# Your money no longer guaranteed safe in Canadian banks.



## Rusty O'Toole (Feb 1, 2012)

The new 2013 budget includes this on page 144:

“The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure
could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of
options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.”

Translated, Without the use of taxpayer funds means via depositor funds.

And the meat of the provision, from Page 145:

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.
This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.
Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants…"

certain bank liabillities = depositors accounts.

If you have been watching the Cyprus bank crisis you know what this means. Cyprus is the template for future bank "bail ins" in which insolvent banks make up their losses by helping themselves to depositors' money. The government closed the banks on March 17th, at that time they proposed to take 6.75% to 9.9% of depositors' money. Since then, many large accounts have mysteriously been withdrawn so they are talking about an 80% haircut for the rest. Haircut seems to be the new name for shearing the sheep.

Deposit insurance does not apply because they do not consider this a default, they consider it a tax.

Another thing that bothers me. How long ago was this provision written into the budget? The Cyprus bank holiday was announced on Sunday the 17th, the new budget came out on Thursday the 21st. Hardly time to write it in on the spur of the moment. So this had to be planned before the Cyprus announcement, yet it uses the same language as the Cyprus press releases like "bail in", a term I never heard before.

Maybe they have no intention of using it. But it's there all the same, if they want to.


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## sags (May 15, 2010)

It certainly is suspect, given the timing and exact wording.

It makes on wonder what they know...............that we don't.


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## andrewf (Mar 1, 2010)

Rusty O'Toole said:


> The new 2013 budget includes this on page 144:
> 
> “The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure
> could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of
> ...


No it does not. It means using equity dilution, debt converting to equity and bondholder haircuts.



> And the meat of the provision, from Page 145:
> 
> The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.
> This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.
> ...


No it does not.



> If you have been watching the Cyprus bank crisis you know what this means. Cyprus is the template for future bank "bail ins" in which insolvent banks make up their losses by helping themselves to depositors' money. The government closed the banks on March 17th, at that time they proposed to take 6.75% to 9.9% of depositors' money. Since then, many large accounts have mysteriously been withdrawn so they are talking about an 80% haircut for the rest. Haircut seems to be the new name for shearing the sheep.
> 
> Deposit insurance does not apply because they do not consider this a default, they consider it a tax.
> 
> ...


This is nothing new from the government of Canada. When they speak of bail ins, certain bank liabilities, etc. they are speaking of bond holders, not depositors.

I'll be frank: I think you're fear-mongering.


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## GoldStone (Mar 6, 2011)

andrewf said:


> I'll be frank: I think you're fear-mongering.


It's not him. Here's the source of his quote:

http://www.silverdoctors.com/canada...-systemically-important-banks-in-2013-budget/

No surprise there. Gold/silver bugs thrive on fear-mongering. Here's a classic Warren Buffet quote:

“Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.”


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## none (Jan 15, 2013)

Yeah, someone obviously went full retard.


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## Rusty O'Toole (Feb 1, 2012)

andrewf said:


> No it does not. It means using equity dilution, debt converting to equity and bondholder haircuts.
> 
> 
> 
> ...



What is new is that depositors (customers) are now fair game, starting in Cyprus. This looks to me like the same thing.

"I'll be frank: I think you're fear-mongering."

You sure got that right. Those paragraphs scared the hell out of me, as they have done with everyone I showed them to.

I never heard the term bail in before except in connection with the Cyprus bail in of banks using depositors funds. I have read those paragraphs over and over and have come to the conclusion that they reflect the the bail in template and do not exclude the seizure or taxing of any bank liability including CDs, deposits, RRSPs, stocks or bonds.


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## andrewf (Mar 1, 2010)

Cyprus is nothing new. When countries have financial crises due to having debt in currency they have no control over, deposits are often targeted. Check out Argentina.

As far as Government of Canada talking about bail-ins, here is OSFI from 3 years ago:

http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/speeches/jdlh20100506_e.pdf

They scare you, but your fears are unfounded. They are based on misunderstandings (perhaps you have been misled by an unscrupulous website) of the government's position.


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## dogcom (May 23, 2009)

Anything is possible and no one is completely safe. I think Canadians should demand more and more capital requirements for the banks so that they are safe for bank deposit holders. I really don't care if they don't make huge profits from leverage and I really don't care if share holders lose some money.


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## Rusty O'Toole (Feb 1, 2012)

The government's position seems clear enough, as outlined in their own official publications. Whether they will ever need to implement these measures remains to be seen. History does tell us that if they do, they will do so without warning.

We also know from the GM bailout that they have no problem ignoring the rule of law and a hundred years of precedent when it suits their purpose.


