Sigrún Davíðsdóttir's Icelog

Can Cyprus do “an Icesave”? – updated

with 4 comments

The idea of an doing” an Icesave,” of an “Icesave solution,” for Cyprus pops up again and again. But can Cyprus do an Icesave? The short answer is “no.” If doing an Icesave means Cyprus avoiding to reimburse foreign/Russian depositors Icesave provides no example to follow.

Icesave was a foreign operation. When the Icelandic banks failed, it was decided to keep alive the banks’ Icelandic operations, letting those abroad fail. It also meant that all deposits in Iceland were moved into new banks, the rest was wound up. The governments in the UK and the Netherlands reimbursed the Icesave depositors.

An “Icesave solution” indicates a division between domestic and foreign accounts. That is of no great use to Cyprus because the major part of the deposits in Cyprus are in Cyprus and that is also where the largest part of their operations are.

Contrary to the Cypriot situation, the largest part of the operations of the three Icelandic banks were abroad, not in Iceland. Kaupthing, the largest bank, had ca 80% of its operations abroad. The two others, Landsbanki and Glitnir, were heading in the same direction.

In Cyprus, the main operations of the banks are in Cyprus. Ergo, a division like the Icesave – or more exactly, in domestic and foreign operations – does not provide a Cypriot solution. EU Directives do not allow for differentiating between foreign and domestic depositors within the same country. Consequently, Cyprus can not decide to insure deposits owned by Cypriots and Cypriot entities and not others. Completely forbidden.

The only way to differentiate between deposits in Cyprus – for levy or any other action – is to differentiate between insured and non-insured deposits, i.e. between deposits under €100.000 and over €100.000. An Icesave “trick” does not help in Cyprus.

*Here is an earlier blog on the EFTA Court ruling re Icesave.

Follow me on Twitter for running updates.

Written by Sigrún Davídsdóttir

March 23rd, 2013 at 11:59 am

Posted in Iceland

4 Responses to 'Can Cyprus do “an Icesave”? – updated'

Subscribe to comments with RSS or TrackBack to 'Can Cyprus do “an Icesave”? – updated'.

  1. The fact that the accounts were overseas and in a separate entity didn’t make the Icesave ‘solution’ legal under EU law. Treating EA depositors differently is illegal, except in exceptional circumstances.

    The EFTA SA judgment said it was impossible to save the offshore account and therefore acceptable.

    So Cyprus can differentiate (the Russians are probably not EU citizens anyway) by using the special circumstances excuse used for Icesave.


    23 Mar 13 at 4:21 pm

  2. We have to clear away the layers of propaganda that Britain and Holland (and the EC) spread to obfuscate the Icesave case, and clear up misunderstandings that common-usages encourage to see perceive what was done in the Iceland bank failure situation, and how what measured in legal terms

    First, we have to bear in mind that Deposit Guarantors are commercial insurance corporations. They are not the sovereign states whose banks depositors they serve. The Icesave case was carried to the court to attempt to force Iceland, the sovereign state, to assume liability for the TIF, deposits guarantor. The court found that the state was not so liable.

    Next, we have to recognize that the Icesave depositors _were_ compensated: TIF arranged with its British and Dutch counterparts for them to cover TIF’s debt. The coverage was undertaken by the counterparts with anticipation that Iceland would co-sign, which the people refused to do. A nicety of the EFTA Court ruling was the backhand given to the greediness of the two DGS, who sought to profit by TIF’s distress, instead of helping a fellow-insurer in a hard situation.

    The only part of the Icelandic handling of the banks’ failure that raised any legitimate questions was the Icelandic government’s effective nationalizing of the failing banks domestic branches, to save the nation’s banking system and economy from catastrophic collapse (which would have left all without cash in their pockets moneyless and unable to buy or pay bills). All precedent, and common sense, suggested the Icelandic state’s actions were correct in the event.

    For a parallel, consider that it is everywhere considered illegal to take up a weapon and kill another person, but, in a catastrophic event situation, where injury and harm are imminent, or war has been declared, taking up weapons and killing may become not only legal, but ‘heroic’. [This parallel can also apply to cutting other fishermen’s fish-nets when such normally uncivilized behaviour is recognized ‘necessary’, and to manipulating share-prices in business, when it is done defensively, to thwart share-price manipulation (short-sale assault) attacks by market-pirate aggressors who want to collapse a healthy enterpise’s capitalization, to take profits, or to force the enterprise to fail or desperation-sell. This sort of defensive use of tactics not acceptable in normal, civilized, circumstances is going to play in the cases the ‘special prosecutors’ have brought against Kaupthing].

