What the Cyprus bank crisis means for our money
As the Cypriot Government prepares to introduce a levy on savings in its banks, here's what this means.
Cyprus is in turmoil after its government imposed a high banking levy on its savers, sparking fears of mass withdrawals, also known as a run, on its banks.
A banking levy was agreed as one of the conditions of a €10 billion (£8.6 billion) bailout by the European Union and International Monetary Fund.
But the Cypriot Government sparked anger by proposing that savers would be charged a one-off fee of 6.75% on savings of up to €100,000 and 9.9% on savings over that amount. Savers will be compensated with the equivalent value of shares in the banks.
The EU and IMF are keen to not be seen to be bailing out the Cypriot banks without any strings attached.
What this means for expats and people working in Cyprus
And that means a cost for the estimated 25,000 UK expats living in Cyprus, plus UK troops and Government employees. However, the UK Government says it will compensate service personnel and Government workers.
What this means for people living in the UK with money in Cypriot banks
However, people living in the UK with savings in the UK arms of two Cypriot banks – Bank of Cyprus UK and Laiki Bank UK – are not affected by the levy.
Both banks have confirmed that savers will not be penalised and savers’ money held are protected by compensation up to a limit of £85,000 under the UK FSCS (Bank of Cyprus UK) and €100,000 under the Cyprus Deposit Protection Scheme (Laiki Bank UK).
Mark Neale, Chief Executive of the FSCS, said: "I am emphatic that people [in the UK] will not lose a penny of their savings in this way."
The risk of foreign banks
This situation does highlight again the potential risk in saving in banks in foreign countries, which was laid bare by the Icelandic banking crisis of 2008. Read Think twice about saving in foreign banks for more on this.
It also underlines that you should think very carefully about holding more than £85,000 with any UK institution (bearing in mind some may own several banks and/or building societies), as any money over that amount is not guaranteed by the Government. Take a look at Who owns your bank or building society? for more information on who owns who.
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@jonnie2thumbs Yes the US government did DO that and thanks for the confirmation. And by the way our "sovereign" government does whatever the "parliament of the European Union "decides. ( ps am all for economic union for trade etc but not at the expense of losing our sovereignty) Polite reminder that our politicians have sold our sovereignty to the EU a long, long time ago via the proverbial traders entrance. EU has a central bank called ECB for all of the European countries who have bowed down to the notion of a united Europe governed by Brussels. EU has laws and directives which this sovereign aka independent country follows or is punished. Our government would change direction towards whichever way the EU wind blows or sucks!
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it was only 80 years ago that the US did that - and I love how this is all the fault of 'foreign governments and banks' as if at the drop of a hat the UK government couldn't do the same - what a joke. I prefer silver bullion coins over gold, more volatile market but easier to sell on when TSHTF. Plus if the world doesn't end they need silver to make iPods, not so much need for gold.........
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Agree with the sentiments from other posters. This is just the start, next it's time to blackmail citizens of Europe to expect further tax hikes or lose your banks and ultimately your savings! The Cyprus issue is bigger and deeper then what the governments and economists dare to mention. The government , with Eupean central bank backing, is taking out hard cash ( not digital fictious currency). This hard cash is then going to be levied and further fictious credit created from it to beef up the banks and other financial institutions. This is nothing short of theft and fraud. I recall the US doing something similar around 100 years ago when they confiscated GOLD from each citizen citing national security! The "planned" lowered interest rates/savings rates are also having the effect of having one's wealth depreciate in value in the face of higher prices/inflation. Our pension pots, be they state or private will also be suffering due to the treachourous financial "planning" of fiscal planners and the affects of this "planning" upon markets and capitalism as a whole. Invest in gold and silver,copper. Do not trust the banks as there are no nice banks! Neither should you trust the governments as they are working in the interests of the banks and not us! Remove your hard earned cash from banks and buy commodities..anything. Work with your local residents groups and networking groups to setup your own banks and ultimately private equity investors...in essence start creating your own money from thin air as that is exactly what the banks,equity firms and national governments have been doing since moving away from the gold backed currencies. Two can play that game
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20 March 2013