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## GoldStone (Mar 6, 2011)

What exactly is new here?

CDIC covers deposits up to 100K. Anything above that is not guaranteed. If it's not guaranteed, you may not get it back if the bank fails.


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## sags (May 15, 2010)

I am not sure having money or gold or land........or anything is going to mean much if the world economy collapses.

I would think we would all be standing in a soup line eventually. 

Hope they are serving a hearty potato and bacon soup...............and not the cheap stuff.


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## Rusty O'Toole (Feb 1, 2012)

GoldStone said:


> What exactly is new here?
> 
> CDIC covers deposits up to 100K. Anything above that is not guaranteed. If it's not guaranteed, you may not get it back if the bank fails.


That is what they thought in Cyprus until they closed the banks. They were covered up to 100,000 Euros.

Turns out a bail in is a tax not a default, and is not covered by insurance. Latest word is the remaining depositors will lose 80% of their accounts.


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## Rusty O'Toole (Feb 1, 2012)

sags said:


> I am not sure having money or gold or land........or anything is going to mean much if the world economy collapses.
> 
> I would think we would all be standing in a soup line eventually.
> 
> Hope they are serving a hearty potato and bacon soup...............and not the cheap stuff.


Where have you been for the last 7 years? The world economy is collapsing now. Have you never heard of the subprime crisis, Iceland, Ireland, Greece, Cyprus? Nothing has been done about the root causes. Everything that has been done has been in the nature of a bailout or temporary solution. Every time they say the problems are contained they pop up somewhere else.

I think Canada will go last if at all. But if Canadian banks and financial institutions hold bonds and other investments from abroad they are in danger. TPTB are already making their plans.

We should be making ours. Hoping to keep out of the soup line as long as possible.

Or to put it another way, for our Warren Buffet fans, return OF capital is more important than return ON capital.


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## kcowan (Jul 1, 2010)

This is the inevitable result of the massive transfer of wealth from taxpayers to investment bankers that began in the US (architected by GWB and his advisors). The WW contagion has not yet worked itself out. The wanton printing of money made possible by abandoning the gold standard was an earlier enabler. Cyprus could not print money so the gradual dilution of wealth was replaced by a sudden grab of wealth.


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## lonewolf (Jun 12, 2012)

Not backing the banks with tax payers money makes it easier to decide to go bank or credit union. Since money loaned (deposited) in banks is not always made by shareholders thier is a conflict of interest as to weather the depositor gets their money back. Credit union since owned by members there is no conflict of interest.

Banks should never be backed by tax payers it results in banks taking high risks & if they lose money they just get bailed out if they win big they keep the profit.


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## Rusty O'Toole (Feb 1, 2012)

Latest word from Cyprus is that the biggest losers in the bail in are Cyprus based businesses who had their working capital in local banks. Hundreds of businesses are wiped out. Thousands of employees out of jobs. Employers leaving the country, trying to start over someplace else.

The IMF published a paper in April of 2012 called Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions.

Mark Carney mentioned the use of bail-ins in a speech in Nov.2012.

This has been in the works for a year.

Lonewolf, thanks for the tip about the credit unions.


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## andrewf (Mar 1, 2010)

Carney said nothing, explicit or implicit, about using deposits for bailing in a bank.


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## GoldStone (Mar 6, 2011)

Rusty O'Toole said:


> GoldStone said:
> 
> 
> > What exactly is new here?
> ...


Insured depositors with less than 100,000 Euros will not lose a cent.

Uninsured depositors with more than 100,00 Euros may lose a lot. The exact % depends on the bank.

That's the difference between insured and uninsured deposits.

If you have more than 100K on deposit in a Canadian bank, that should give you a pause. BUT.... 

There is nothing new here. Nothing has changed as far as Canadian deposits are concerned.

I agree with Andrew, you are fear-mongering.


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## GoldStone (Mar 6, 2011)

Garth Turner is generally not the most respected source, but he is right on the mark in this case.

*Hysteria*


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## fraser (May 15, 2010)

I don't think that it is reasonable to compare the banking system in Cyprus to the one in Canada. For a start, the banking regulations are/were completely different. The amount savings in comparision to GDP in Cyprus was way out in left field. Exposure to Greek debt was extremely high. 

Cypriot banks were paying as much as 4.5 percent in deposits at the time when rates in Canada and Germany are in the 1.-1.5 percent range. Almost ponzi like. Return is a reflection of risk.

While there may not have been bank failures in Canada but there have been a number of close calls in the credit union environment. The public has not had visibility to them but they are just one of the reasons why there has been so much consolidation in this environment. Typically the regulators move in to a troubled credit union and the within days the branch is amalgamated into a larger group. This has occured a number of time in British Columbia. Depositors were not impacted nor were the often aware of the issues.


