Cyprus-Forum.com

[Paphitis]

There were 206bn Euros worth of Greek bonds that were involved in the PSI. I don't think Cypriot banks were the only ones left holding the parcel.

Yes that is true DT.

But Cypriot Banks invested large sums. 4 Billion is 20% of GDP. They over exposed themselves and consequently over exposed the RoC Government. It would have been more prudent to invest a lot less in Greek Bonds and stick to the low yield Bonds from other countries.

A German Bank investing a much larger amount, let's say 100 Billion is a much smaller ratio to Germany's GDP, and a Bank like CommerzBank would be able to just write it off and continue to trade.

[DT.]

There were 206bn Euros worth of Greek bonds that were involved in the PSI. I don't think Cypriot banks were the only ones left holding the parcel.

Yes that is true DT.

But Cypriot Banks invested large sums. 4 Billion is 20% of GDP. They over exposed themselves and consequently over exposed the RoC Government. It would have been more prudent to invest a lot less in Greek Bonds and stick to the low yield Bonds from other countries.

A German Bank investing a much larger amount, let's say 100 Billion is a much smaller ratio to Germany's GDP, and a Bank like CommerzBank would be able to just write it off and continue to trade.

I agree and I don't mean to excuse the bank investment policy as I also believe it was haphazard but banks don't invest with a country GDP in mind they invest with Assets under custody in mind and in this case the banks had deposits just in Cyprus of around 80bn making the % invested around 5%.

[Robin Hood]

DT

.............. in this case the banks had deposits just in Cyprus of around 80bn making the % invested around 5%.

I think you are confusing ‘deposits’ with ‘assets’ and they are not the same thing.

In banking what they have out on loan is considered an ‘asset’ because it is money owed to them. Deposits are treated as ‘liabilities’ because that is money they owe the depositors. NPL’s are toxic assets ...... or to you and me, money the banks are never likely to realize and these represent 46% of the loans in Cypriot banks. They do not have 46% of their declared assets!

Assets are always significantly larger than liabilities because of the banking practice of ‘fractional reserve debt’, with a fraction of deposits held as a reserve and the remainder loaned over and over again. With a 10% fractional reserve the banks can multiply the original deposit to a sum ten times greater than the original sum. So, say a deposit is made of €1000 into a single account, the banks can create €10,000 from the to loan out or in other words, a single deposit/liability of €1000 become an asset of €10,000. So the 5% you quote is a very significant drop and would be equal to 50% of their reserves! Then consider that the fractional reserve in some cases has been as low a 1% i.e. for every €1 deposited the bank can create €100............ is it any wonder the banks are continually in the s**t?

You only have to see a dip of 1% and the banks fail to meet the deposit fractional requirement of 10% retained as a reserve. This is the point where banks require bailing out (or in Cyprus’ case bailing-in) because they need to rebuild the reserves to maintain the required fractional 10% level. What they are ‘losing’ is actually money they created out of thin air.

It gets even better! They start with a customer’s deposit of €1000 into their account and end up making that into €10,000 which they lend out at interest, let’s say at 5%pa. So they make 5% on €10,000 which equates to €500 ................. a 50% mark up on the actual money on deposit in one year.

So who are the mugs? We get sod all on our deposits and the bank make a very nice 50% then, when their gambles fail to pay off they screw us again to bail them out of the s**t hole they dug for themselves.

And ..... absolutely NOTHING has been done to correct this since the 2008 collapse .... everything for the banks is back to normal and they are already creating the next financial disaster!

[DT.]

DT

.............. in this case the banks had deposits just in Cyprus of around 80bn making the % invested around 5%.

I think you are confusing ‘deposits’ with ‘assets’ and they are not the same thing.

In banking what they have out on loan is considered an ‘asset’ because it is money owed to them. Deposits are treated as ‘liabilities’ because that is money they owe the depositors. NPL’s are toxic assets ...... or to you and me, money the banks are never likely to realize and these represent 46% of the loans in Cypriot banks. They do not have 46% of their declared assets!

Assets are always significantly larger than liabilities because of the banking practice of ‘fractional reserve debt’, with a fraction of deposits held as a reserve and the remainder loaned over and over again. With a 10% fractional reserve the banks can multiply the original deposit to a sum ten times greater than the original sum. So, say a deposit is made of €1000 into a single account, the banks can create €10,000 from the to loan out or in other words, a single deposit/liability of €1000 become an asset of €10,000. So the 5% you quote is a very significant drop and would be equal to 50% of their reserves! Then consider that the fractional reserve in some cases has been as low a 1% i.e. for every €1 deposited the bank can create €100............ is it any wonder the banks are continually in the s**t?

You only have to see a dip of 1% and the banks fail to meet the deposit fractional requirement of 10% retained as a reserve. This is the point where banks require bailing out (or in Cyprus’ case bailing-in) because they need to rebuild the reserves to maintain the required fractional 10% level. What they are ‘losing’ is actually money they created out of thin air.

