyprus’s GDP. If Cyprus can survive Laiki’s collapse, then maybe — just maybe — the world could cope with the “resolution” of a big bank like Citigroup. But that’s a very big “if”.

More likely, the costs to Cyprus of allowing Laiki to fail will be enormous, both politically and economically. And 800,000 Cypriots will for years to come be paying the price of what Mohamed El-Erian elegantly calls “bailout fatigue”.

More here: Cyprus: It’s not over yet

Catharsis Ours

Monday, March 25, 2013

As Cyprus Delays Reopening Banks Again, Here Are The Longest Bank Closures Ever

All banks to remain closed until Thursday

Monday, March 25, 2013 3:17 PM

Regulators Prepare for Run on Cypriot Banks; Two Largest Banks Remain Shut, Others Open Tomorrow

You want contagion…I’ll show you contagion…

Let the guessing game continue: The Eurogroup's mixed messages on capital controls

Most banks to reopen Tuesday, Central Bank source

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Further limits on ATM cash withdrawals

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The best early reaction

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