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## olivaw (Nov 21, 2010)

Loathe as I am to defend the Harper government, I will this time. There has been no stated or implied willingness to raid deposits in Canadian banks. The government recognizes the importance of the largest six Canadian banks and requires them to increase their capital reserves. Seems like a sensible way to reduce the risk of a liquidity crisis.


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## kcowan (Jul 1, 2010)

Here is a good summary and discussion about how the Cypriot crisis got so much worse:

Leakage of Cypriot Deposits overseas

If you think this will have no effect on Canada, then I wish you to continue to have restful sleep. I am not being a drama queen here. Just trying to remain pragmatic.


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## Rusty O'Toole (Feb 1, 2012)

GoldStone said:


> Insured depositors with less than 100,000 Euros will not lose a cent.
> 
> Uninsured depositors with more than 100,00 Euros may lose a lot. The exact % depends on the bank.
> 
> ...


Deposit insurance does not apply because the banks are not insolvent. They are not insolvent because they are being "topped up" from depositors' funds. This is a tax imposed by the government. Besides, they are getting bank stock in exchange for their money. Stock in a bank with no assets.

Latest word is the "haircut" or shearing will be 80%. The reason it is so high is that all the biggest depositors have removed their money. Only the small fry are left.

I already told you I was fear mongering. The question is, is it justified to feel afraid? The answer is, there is nothing to be afraid of today. Whether there is something to be afraid of in the future, depends to a great extent on what measures you take to protect your assets.


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## carverman (Nov 8, 2010)

kcowan said:


> If you think this will have no effect on Canada, then *I wish you to continue to have restful sleep*. I am not being a drama queen here. Just trying to remain pragmatic.


We can all sleep like babies...and dream of better times ahead...by Chiken Lytle. :biggrin:

http://brighterlife.ca/2012/12/17/i...:SEP:Is-the-Canadian-economy-in-trouble-in-20
and 
http://usatoday30.usatoday.com/mone...2-26/stock-market-bears-doomsayers/53259742/1


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## Rusty O'Toole (Feb 1, 2012)

olivaw said:


> Loathe as I am to defend the Harper government, I will this time. There has been no stated or implied willingness to raid deposits in Canadian banks.


This is perfectly true. All they said is, they can do it if they have to. They will not take your bank account unless there is a real crisis and their friends on Bay Street need the money badly.


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## Rusty O'Toole (Feb 1, 2012)

"I don't think that it is reasonable to compare the banking system in Cyprus to the one in Canada. For a start, the banking regulations are/were completely different."

Not anymore.

" The amount savings in comparision to GDP in Cyprus was way out in left field. "

Canadian banks have branches all over the world

" Exposure to Greek debt was extremely high. "

Canadian banks are in a better position in that regard

"Cypriot banks were paying as much as 4.5 percent in deposits at the time when rates in Canada and Germany are in the 1.-1.5 percent range. Almost ponzi like. Return is a reflection of risk."

Too bad nobody explained this to the Cypriot bank depositors before March 17.


"While there may not have been bank failures in Canada but there have been a number of close calls in the credit union environment. The public has not had visibility to them but they are just one of the reasons why there has been so much consolidation in this environment. Typically the regulators move in to a troubled credit union and the within days the branch is amalgamated into a larger group. This has occured a number of time in British Columbia. Depositors were not impacted nor were the often aware of the issues."

That is as it should be and that is how it has been in the past. 

In other countries things don't work as smoothly. Regulators are not as strict. Money has a way of getting lost. Governments put their cronies ahead of the public interest. When I see our government copying them it bothers me.


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## GoldStone (Mar 6, 2011)

Rusty O'Toole said:


> Deposit insurance does not apply because the banks are not insolvent. They are not insolvent because they are being "topped up" from depositors' funds.


Yes, they raided uninsured deposits. Uninsured deposits are not protected. Never have been. Not in Cyprus. Not in Canada. This is not new.



Rusty O'Toole said:


> Latest word is the "haircut" or shearing will be 80%. The reason it is so high is that all the biggest depositors have removed their money. Only the small fry are left.


Last word from where?? Please provide references to your sources. What you say is in direct contradiction with the reputable media coverage. The deal in place protected the small fry.


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## lonewolf (Jun 12, 2012)

If a banking failure occures in Canada would the bond holders holding bonds from the bank be hit before the depositors or would the bond holders get paid before the depositors ? I asked the bank this question & they could not give me a proper answer.


