Cypriot Banking Crysis Scr

CY - - CSR search Kozhevnikova E. , Sadokhina A. , Yatisyshina P. ? . . The bother2 Time-line2 Reasons of crisis in prostitute banking concerning arena4 Moral Dilemmas4 The problem The trustworthy crisis of banking form in Cyprus had raised difficult moral dilemmas for tart administration, members of Euro sum of funds and other affiliated goernments. sporting lady banks became un suitable to secure the deposits due to several reasons the Greek crisis, crisis in real estate sector. It leave aloned relatively high income on deposits, which is incessantly associated with lay on the liney investments. The macroeconomic situation in the world only worsen the situation. To sum up, the some of the banks scarcely lost the money of the depositors. In this case, the problem of totallyocation of losses appeared. Who should bear the losses for the mistakes made by Cypriot banks, which were aggravated by the multiple unfavorable circumstances?The depositors who br ought their money to banks? every last(predicate) of them? Prosperous European countries? We should remember, that the ones who are in charge of this situation simply bunst cover that be (banks eat up no liquidity assets cover the losses). In this paper we discuss the impacts of different possible antecedents of this problem from the point of ethics theories. We start we describing the spurground of the problem including time-line of facts, the reasons for crisis of banking concerning System, than we move on to reviewing different options of how to save Cypriot economy using theories of ethics.Time-line * 14-15 March EU-summit as a result of which was reaching the megabucks between Cyprus Euro Zone and IMF (International financial Fund) for a 10 one million million Euro bailout on condition that Cyprus imposes a one-off bill of 6,75% to insured deposits ( below 100 000 Euro) and 9,9% to uninsured deposits (over 100 000 Euro). So that Cyprus willing provide 5,8 billion Euros to secure the 10-billion bailout. * March 16 first day of Cyprus Bank closure after the government announced Bank holidays. The idea of wondrous a tax on ordinary depositors resulted in mass protest-demonstration of Cypriots, citizens similarly protested against Germ any(prenominal) dictating such hush conditions. It had also ca procedured anxiety in other countries for background knowledge such an extraordinary and little terrorening precedent. * March 19 the Cyprus Parliament rejects a 10 billion Euro bailout package (law receivers voted 36 against 19 abstaining) arguing that it is unsufferable to take money from regular account holders.The chairmen of the Cyprus Investor Association said Parliaments rejection of the channel will buy us some time to see if we can come up with a better agreement * The President of Cyprus Nicos Anastasiades proposed to make an exception for deposits with less that 20 000 Euros to calm the public, but that didnt form out either * The failed vote intensified the relationship between Cypriot government and EU. Cypriots accused EU for pressing them to accept an unacceptable sight that heats ordinary savers and pensioners.In return, German officials and IMF stated that they didnt force Cypriot government to impose the deposit on depositors but that one way or another the country must come up with the rest 5,8 billion Euros to secure the bailout. * The next step included testing to which extent Russia would be willing to assist Cyprus in this difficult situation. Investments of Russian depositors accounted for about 20 billion Euros in Cypriot banks, so Russia is for sure an affiliated party.Russian officials reacted furiously to the proposed tax deposit bank * March 22 Cyprus adopted legislation that allows the government to split the Cypriot lenders into good banks and bad banks and creates resolution fashion model to wind down banks. * March 24 a new bailout deal between Eurozone and Cyprus. Cyprus will get a 10 billion Euro bailout on condition that Laiki (Popular) Bank, the second largest bank in Cyprus will be offend down.The deposits under 100 000 Euros will be fully compensated by the government, the depositors with more than 100 000 Euros on their accounts will face extremely considerable losses. In this case Cyprus successfully avoided being excluded from EU, which surpassred to be highly probable. What is more, this solution pensioners and clients with small deposits (which mean with low income level) wont be affected, so the anger of the public will be