It gets even better! They start with a customer’s deposit of €1000 into their account and end up making that into €10,000 which they lend out at interest, let’s say at 5%pa. So they make 5% on €10,000 which equates to €500 ................. a 50% mark up on the actual money on deposit in one year.

So who are the mugs? We get sod all on our deposits and the bank make a very nice 50% then, when their gambles fail to pay off they screw us again to bail them out of the s**t hole they dug for themselves.

And ..... absolutely NOTHING has been done to correct this since the 2008 collapse .... everything for the banks is back to normal and they are already creating the next financial disaster!

RH the reference to assets under custody was used to define the term of size that was used wrongly in my opinion as GDP.

NPL's are not money that the bank will never see. The fund we manage has purchased a great deal of NPL's and have paid up 6-7% on non-secured npl's and up to 30-35% on secured debt. Not a small figure by any means.

[Oceanside50]

DT

.............. in this case the banks had deposits just in Cyprus of around 80bn making the % invested around 5%.

I think you are confusing ‘deposits’ with ‘assets’ and they are not the same thing.

In banking what they have out on loan is considered an ‘asset’ because it is money owed to them. Deposits are treated as ‘liabilities’ because that is money they owe the depositors. NPL’s are toxic assets ...... or to you and me, money the banks are never likely to realize and these represent 46% of the loans in Cypriot banks. They do not have 46% of their declared assets!

Assets are always significantly larger than liabilities because of the banking practice of ‘fractional reserve debt’, with a fraction of deposits held as a reserve and the remainder loaned over and over again. With a 10% fractional reserve the banks can multiply the original deposit to a sum ten times greater than the original sum. So, say a deposit is made of €1000 into a single account, the banks can create €10,000 from the to loan out or in other words, a single deposit/liability of €1000 become an asset of €10,000. So the 5% you quote is a very significant drop and would be equal to 50% of their reserves! Then consider that the fractional reserve in some cases has been as low a 1% i.e. for every €1 deposited the bank can create €100............ is it any wonder the banks are continually in the s**t?

You only have to see a dip of 1% and the banks fail to meet the deposit fractional requirement of 10% retained as a reserve. This is the point where banks require bailing out (or in Cyprus’ case bailing-in) because they need to rebuild the reserves to maintain the required fractional 10% level. What they are ‘losing’ is actually money they created out of thin air.

It gets even better! They start with a customer’s deposit of €1000 into their account and end up making that into €10,000 which they lend out at interest, let’s say at 5%pa. So they make 5% on €10,000 which equates to €500 ................. a 50% mark up on the actual money on deposit in one year.

So who are the mugs? We get sod all on our deposits and the bank make a very nice 50% then, when their gambles fail to pay off they screw us again to bail them out of the s**t hole they dug for themselves.

And ..... absolutely NOTHING has been done to correct this since the 2008 collapse .... everything for the banks is back to normal and they are already creating the next financial disaster!

RH the reference to assets under custody was used to define the term of size that was used wrongly in my opinion as GDP.

NPL's are not money that the bank will never see. The fund we manage has purchased a great deal of NPL's and have paid up 6-7% on non-secured npl's and up to 30-35% on secured debt. Not a small figure by any means.

Are the government bailouts the reason for these purchases? Would you be buying them if there was not a government bailout in Europe and the isa?

[Robin Hood]

NPL's are not money that the bank will never see. The fund we manage has purchased a great deal of NPL's and have paid up 6-7% on non-secured npl's and up to 30-35% on secured debt. Not a small figure by any means.

DT: I am not sure if I fully understand what you are saying but ...........

If you bought an unsecured NPL that was a loan of €100k plus rolled up interest at say 7% and it had been non performing for 10 years, it would now be a debt of around €200k. If you bought such a debt at 6-7% then you must be expecting to recover more than your investment. If the borrower has no collateral to secure the debt ............... it would be like getting blood out of a stone? Unless of course, you are going to send in the bailiffs to strip him of all his assets at cents on the Euro?

If you do the same with a secured debt using the same figures as above, then you be expecting to recover at least 30-40% or €60k-€70k, by selling off the collateral put up as security. In many cases these will be developers who were Limited Companies and whose own assets cannot be touched but who were the beneficiary of the loan. If there are many others doing the same thing as you then, like shares, the value of the collateral will drop as property will devalue (even more). In Cyprus the intentions seems in many cases, to be to take from those that have paid for their properties but were defrauded by a combination of banks/lawyers/developers as they have neatly put themselves beyond the reach of the law.

But, all-in-all it does not alter the simple fact that all this money the banks claim to have ‘lost’, did not exist until the banks created it as debt in the first place. How can you lose something that never existed?

[DT.]

DT

.............. in this case the banks had deposits just in Cyprus of around 80bn making the % invested around 5%.

I think you are confusing ‘deposits’ with ‘assets’ and they are not the same thing.

