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22 Mar 2013
Cyprus deposit levy back on the table
FXstreet.com (Barcelona) - The latest news on the Cyprus bailout negotiations suggest that the proposition to tax bank deposits is back on the table. According to Bloomberg the Eurogroup is considering creating a ‘bad’ bank and a ‘good’ bank to which the deposits from the country’s two largest lenders, Laiki and Bank of Cyprus, would be assigned.
The ‘good’ bank would take in insured deposits below 100.000 euros, which would not be taxed. Uninsured deposits exceeding this amount would go to the ‘bad’ bank and remain frozen until assets were sold. These deposits could sustain losses of up to 40%.
Despite the Cyprus tension, financial markets continued trading rather steady on Friday. TD Securities Rates, FX and Commodities Research team comment: “Equities have been modestly under pressure and peripheral Eurozone spreads are generally neutral. In FX land, looming Cyprus event risk is even less apparent, and the majors are mostly in consolidation mode reflecting the minimal developments overnight. “
The ‘good’ bank would take in insured deposits below 100.000 euros, which would not be taxed. Uninsured deposits exceeding this amount would go to the ‘bad’ bank and remain frozen until assets were sold. These deposits could sustain losses of up to 40%.
Despite the Cyprus tension, financial markets continued trading rather steady on Friday. TD Securities Rates, FX and Commodities Research team comment: “Equities have been modestly under pressure and peripheral Eurozone spreads are generally neutral. In FX land, looming Cyprus event risk is even less apparent, and the majors are mostly in consolidation mode reflecting the minimal developments overnight. “