You’ve probably already read the news about Cyprus planning a levy against retail banking deposits. On Friday, Cyprus announced that it will apply a one-time levy against all retail bank deposits held in the nation. Officials plan to take 9.9% of all deposits over 100,000 euros and 6.7% of all deposits under that threshold.
The Cypriot government is in a pickle about how to rescue its banking sector, and it’s trying to get EU bailout money. Where other bailouts made bank creditors and bond holders take huge hits, Cyprus has fewer options. But this draconian measure seems more like something that could tip the EU financial sector into a deeper financial crisis rather than shore up the Cyprus economy.
There has already been a limited run on the banks in Cyprus, as depositors rushed to ATMs over the weekend trying to withdraw their cash. Most of the ATMs were emptied within hours, preventing Cypriots from accessing their money. Today is a bank holiday, so no money can flow out until tomorrow.