Expatriates living in Cyprus are nervously awaiting news on the extent to which any savings they hold in the country will be impacted by the planned confiscation on funds held in state-owned banks.
All expatriates who have savings in the Cyprus Popular Bank, or Laiki Bank, have been informed that any savings they hold in excess of €100,000 ($128,225 USD) will initially lose 37.5 percent of their value after they are converted into bank shares. However, the losses may increase by a yet to be determined amount, potentially up to 100%, if it is decided at a later date that the bank is in need of further injections of cash.
The controversial conditions of the €10-billion bank bailout from the Eurozone and the International Monetary Fund are set to impact thousands of expatriates, many of whom had transferred their savings after being lured by the potential of high interest rates.
Many expatriates were further angered this week after it emerged that many wealthy Russians had succeeded in withdrawing funds from the country’s banks prior to the announcement that a tax raid on savings was to take place. According to recent reports, funds in excess of $2 billion were withdrawn after rumors of the measures were leaked to politicians and investors, many of whom started to reallocate their savings ahead of the announcement. Speaking to UK newspaper The Daily Express, wealth management expert Jonathan Davis commented: “We know hundreds transferred deposits out of Cyprus in the weeks before and that seems pretty coincidental, doesn’t it?
“The tip could have come from the bank, government or from the EU in Brussels, but certainly a lot of people knew.”
Expatriates throughout the European region are being warned to carefully plan their finances to manage any risk associated with the run on the banks that may occur in other countries within the Eurozone, particularly those that are already experiencing economic woes. Mr. Davis added: “I would say it is almost inevitable this financial crisis, deposit confiscations and ‘state bail-ins’ will spread across the Western world.”
Tomorrow: What lessons can expatriates learn from what happened in Cyrpus?