The Cyprus EU bailout – will it affect FX brokerages?
The Cyprus EU bailout explained by professional Forex trading experts the “The Cyprus EU bailout ” FX trading team.
The Cyprus EU bailout
Before we start (or contribute to an existing) panic among clients of Cyprus-based FX brokerages, we would like to state at the outset that we have been told directly by senior management at several leading Cyprus-based FX brokerages, that all client money at Cyprus FX firms is completely safe, and there will be no haircuts or confiscation whatsoever in client funds.
That being said, Saxo Bank founder and co-CEO Lars Seier Christensen posted a scathing piece on Saxo Bank’s TradingFloor.com research and commentary website (also available in LeapRate’s FX Research section) blasting the general confiscation idea, which also questioned: “What is the exact impact on any client deposits they might be holding in Cyprus [FX brokerages]? I would assume that most funds are held abroad with major FX counterparts, not Cyprus banks, but clarification of this aspect would be useful.”
A quick recap — the EU announced a €10 billion financial rescue package for Cyprus over the weekend. The plan includes a “share-the-pain” clause whereby depositors in Cyprus banks will see a portion of their savings confiscated, to help pay for the bailout. Depositors with less than €100,000 in their accounts will have to pay a one-time tax of 6.75%, and those with greater sums will lose 9.9%. Depositors will be compensated with the equivalent amount in shares in their banks. The levy will not formally take effect until Tuesday, following a public holiday, but action has been taken to control electronic money transfers over the weekend. Co-operative banks, the only ones open in Cyprus on Saturday, closed after people started queuing to withdraw their money. At one bank in Limassol a frustrated man parked his bulldozer outside and threatened to break in.
The Cyprus EU bailout Conclusion
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