reduced. Finally, two biggest Banks will be restructured Laiki Bank will be wind down, Bank of Cyprus will benefit at the expense of its clients insured deposits of Laiki Bank will be transferred to Bank of Cyprus, owners of uninsured deposits of Laiki Bank will lose up to 80% of their deposits 37,5% of uninsured deposits of Bank of Cyprus are transferred into stocks of Bank of Cyprus which actually cost nothing, 22,5% will b e frozen so clients have no right to use that sums of money.In this case the costs of bank mistakes lay down on clients with deposits over 100 000 Euros. By the way, most of such clients are Russian (Russian investments in Cypriot bank sector are estimated 26 bn Euro, they exceed Cypriot gross domestic product which is around 18 bn Euro). Russians were happy to use Cyprus as an offshore due to double taxation agreement. This was a place where nobody asked where that money came from. At the same time EU and Cyprus were happy to transfer the costs to Russian depositors by expropriating their depsits.Is it ethical? Not the easiest question to answer angiotensin converting enzyme more concerning fact . ? 1 15 ( ) ? . , ? . , . ? ? . - - ? . - Reasons of crisis in Cypriot banking sectorThe Greek financial crisis had put in danger the stability of all Eurozone. But the greatest impact was imposed on Cyprus due to their sound economic and financi al bonds. Cypruss banking sector was affected the most. It became quite clear that banking system of Cyprus is in danger a couple of age ago. Stavrakis -the Finance take care of Cyprus said We are a small country and most importantly, we have a banking system which has invested heavily in Greek bonds. Nevertheless, the minister conscious that Cypriot anking system was safe and sound, that it had a strong capital lowly and that there was a huge inflow of foreign deposits which helped to stabilize the situation. Anyway, the premier(a) reason of crisis in Cypriot banking sector is cancellation of Greek bonds. It was not a secret that Cypriot banks invested heavily in yearn-term Greek bonds, so when a default in Greece was announced and it was stated that Greece is not passing game to fulfill its bonds obligations, and, as a result, the trust in Cypriot banks declined. As the trust in banks decline, depositors tend to take back their money.But this is a muddle something happens i n the banking industry, depositors leave, at the same time a lot of bank assets are frozen in long-term obligations. Theoretically, the bank has or much has enough assets to return everything to clients, but these assets are not liquid, so at the moment when clients start to panic and claim for their money, the bank is under threat of running out of liquid assets to pay to clients. This can happen to any bank, even the most reliable one. The moment panic begins the bank is under great threat.This is why laws that dont allow taking back deposits at any moment may be quite reasonable. hither is a breath summary of reason of Cypriot banking sector crisis * huge investments of Cypriot banking sector in Greek default economy = able losses and asset write-downs of Cypriot banks * A strong offshore penchant of Cypriot economy total sum of deposits heavily exceed GDP * As a result the government (does it have to? ) is not able to compensate the losses of depositors * Unfavorable macroec onomic situation in EU and world The fact that Cypriot banks havent revalued their assets for a long time, so the assets were overestimated * And many other reasons that we will understand 20 years after Moral Dilemmas Here is a list of moral dilemmas occur in such a complicated situation 1) Who should bear the risk of bank bankruptcy? Government/all customers/the richest customers/other countries governments/ 2) Can expropriation be ethical? 3) 4) 1 . http//online. wsj. com/article/SB10001424127887323605404578384331402208120. html 2 . http//www. nytimes. om/2013/03/20/ craft/global/cyprus-rejects-tax-on-bank-deposits. html? _r=0 3 . http//www. bbc. co. uk/news/world-europe-21916102 4 . http//lenta. ru/news/2013/03/25/threat/ 5 . http//somo. nl/dossiers-en/sectors/financial/eu-financial-reforms/newsletter-items/issue-17-march-2013/innovative-approach-in-cyprus-bailout 6 . http//www. cyprusnewsreport. com/? q=lymph gland/4239 7 . http//www. mondaq. com/x/231362/Financial+Serv ices/The+Latest+Developments+In+The+Cyprus+Banking+ sector 8 . http//www. reuters. com/article/2013/03/22/us-column-cyprus-investing-saft-idUSBRE92L0UV20130322