by Tyler Durden
March 27, 2013
from
ZeroHedge Website
On Monday
we reported the very disturbing news that despite the ongoing liquidity
blockade, capital controls and (somewhat) closed Cyprus banks, one
particular group of people - the very same group targeted to prompt this
whole ludicrous collapse of the island nation - Russian Oligarchs had found
ways to bypass the ring-fence and pull their money out quickly and quietly.
We said that, if confirmed,
"If we were Cypriots at this point we would
be angry. Very, very angry."
Turns out the Cypriots did become angry, and the
questions are finally starting.
As Spiegel reports, the Cypriot Parliament,
which may or may not last too long once the banks reopen tomorrow and the
people realize that in a fractional reserve banking system, those deposits
you thought were there... they are gone, poof, has begun
investigating the capital flight that may means the destruction of Cyprus
has been for nothing.
Sadly, it is now too little, too late.
From
Spiegel:
Banks have been closed and
accounts frozen in Cyprus recently.
Nevertheless, large amounts
were moved out of the country's
crippled financial
institutions on the eve of the bailout package.
Lawmakers are suspicious and
are investigating both
the government and the
Cypriot central bank.
Panicos Demetriades looked dead tired
as he opened the press conference on Tuesday afternoon on the fourth
floor of the Central Bank of Cyprus.
The questions and answers flew back and
forth for 90 minutes, with Finance Minister Michalis Sarris doing
his best to back up the central bank head. Outside, the mountains slowly
receded from view behind into a haze, while inside journalists became
increasingly restive.
When the session ended, many were left
wondering why Demetriades had invited them in the first place. He had
virtually nothing new to say.
Many interpreted the press conference as a
symbolic exercise.
Central bank head Demetriades, they felt,
sought to stage a show of strength to counter the pressure that has been
heaped on his shoulders in recent days. For one, he announced earlier
this week, without consulting the Cypriot government first, that small
banks in the country would open their doors again on Tuesday, in
contrast to the island-nation's two largest financial institutions Laiki
and Bank of Cyprus.
The result was a massive protest from the
smaller banks and a reversal. The banks stayed closed. For the moment,
the opening date is set for Thursday (March 28, 2013), and many fear
that a flood of angry customers could overwhelm the sector.
Then, on Monday, the central bank announced
that it was installing financial manager Dinos Christofides as a
special consultant to the Bank of Cyprus as it prepares to take on
assets from Laiki, which is to be liquidated.
The deployment of Christofides is
legitimate, but it triggered widespread concerns that the Bank of Cyprus
too may soon be broken up. Demetriades was accused of not doing enough
to explain the steps he was taking, thus intensifying investor anxiety.
Most
of all, though, the central bank head has been harshly criticized due to
the suspicious capital flight from Laiki and the Bank of Cyprus, the two
institutions that have been hit hardest by the Cypriot banking crisis.
There are indications that large sums flowed
out of the two banks just before the first bailout package was signed in
the early morning hours of March 16. At the end of January, some 40
percent of all savings held in Cypriot accounts were on the books of
those two banks.
Since
then, however, much of it has been transferred elsewhere, despite orders
from the central bank that accounts at the two institutions be frozen.
'Special Payments'
The central
bank now stands accused of not doing enough to control the movement of
capital.
Transfers
for humanitarian aid were permitted which, while certainly an acceptable
exception, opened a loophole for abuse. Many are also furious that the
bank allowed "special payments," the definition of which was never
adequately established.
The Cypriot central bank has defended
itself by saying that it was impossible to completely prevent all
transactions, despite the account freeze.
Much of the money was
withdrawn from overseas, where Cyprus had no authority. Branches of
Cypriot banks in non-Euro-Zone countries such as Russia and Britain do
not answer to the European Central Bank. Their liquidity is controlled
by central banks in those countries.
Such
a defense is nothing less than a voluntary admission of impotence.
Holders of smaller savings accounts have
been unable to access much of their money for almost two weeks,
companies have been unable to pay their suppliers and across the country
people are concerned that their salaries will not arrive on schedule on
the first of the month.
Meanwhile, rich businesspeople and those
with connections overseas have been able to transfer their money into
foreign accounts.
In other words, the Cypriots are, indeed,
getting very angry.
And soon, they may just have a list of people on
whom to take it out:
Lawmakers have demanded that the central
bank assemble a list of those customers who withdrew large amounts of
money prior to the closure of the country's financial institutions.
In particular, parliamentarians want to know
if central bank employees or members of the government received early
warning and were able to quickly rescue their assets.
According to the Greek television station
Mega Channel, the list has already found its way into the hands of
Parliament President Yannakis Omirou. No one in parliament or in the
central bank could be reached for comment on Tuesday evening.
Still,
the parliamentary investigation indicates just how great the mistrust is
between lawmakers and the government - and how acute the doubts are as
to Panicos Demetriades' competence.
Only now is Panicos'
competence being questioned? Well better late then never.
Perhaps, a better question is how much longer
will the rule of law remain in Cyprus once full blown class warfare
is unleashed, and the 99% are generously handed the list of the 1% who were
"informed" enough to pull their money from the flaming sovereign equivalent
of Bernie Madoff, while every other uninsured depositor is facing
losses of up to 80%, and soon 100%?
And what happens if the realization dawns that
despite all the promises even insured investors will eventually get impaired
once the money runs out?