Thursday, April 11, 2013

The Cyprus "Template" that wasn't - or was it...?

Could it be....

...that the Cyprus "bail-in"  – which first looked like an accident of some politicians' negligence, then became a template, and after that, very quickly "no template at all", in fact actually was not a template, but a test following an already preconceived template, carried out on a comfortably small scale -  with a hopefully limited impact ?  

Whatever the facts are, and despite the now comfortably low volatility in all kinds of rising asset markets, it will pay to remain vigilant.

The course taken in Cyprus at least seems to be awkwardly similar to what we can read in this "Recommendation Report" already formulated back in 2010:

Bank for International Settlements, March 2010: 

Report and Recommendations of the Cross-Border Bank Resolution Group

see Page 43 ff:

Recommendation 10
National authorities should adopt crisis management and resolution strategies that reduce moral hazard by minimising public expenditures. Losses should be allocated among shareholders and other creditors, where possible; and private sector resolutions rather than public ownership should be facilitated. Where temporary public ownership is necessary, authorities should seek to return assets to private ownership and management as soon as possible. At the time of public intervention, national authorities should seek to develop public understanding about the amount of fiscal support that may be necessary, estimates of the time horizon for intervention, risk sharing arrangements and the possible losses borne by the taxpayers.
SIGNATORIES to the document which proposes that creditors of financial organizations, the depositors, carry responsibility to "bail in" bankrupt organizations.
  • Members of the Cross-border Bank Resolution Group
  • Swiss Financial Market Supervisory Authority
  • Federal Deposit Insurance Corporation Banco Central de la República Argentina National Bank of Belgium
  • Commission bancaire, financière et des assurances, Belgium Banco Central do Brasil
  • Office of the Superintendent of Financial Institutions, Canada Commission Bancaire, France
  • Deutsche Bundesbank
  • Bundesanstalt für Finanzdienstleistungsaufsicht, Germany Banca d’Italia
  • Bank of Japan
  • Financial Services Agency, Japan
  • Commission de Surveillance du Secteur Financier, Luxembourg De Nederlandsche Bank
  • Banco de España
  • Sveriges Riksbank
  • Swiss National Bank
  • Swiss Financial Market Supervisory Authority
  • Bank of England
  • Financial Services Authority
  • Board of Governors of the Federal Reserve System Federal Reserve Bank of New York
  • Office of the Comptroller of the Currency
  • Office of Thrift Supervision
  • Federal Deposit Insurance Corporation
  • European Commission European Central Bank (ECB)
  • Financial Stability Board
  • Offshore Group of Banking Supervisors
  • Bank for International Settlements
  • Financial Stability Institute
  • Secretariat, Basel Committee on Banking Supervision

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