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## NorthernRaven (Aug 4, 2010)

Rusty O'Toole said:


> Deposit insurance does not apply because the banks are not insolvent. They are not insolvent because they are being "topped up" from depositors' funds. This is a tax imposed by the government. Besides, they are getting bank stock in exchange for their money. Stock in a bank with no assets.
> 
> Latest word is the "haircut" or shearing will be 80%. The reason it is so high is that all the biggest depositors have removed their money. Only the small fry are left.


This reasoning seems rather silly. The whole reason the banks have problems is that many of their assets are tied up in things (like Greek bonds) that have lost value. They don't have all the depositors' money sitting on a shelf in a big safe - much of it has been transformed into those (and other) assets. If enough bigshot shady Russians (and whoever else was swelling up the deposit base to such a huge degree) all want their money back in a bank run, the bank is going to either have to liquidate those assets, or someone else (ECB, Cypriot central bank) is going to have to provide liquidity beyond whatever that bank has to honour those transfers. If the central bank actually cleared withdrawals totalling a hefty fraction of a bank's deposit base, that isn't, in fact, a freeze at all.


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## Addy (Mar 12, 2010)

sags said:


> I am not sure having money or gold or land........or anything is going to mean much if the world economy collapses.
> 
> I would think we would all be standing in a soup line eventually.


If you have land, you can at least grown your own food, make your own soup.


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## Sampson (Apr 3, 2009)

Addy said:


> If you have land, you can at least grown your own food, make your own soup.


If the government will take you money, why can't they take your land from you?


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## crazyjackcsa (Aug 8, 2010)

Sampson said:


> If the government will take you money, why can't they take your land from you?


People don't own land in Canada.


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## lonewolf (Jun 12, 2012)

They rent the land (property tax)


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## andrewf (Mar 1, 2010)

GoldStone said:


> Garth Turner is generally not the most respected source, but he is right on the mark in this case.
> 
> *Hysteria*


To quote Garth:

"Let’s recap.

This is a good development. It slaps the bankers around, makes them raise a bunch of money and clearly says if they screw up, they have to fix it. This shifts liability from us to them. And nowhere – absolutely nowhere – does this suggest your bank TFSA is going to be sucked dry if CIBC chokes.

There will no more be confiscation of bank deposits in Canada than there will be a bank failure.

*But it does prove we have a bottomless well of stupid.*"

Couldn't have said it better...


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## Rusty O'Toole (Feb 1, 2012)

andrewf said:


> To quote Garth:
> 
> "Let’s recap.
> 
> ...


I'm certainly glad to hear that. I was worried there for a while. Evidently Garth has some secret source of advance information to know what the banks and the government is going to do in the future. All I have to go on is what they are saying now. And what they are saying now, does not rule out a bail in that follows the Cyprus template.

By the way... has he ever been right about anything before?


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## Rusty O'Toole (Feb 1, 2012)

Re: the 80% haircut. 

"Last word from where?? Please provide references to your sources. What you say is in direct contradiction with the reputable media coverage. The deal in place protected the small fry. "


This information comes from a statement made by Michalis Sarris the Cyprus finance minister. I got this from the Greek Reporter web site.

"Cyprus΄s finance minister said Tuesday that large deposit holders at Cyprus Popular Bank PCL (CPB.CP), the island΄s second biggest lender, could face losses of as much as 80% on their deposits as the government moves to wind down its operations.
Speaking in a television interview with state broadcaster RIC, Michalis Sarris indicated that it could also take years before those depositors see any of their money returned.
“Realistically, very little will be returned,” Mr. Sarris said."

Full story - http://greece.greekreporter.com/201...sured-laiki-depositors-could-face-80-haircut/

When they started, they were talking about a 6.75% levy on small deposits and a 9.9% levy on large ones. Then they said they would not touch small deposits, only large ones. Then they said most of the large accounts held by foreigners seemed to have vanished. This story says they will take 80% of what is left.

The situation is still unfolding and there will likely be new developments. Nothing can be depended on for sure except, we know the banks are insolvent and the banks and government agencies are planning to bail them in with depositors money.

There is no telling how far this thing could go. We know now that the Cyprus banks were insolvent because of the 50% write down in the value of their Greek bonds, which was part of the Greek bailout last June. We also know every bank in Europe holds Greek bonds and no doubt, Cyprus bonds and everybody else's bonds.

We also know they are levered up at up to 60:1. This means losses of 2% could break them.

What happens if enough Europeans get spooked and take their money out of the bank? What if other banks take a loss on their Cyprus investments? I don't know what might happen and I don't think anyone else does either. And the way the government and banking establishment has handled things so far does not inspire confidence.


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## GoldStone (Mar 6, 2011)

Rusty O'Toole said:


> Re: the 80% haircut.


I didn't question 80% haircut. The number refers to the losses of large uninsured depositors in one failed bank.

