In which: the Cypriot bailout conditions cause a bank to get bulldozed, and some analyst opinions on Apple divs.

Good morning

The headlines:

  1. Cyprus and the Bailout.

    Link: Woah.

    Geezlike. Talk about bailout terms that cause a more drastic crisis…

    To backtrack and summarise: Cyprus is famous, more than anything, for its finance sector. And as a result of its very pleasant tax regime, her banks have accumulated large amounts of capital (from places like Russia), which in turn required the banks to hold large amounts of capital reserves, which in turn led to the accumulation of sovereign bond-holdings from countries like Greece and Cyprus herself. Which made sense – if your Basel requirement is to place your reserves in AAA rated bonds, you’d go for the AAA-rated bonds that earned the highest returns. And those are the ones with the highest market-risk perception* – which were mostly Greek.

    Then Greece had her crisis, which left the Cypriot banks in crisis. And given that their assets** were 7 to 8 times GDP, this left the Cypriot government in a shaky fiscal situation similar to those of Ireland and Spain.

    But as a condition of the bailout, the Troika (being the EU, the ECB and the IMF) has insisted that a tax be immediately imposed on bank deposits. A tax of 6.75% on all deposits under €100,000; and a tax of 9.9% on all deposits over that. A levy that has not been part of any previous bailout.

    Cue: a sudden and dramatic flurry of bank-runs. And a man driving a bulldozer into a bank branch in Limassol in protest.

    Some might say that the Troika is using the bailout as an opportunity to bring the off-shore tax-haveny-style Cypriot finance system to an end. Others might ask what message this sends to the citizenry of all the other bailout candidates.

    Did we just spend four years avoiding Greek contagion to have it all come crashing down over a depositor tax?

    *Although not, apparently, so risky in the eyes of the ratings agencies.

    **ie. the size of their sovereign bond portfolios.

  2. Apple’s dividend.

    Link: waiting.

    According to Bloomberg analysts, we should expect a 50% bump in Apple’s dividend.

    They’re expecting the announcement any day now.

That’s all for now.

Have a good day.