In banking what they have out on loan is considered an ‘asset’ because it is money owed to them. Deposits are treated as ‘liabilities’ because that is money they owe the depositors. NPL’s are toxic assets ...... or to you and me, money the banks are never likely to realize and these represent 46% of the loans in Cypriot banks. They do not have 46% of their declared assets!

Assets are always significantly larger than liabilities because of the banking practice of ‘fractional reserve debt’, with a fraction of deposits held as a reserve and the remainder loaned over and over again. With a 10% fractional reserve the banks can multiply the original deposit to a sum ten times greater than the original sum. So, say a deposit is made of €1000 into a single account, the banks can create €10,000 from the to loan out or in other words, a single deposit/liability of €1000 become an asset of €10,000. So the 5% you quote is a very significant drop and would be equal to 50% of their reserves! Then consider that the fractional reserve in some cases has been as low a 1% i.e. for every €1 deposited the bank can create €100............ is it any wonder the banks are continually in the s**t?

You only have to see a dip of 1% and the banks fail to meet the deposit fractional requirement of 10% retained as a reserve. This is the point where banks require bailing out (or in Cyprus’ case bailing-in) because they need to rebuild the reserves to maintain the required fractional 10% level. What they are ‘losing’ is actually money they created out of thin air.

It gets even better! They start with a customer’s deposit of €1000 into their account and end up making that into €10,000 which they lend out at interest, let’s say at 5%pa. So they make 5% on €10,000 which equates to €500 ................. a 50% mark up on the actual money on deposit in one year.

So who are the mugs? We get sod all on our deposits and the bank make a very nice 50% then, when their gambles fail to pay off they screw us again to bail them out of the s**t hole they dug for themselves.

And ..... absolutely NOTHING has been done to correct this since the 2008 collapse .... everything for the banks is back to normal and they are already creating the next financial disaster!

RH the reference to assets under custody was used to define the term of size that was used wrongly in my opinion as GDP.

NPL's are not money that the bank will never see. The fund we manage has purchased a great deal of NPL's and have paid up 6-7% on non-secured npl's and up to 30-35% on secured debt. Not a small figure by any means.

Are the government bailouts the reason for these purchases? Would you be buying them if there was not a government bailout in Europe and the isa?

Yes we would, we haven't bought any in Cyprus. So far most of the countries we buy fro have NOT been bailed out.

[DT.]

NPL's are not money that the bank will never see. The fund we manage has purchased a great deal of NPL's and have paid up 6-7% on non-secured npl's and up to 30-35% on secured debt. Not a small figure by any means.

DT: I am not sure if I fully understand what you are saying but ...........

If you bought an unsecured NPL that was a loan of €100k plus rolled up interest at say 7% and it had been non performing for 10 years, it would now be a debt of around €200k. If you bought such a debt at 6-7% then you must be expecting to recover more than your investment. If the borrower has no collateral to secure the debt ............... it would be like getting blood out of a stone? Unless of course, you are going to send in the bailiffs to strip him of all his assets at cents on the Euro?

If you do the same with a secured debt using the same figures as above, then you be expecting to recover at least 30-40% or €60k-€70k, by selling off the collateral put up as security. In many cases these will be developers who were Limited Companies and whose own assets cannot be touched but who were the beneficiary of the loan. If there are many others doing the same thing as you then, like shares, the value of the collateral will drop as property will devalue (even more). In Cyprus the intentions seems in many cases, to be to take from those that have paid for their properties but were defrauded by a combination of banks/lawyers/developers as they have neatly put themselves beyond the reach of the law.

But, all-in-all it does not alter the simple fact that all this money the banks claim to have ‘lost’, did not exist until the banks created it as debt in the first place. How can you lose something that never existed?

If we bought an unsecure 10yr old npl then we wouldn't pay 6-7% for it but most probably 2-3%. Most people do want to pay their debt and when buying at these levels then the collection lawyers that are assigned to contact the clients can afford to provide high discounts to the overall loan in exchange for regular small payments.

As for the secured assets, there are other funds that will pick these assets up directly and land bank them. Having spoken at length to the banks here there doesn't seem to be anything holding them back from going directly after large developer creditors and I believe they have already began.

[repulsewarrior]

The tortuous and pricey road to saving Cyprus in 2013
https://cyprus-mail.com/2023/03/19/the- ... s-in-2013/

...a good article

''Sarris was doing his second stint as finance minister, which lasted just over a month – from February 28 to April 2, 2013.''

...Mr. Sarris recalls.

[repulsewarrior]

...a net contributor so to speak,

https://in-cyprus.philenews.com/insider ... s-in-2023/

''Specifically, in 2023, all Member States, except Cyprus and Denmark (both at +3.1%), Ireland (+1.7%), and Portugal (+1.2%), reported deficits. The highest deficits were recorded in Italy (-7.4%), Hungary (-6.7%), and Romania (-6.6%). Eleven Member States had deficits exceeding 3% of GDP.''