I challenged your repeated claims that small insured depositors will take a haircut.




Rusty O'Toole said:


> Full story - http://greece.greekreporter.com/201...sured-laiki-depositors-could-face-80-haircut/
> 
> When they started, they were talking about a 6.75% levy on small deposits and a 9.9% levy on large ones. Then they said they would not touch small deposits, only large ones. Then they said most of the large accounts held by foreigners seemed to have vanished. This story says they will take 80% of what is left.


No. It does not say that. Read the story again. Nowhere does it say that *small insured depositors* (under 100K) will take a haircut.


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## Rusty O'Toole (Feb 1, 2012)

GoldStone said:


> I didn't question 80% haircut. The number refers to the losses of large uninsured depositors in one failed bank.
> 
> I challenged your repeated claims that small insured depositors will take a haircut.
> 
> ...


I told you, they keep changing the rules. Latest word is they are taking 100% of all deposits over 100,000 Euros. This is from Reuters web site.

http://www.reuters.com/article/2013/03/29/us-cyprus-parliament-idUSBRE92G03I20130329

Quote:"an initial plan to hit small deposits as well as big ones was abandoned and accounts under 100,000 euros were spared."

At one time they were going to clip small depositors. Then they changed their plans. Hope this is clear.

Right now, withdrawals are limited to 300Euros per day. So depositors will be able to get all their money out in 334 days. Unless they change the rules again. Or they run out of money.

There is no use quibbling about details. Either you get the picture or you don't.


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## Rusty O'Toole (Feb 1, 2012)

*'I went to sleep Friday as a rich man. I woke up a poor man'*

NICK MILLER March 29, 2013
Retirement dreams dashed: John Demetriou.

Retirement dreams dashed: John Demetriou. Photo: Nick Miller

''Very bad, very, very bad,'' says 65-year-old John Demetriou, rubbing tears from his lined face with thick fingers. ''I lost all my money.''

John now lives in the picturesque fishing village of Liopetri on Cyprus' south coast. But for 35 years he lived at Bondi Junction and worked days, nights and weekends in Sydney markets selling jewellery and imitation jewellery.

He had left Cyprus in the early 1970s at the height of its war with Turkey, taking his wife and young children to safety in Australia. He built a life from nothing and, gradually, a substantial nest egg. He retired to Cyprus in 2007 with about $1 million, his life savings.

He planned to spend it on his grandchildren - some of whom live in Cyprus - putting them through university and setting them up. There would be medical bills; he has a heart condition. The interest was paying for a comfortable retirement, and trips back to Australia. He also toyed with the idea of buying a boat.

He wanted to leave any big purchases a few years, to be sure this was where he would spend his retirement. There was no hurry. But now it is all gone.

''If I made the decision to stay, I was going to build a house,'' John says. ''Unfortunately I didn't make the decision yet.

''I went to sleep Friday as a rich man. I woke up a poor man.''

His money was all in the Laiki ''Popular'' Bank which was the main casualty of Cyprus' bailout package set by the European Union. Laiki is to be dismantled. Savings of less than €100,000 are to move to the Bank of Cyprus. Anything more than that will almost certainly be wiped out as the bank is wound down, its remaining assets taken by the bank's creditors.

Last week he heard a rumour that the bank was in trouble and went into Aiya Napa to ask his bank manager - a friend - if he should move his life savings.

''There's no problem, nothing to worry about,'' he was told.

Not so. ''I go to bed and I can't sleep. I walk around, I have a coffee. I am thinking about my family.''

John's tears flow. As he chokes up, his son George, who moved to Cyprus in 1990, explains.

''The whole family, we used to work at the markets. I would work at the markets on the weekend to help my parents while my mates were off having fun. Honest work in honest jobs. Now all that hard work is paying

the debts of other people and the government. It's disgusting, to be honest.''

George says he can start again - if things get worse he and his family might move back to Australia.

''But not my dad. He can't go back to Australia. He is not allowed to fly because of his heart, and anyway where would he live? He has no house. He will have €100,000 left to live off. Soon he's not going to have a cent to his name.''

John has a thin hope. His money was sitting in the bank in Australian dollars instead of euros, so he wonders if it would be exempt from the bank's collapse. But the bank's doors are closed, so he doesn't even know to whom he should put that argument.

''For the moment I am 'sitting on charcoal', as they say,'' waiting to see if he gets burnt.

''It's not Russian money, it's not black money. It's my money.''

There are almost 5000 Cypriot-Australians on the island. Most are - or were - self-sufficient veterans of the 1950s engineering boom or the 1974 war who came back to retire or to be with family (John is looking after his 90-year-old mother).