    In the Cyprus banks’ present distress situations it is important to remember that their situation was brought on, not by careless or manic speculating, but by domino-effect, by the designed and orchestrated collapse of Greece’s economy. Commonly considered ‘safe-as-houses’ sovereign debt the Cypriot banks held were ‘hair-cut’, without provision made for those, like the Cypriot banks, whose livelihoods depended on the cut-away “hair”. In the Cyprus case it is those who did the cutting for Greece who are responsible for the Cypriot banks’ situations, and there through, for the precarious positions those banks’ depositors are in. Neither the banks, nor the depositors, did wrong.


    25 Mar 13 at 12:50 am

  3. What about the gross manipulating extravaganza of the banks and their overwhelming greed and recklessness with other people’s money?
    If you look at all the countries who have been brought to their knees and then you look at the countries who have done nothing to investigate the frauds and misappropriation of funds, nor the crafty transfers and manipulations to take from ordinary families and reward the bankers, you will see what is being called ‘FINANCIAL TERRORISM.’
    Countries like the UK and the USA talk of nothing but TERRORISM and yet they refuse to see that the BANKSTER’S TERRRORISM is causing the destruction of nations and of people.

    Why are these countries so concerned by Terrorism, not punishing them and stopping the huge salaries and bonuses for such over-rated people?
    Are surgeons, scientists,professors, or other highly qualified people paid bonuses as well as a huge salary when it is clear they are doing a job they are not qualified for and are doing it so badly? NO, they are not.

    We are seeing FINANCIAL TERRORISM and Banker Havens such as London and Luxembourg turn a blind eye to the Financial Terrorism which is destroying the lives of decent , hard working people and continue to reward incompetence, greed and extreme selfishness.

    We are hearing leaders talking about ‘HAIR-CUTTING’ when we should be talking about ‘HEAD-CUTTING’.

    Why should Iceland be the only country who has Politicians able to show the courage it takes to lead the world to do the right thing?

    Why is Iceland the only country where the Bankers are not getting off the hook?

    Why is Iceland the only country which is not rewarding bankers for their unqualified failure by giving them more bonuses and even titles, as is the case in London?

    The European financial centres of Europe, not to mention the USA, should be hanging their heads in shame as they look at little Iceland, leading the way on a moral, diplomatic path and doing what the rest of the world’s leaders should be doing.

    Is the normal world of decent people not applauding Iceland for having the courage to show the world that true wealth is doing the right thing?

    We have had enough of ‘MORAL BANKRUPTCY’ and ‘FINANCIAL TERRORISM’.

    George Ward

    29 Mar 13 at 7:45 am

  4. George Ward,

    You are correct in identifying the true villains who perpetrated the crisis of 2008, and continue to “harvest” profits from those unable to, like them, raise themselves up to over the law, who are, instead, subject to law, and, it appears today, may be subjected to any law the commercial-elite anarchists (an aristocracy that is above law, for being able to direct the law to be what they want, which is what will serve their interests) may require the politicians and courts they appear to own, to impose. The centers these do business from appear to be headquartered in the USA and UK, primarily, and snake out from those strongholds of lawlessness to threaten, frighten, intimidate and coerce who they are able to. It was, you may recall, Goldman Sachs, of the USA, who were responsible for much of the lending and loan manipulation that sank Greece in its sea of debt, and who “restructured” the Greek debt prior to the “rescuing” that produced the write-downs that cost German taxpayers (and irritated them) and pushed Cyprus to and then over the cliff. Goldman Sachs and the others, including hedgefunds, profited form all, taking fees and buying default-swap insurance on the sure-things they set up.

    The things done by the banksters, who are not taken to task for them were not done by the Icelandic banks, who have been, and are being, taken to task. It is insult to injury, that the wrong-doers are profiting, with no comeuppance in sight, while victims of their crooked systems and machinations are losing, suffering, and in the Icelandic case, being taken to task “to set an example”. In the Iceland case, the Icelandic economy was hit as hard as it was precisely because the Icelandic bankers were not shipping their profits off-shore, but were shipping them home and plowing them into the Icelandic economy (which was devastated when those profits evaporated).

    It would be nice if the legal energy being expended uselessly (or worse) in Iceland today could be turned to good use against the perpetrators and profiteers taking advantage of the crises they orchestrated and are “surfing” on. In the current case in Iceland, concerning “manipulating”, no good solution is possible, for two reasons, one is that the kinds of manipulating of funds the Icelandic bankers are accused of was a normal part of banking, necessary in leverage-banking, to absorb and smooth out shocks and bumps and bridge movements of money necessitated by that kind of banking. The other is that the manipulatings of shares is also normal, especially in a small exchange marketplace, and, as Sigrún pointed out in her post on the case, is evidenced having been done even before the banks were privatized. These facts make the cases not winnable, because even if the accused are found guilty the court will lose for convicting them for industry-wide common behaviors.


    30 Mar 13 at 12:53 am

Leave a Reply