You will have noticed the banking crisis in Cyprus. It has absorbed my twittertime for 24 hours. I understand Iceland activist Hordur Torfason, currently on a speaking tour of NZ, is going to Cyprus after New Zealand. It should be interesting.
As a condition for a massive loan from the ECB, their government is required to tax ordinary savers from 7-10%. This is ground breaking policy. ‘What is different this time is the nakedness of the Cypress heist’, writes Adita Chakrabortty in the Guardian. His article explains how the European powers pushed Cyprus into a politically suicidal pact. They demanded an impossible deal and it is no surprise when the politicians see how unpopular this measure is, they delay doing it.
As I write this, the banks are closed in Cyprus for another two days and heaven knows what will happen when they open. See Guardian article, for example
Senior bondholders (and it looks as though there aren’t many) will be exempt. This is not true in New Zealand, where Open Bank Resolution only touches deposit holders. As Geoff Bertram and David Tripe pointed out in their Victoria University article, there are at least six classes of creditors who are ahead of us in the queue to be reimbursed. They include holders of Covered Bonds held mostly by pension funds. These are illegal in South Africa and were so in Australia until recently.
All this makes it doubly important for us to get behind our petition asking for a Parliamentary Enquiry into the best ways of making banks stable. We want a lasting durable banking system not one which gets into such crises. So why not write to your MP, the Minister of Finance and the Prime Minister about this?
Jill Abigail has led the way in having her letter on the subject lead the Dominion Post letters today. Here it is:
As a superannuitant dependent on interest from term deposits to top up my pension to a livable level, I am horrified to learn that the Reserve Bank is planning to set in place a process (called “Open Bank Resolution”) where ordinary bank depositors will – without notification and without our consent – have our savings used to bail out a bank in financial distress. If a banking crisis arises, your bank will be able to freeze your bank account overnight and release it the next day. But the account will have been “shaved”, and you will have less money than you had yesterday. A nameless amount will remain frozen while liquidators examine the financial state of the bank and then some or all of it will be used to bail out the bank. This process, which readers can check out on the Reserve Bank website, will all be in place by June 30. There has been no public warning of this undemocratic proposition. Is it legal? Isn’t it theft?
Those of us who suffered loss of retirement savings in the finance institutions’ crashes in 2008 thought we would be safe by keeping the remainder in our banks, especially the Kiwi-owned bank. What a shock now for us to learn that our money is not safe after all. This is a terrifying prospect for those of us who have no means of replacing any losses because our days of being able to earn are long behind us.