This week Britain stopped paying pensions into Cypriot accounts, advising expatriates to open a British bank account instead.

Australia's high commission in Nicosia has already fielded inquiries from dual nationals seeking advice on their pensions. They were told to set up different payment arrangements, a spokeswoman for the Department of Foreign Affairs and Trade said.

''We expect the main impact will be for Australians who have invested large sums in Laiki Bank or the Bank of Cyprus,'' she said. ''There is no need for special measures at this stage.''


http://m.smh.com.au/national/i-went...-man-i-woke-up-a-poor-man-20130328-2gxab.html


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## GoldStone (Mar 6, 2011)

Rusty O'Toole said:


> Quote:"an initial plan to hit small deposits as well as big ones was abandoned and accounts under 100,000 euros were spared."
> 
> At one time they were going to clip small depositors. Then they changed their plans. Hope this is clear.


It has been clear to me all along. Glad it's clear to you now.


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## sags (May 15, 2010)

The really sad part is that a bailout solution would have involved such a small amount of money for the Eurozone, but they refused and opted instead to force the Cypriot government to seize the deposits.............after they waited long enough for their friends to have time to move their cash out of harms way.

Decisions like this could destroy the relatively short history of peace and harmony in Europe.


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## carverman (Nov 8, 2010)

lonewolf said:


> They rent the land (property tax)


Well..it's complicated..technically the title is in your name..for transfer and paying property taxes..but if you don't pay your property taxes within 4 years, the municipality could
seize your land for tax liens. So unlike a lease..that has a definite period of time and you can't sell that property..you can if you own it..you can sell your free and clear property
at any time. 



> Tax Liens
> Homeowners who rack up significant property tax bills can expect the municipality to levy a tax lien against their properties. Tax liens supersede any mortgage in place against the property. Should you ever sell your home, the proceeds would immediately divert to your outstanding tax bill, and any remaining balance you owe on your mortgage loan becomes your personal responsibility. A tax lien also impedes your ability to refinance your current mortgage or seek a second mortgage or equity loan, effectively forcing you to pay your taxes before you can do anything else with the property.* Furthermore, if you fail to pay off the tax lien in a specified period of time, the municipality can seize your property and sell it at public auction to recover the full amount of your overdue taxes, including any additional interest and/or penalties you have incurred.*


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## carverman (Nov 8, 2010)

sags said:


> The really sad part is that a bailout solution would have involved such a small amount of money for the Eurozone, but they refused and opted instead to force the Cypriot government to seize the deposits.............after they *waited long enough for their friends to have time to move their cash out of harms way*.


 Nothing new here..just like insider trading before the stock takes a dive (ie: Nortel ex CEO John Roth), this has happened before, the "priviledged" get a chance to escape
with all their holdings intact and the others suffer the consequences. Before WWII, the Nazis gave Jewish Entrepreneurs time to dispose of
their assets and deutsch marks before they decide to seize all their assets. In times of political or economic instability, it's usually the "peasants" that suffer the most, not only is their savings devalued but they don't have the mechanism to move money around to foreign or Swiss banks.


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## kcowan (Jul 1, 2010)

carverman said:


> Well..it's complicated..technically the title is in your name..for transfer and paying property taxes..but if you don't pay your property taxes within 4 years, the municipality could seize your land for tax liens. So unlike a lease..that has a definite period of time and you can't sell that property..you can if you own it..you can sell your free and clear property
> at any time.


Any creditor can slap a lien on your property. It just has to be justified to a judge. Tax liens are just a special case. The only things secure from creditor actions are your RRSP/Pensions and segregated insurance accounts.


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## Rusty O'Toole (Feb 1, 2012)

GoldStone said:


> It has been clear to me all along. Glad it's clear to you now.


Nothing is clear to me and it won't be as long as they keep changing the rules. That is the problem.

Did you get the part where non insured accounts are being given to the banks in their entirety? What happens to the insured accounts if that is not enough?

http://www.reuters.com/article/2013/03/29/us-cyprus-parliament-idUSBRE92G03I20130329

The important point to bear in mind is that depositors are customers of the bank, they are not investors. They do not take part in the profits of the bank and should not be responsible for losses. This bail in business is something new that goes against many years of legal and banking practice.

The new Canadian budget says they will be changing the law to make the same thing legal in Canada. Not that they are going to do it, but they will be able to do it in the future if it is ever necessary. It goes without saying that if they do such a thing it will be without warning.

The Cypriots may not have had any warning but the rest of us just got it.


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## carverman (Nov 8, 2010)

kcowan said:


> Any creditor can slap a lien on your property. It just has to be justified to a judge. Tax liens are just a special case. The only things s*ecure from creditor actions are your RRSP/Pensions* and segregated insurance accounts.


