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March 20, 2013

Oversight of Cyprus banks: how it should work

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Written by: Politis

Clive Crook has this to say about the proposed legislation to tax depositors in Cyprus, an idea he labels as “stupid.”

“You want bank bondholders to be concerned about the safety of their investment, so that they exert some discipline over the banks, and you want small depositors to rest easy about the safety of their savings so that an uncontrollable run doesn’t destroy a solvent bank. The initial deal sheltered bondholders and punished small savers…

A rescue that would have achieved a restructuring of Cypriot banks on lenient terms for the country’s citizens would have cost German taxpayers next to nothing. It could have provided a model for the next phase of financial cooperation, to which Germany is supposedly committed. After a series of calamitous financial missteps, it would have confirmed that the EU is finally getting on top of its problems.”






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