NOt true..certainly not in my case. I have been paying ex support from MY PENSION, since 2002. Judges will consider pensions as income, and certainly as far as CPP, the courts will
split CPP payments in case of divorce. This happened to me as well. What you may hear is not necessarily the way it may turn out to be.


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## carverman (Nov 8, 2010)

Here's the jist of it...the money is printed by the gov't and the money technically belongs to the gov't. You are permitted by the gov't to earn it (in many ways) and pay taxes back to the gov't in the form of income tax, sales taxes, property taxes, and health taxes. What is left over is available to your use and if you decide to purchase goods, property, services or commodities, you will pay tax on the remainder as well. This isn't a lot different than with the Greek Cypriots. I'm not sure what their taxation base is..but the money they have in their savings in the banks, can also be considered to be taxable, just like yours and mine...and that is what they are doing.

If Canada gets into serious financial problems in the future and the current tax base isn't enough..our gov't will be coming up with different tax schemes for taxation. 
Anybody but the poor is already paying at least 20% tax on their money before they put it in the bank...and more in taxes after that..HST, Property tax, and excise taxes.


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## Rusty O'Toole (Feb 1, 2012)

"Nothing new here..just like insider trading before the stock takes a dive (ie: Nortel ex CEO John Roth), this has happened before, the "priviledged" get a chance to escape"

This sort of thing is much more common than most people believe. Before you say such things are not done in Canada, they are done in Canada all the time. You just don't hear about them. Don't take my word for it. Read Thieves of Bay Street by Bruce Livesey and find out for yourself.


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## kcowan (Jul 1, 2010)

carverman said:


> NOt true..certainly not in my case. I have been paying ex support from MY PENSION, since 2002. Judges will consider pensions as income, and certainly as far as CPP, the courts will
> split CPP payments in case of divorce. This happened to me as well. What you may hear is not necessarily the way it may turn out to be.


Divorce is not the same as an unsecured creditor. Lawyers argue that married couples are participants in the division of assets.


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## carverman (Nov 8, 2010)

kcowan said:


> Divorce is not the same as an unsecured creditor. Lawyers argue that married couples are participants in the division of assets.


Well one could argue that once you ARE divorced, your ex is an unsecured creditor as well.

BTW..it was not a case of division of marital assets, which I understood andaccepted..it was a case of DOUBLE DIPPING into my pension. 

My ex had received a substantial lump sum of my pension, which cost me $500 for actuarial services to come up with lump sum payment
and she was paid in full + interest at the time of divorce from my share of the proceeds of the marital home. 

The court case for her seeking "more gold from my pension" came after the divorce, and *5 years after she had received all monies entitled to her*...
but she wanted more and got it..from the judge that considered pension income available for support payments.


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## carverman (Nov 8, 2010)

Just heard on the news, that Flaherty mentioned in his last budget a clause about "bail-in" to the federal gov't in a future scenario where Canada could get into a similiar
situation as Cyprus. 



> The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure
> could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of
> options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.”
> 
> Translated, Without the use of taxpayer funds means via depositor funds.


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## Rusty O'Toole (Feb 1, 2012)

carverman said:


> Just heard on the news, that Flaherty mentioned in his last budget a clause about "bail-in" to the federal gov't in a future scenario where Canada could get into a similiar
> situation as Cyprus.


I wonder how the banks will react to this news? Will the fact that they no longer have to take responsibility for their losses encourage them to take more risks?


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## Cal (Jun 17, 2009)

I hate to admit it, but Garth Turner simplified and clarified this on his blog the other day:

"It’s also correct the feds’ discussion paper (not the budget, but the ‘economic action plan’) proposes that before public money is used to rescue a bank (not that it’ll ever happen) its shareholders and bondholders step in first. Not depositors. That’s a fabrication.

Instead, the bail-in provisions (when announced) will require the big banks to hold debt that can readily be converted into capital if the institution falters. The logic is simple. Without some mechanism put in place in advance of any troubles, bankers might assume that being “too big to fail”, they’d always and automatically be bailed out (as happened in the US). So the feds are making it clear they need to save themselves. And how can you argue with that?

Nowhere does any document talk about ‘deposits’ or ‘depositors’ or funds held by the banks in trust for customers. The only reference is to the conversion of ‘certain liabilities’ into capital if the SHTF. And you can bet those liabilities will be new bond issues floated by the banks – which will be snapped up in a heartbeat by investors who know how deluded the doomers are.

As the authoritative publication ‘Credit Outlook’ pointed out, the whole idea is to impose losses on bank debtholders (ie, bondholders), not taxpayers, in the event of a disaster. “Canada’s plan to establish bail-in powers is consistent with other international reforms, including the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions, which recommends that resolution authorities have the power to write down or convert all senior unsecured and uninsured liabilities, as well as subordinated debt and preferred stock to regulatory capital.”


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## andrewf (Mar 1, 2010)

Rusty,

You are deliberately misinterpreting what the government has said. You are conflating what has happened in Cyprus to what might happen here. I see no reason to make that leap, given the evidence before us. 

Now, you can say that document did not spell out that deposits were not the intended target of forthcoming bail-in provisions, but their previous statements used as context make the budget statement clear. If you're just tuning in now, maybe you should do a bit more research on the matter.


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## andrewf (Mar 1, 2010)

Carver, that is a totally wrongheaded interpretation of what Flaherty said. People with an agenda are advancing that view.


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## Rusty O'Toole (Feb 1, 2012)

Latest on the Cyprus bank scandal: The banks were insolvent more than a year before they pulled the plug. The delay in dealing with the problem gave Europe's biggest banks time to withdraw their money from Cyprus.

http://www.oftwominds.com/blogapr13/Cyprus-template4-13.html

I'm not saying something like this is going to happen in Canada. If it does it will happen here last. But there is nothing to stop it from happening. If Canada ever gets into the kind of trouble now happening in Europe, Japan and the US there is nothing stopping the banks from taking your money.

You have to ask yourself, is it possible Canadian banks would take advantage of their customers ? I think we know the answer to that question. Would the government stop them? Hell, they already gave them permission.

So, the only question remaining is, what are the chances of Canada's banks getting into trouble? I believe the chance of this happening is remote, but that is what the citizens of Iceland, Ireland, England, Greece, Japan, and Cyprus thought.

We also know that whoever gets warned in advance it won't be the ordinary depositors.


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## Rusty O'Toole (Feb 1, 2012)

Another thought worth pondering. Bank deposits are insured up to $100,000 in case of default. But a bail in is not a default so the insurance does not apply.

Pleasant dreams.


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## andrewf (Mar 1, 2010)

I think the government would be most unwise to use that interpretation. They might as well shut down CDIC in that case.


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## Rusty O'Toole (Feb 1, 2012)

andrewf said:


> I think the government would be most unwise to use that interpretation. They might as well shut down CDIC in that case.


You got that right. They will only do it in the direst necessity i.e. if a bank is in danger of losing money.


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## andrewf (Mar 1, 2010)

You're just trolling. 

The government would not do this because it would trigger a bank run. That's the whole point of CDIC--to remove the incentive to run on banks.


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## sags (May 15, 2010)

As was discussed on CNBC today...........there is no historical reference that replicate today's financial environment. 

Historical charts are meaningless. Historical statistics are meaningless. Historical practices are meaningless.

Only a few years ago, if someone had suggested the government could inject Trillions of dollars into an economy without creating massive inflation......they would have been laughed out of the room.

If someone had listed all the negatives and then claimed that stock markets would continue to go up regardless.......they would have been laughed out of the room.

If someone had said there would be Trillions in money pumping......and gold would be anywhere but straight up.........they would have been laughed out of the room.

It IS different this time..........a lot different.

Maybe not that different from what happened to great empires in the past.........the Romans, the Chinese, the Egyptians...........but I don't know enough about what caused their downfall.

I do agree with one analyst/commenter.........whatever he was.

He said............."there is no solution"...........

I agree with him because nothing has worked. Trillions injected and still bumping along the bottom everywhere.

So........it could get bad enough that governments would seize deposits.......but if it is that bad.........it may not matter.

Some people worry about nuclear war.........I don't. I just want to be at ground zero if it happens........vaporized.


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## andrewf (Mar 1, 2010)

^I disagree that this time is different.

Read Reinhart and Rogoff, _This Time is Different_. 

What we're experiencing now is what the Great Depression would have been like if they hadn't hopelessly bungled the policy response. Not great, but not that bad.


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## bgc_fan (Apr 5, 2009)

Hmm, just an idle thought, as CDIC does not insure deposits past $100K, and from all appearances, money past that point is fair game in case of insolvency, would that mean that money in mutual funds (bank related) is immune from that possibility? I would not think that they would show up on the bank balance sheets as assets.

I mean they play up the fact that mutual funds aren't guaranteed investments, but I always interpreted that as the prices can drop.


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## andrewf (Mar 1, 2010)

^ Your last statement is why CDIC emphasizes that. There is risk of fluctuation in MFs due to change in asset prices. But MFs are separate corporate entities from the banks or other institutions that manage them--they are not part of the capital structure (except, obviously, equity or bond funds that hold the shares or bonds of the manager). They are not assets of the FI.


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