NICOSIA, Cyprus (AP) ? Big depositors at Cyprus' largest bank may be forced to accept losses of up to 60 percent, far more than initially estimated under the European rescue package to save the country from bankruptcy, officials said Saturday.
Deposits of more than 100,000 euros ($128,000) at the Bank of Cyprus will lose 37.5 percent in money that will be converted into bank shares, according to a central bank statement. In a second raid on these accounts, depositors also could lose up to 22.5 percent more, depending on what experts determine is needed to prop up the bank's reserves. The experts will have 90 days to figure that out.
The remaining 40 percent of big deposits at the Bank of Cyprus will be "temporarily frozen for liquidity reasons," but continue to accrue existing levels of interest plus another 10 percent, the central bank said.
The savings converted to bank shares would theoretically allow depositors to eventually recover their losses. But the shares now hold little value and it's uncertain when ? if ever ? the shares will regain a value equal to the depositors' losses.
Emergency laws passed last week empower Cypriot authorities to take these actions.
Cyprus' Finance Minister Michalis Sarris said the measures were taken to put the Bank of Cyprus on a solid footing.
"We suffered a serious blow without doubt ... but we now have a bank which is reformed and ready to assume its role in the Cypriot economy," the state-run Cyprus News Agency quoting him as saying.
Analysts said Saturday that imposing bigger losses on Bank of Cyprus customers could further squeeze already crippled businesses as Cyprus tries to rebuild its banking sector in exchange for the international rescue package.
Sofronis Clerides, an economics professor at the University of Cyprus, said: "Most of the damage will be done to businesses which had their money in the bank" to pay suppliers and employees. "There's quite a difference between a 30 percent loss and a 60 percent loss." With businesses shrinking, Cyprus could be dragged down into an even deeper recession, he said.
Clerides accused some of the 17 European countries that use the euro of wanting to see the end of Cyprus as an international financial services center and to send the message that European taxpayers will no longer shoulder the burden of bailing out problem banks.
But German Finance Minister Wolfgang Schaeuble challenged that notion, insisting in an interview with the Bild daily published Saturday that "Cyprus is and remains a special, isolated case" and doesn't point the way for future European rescue programs.
Europe has demanded that big depositors in Cyprus' two largest banks ? Bank of Cyprus and Laiki Bank ? accept across-the-board losses in order to pay for the nation's 16 billion euro ($20.5 billion) bailout. All deposits of up to 100,000 are safe, meaning that a saver with 500,000 euros in the bank will only suffer losses on the remaining 400,000 euros.
Cypriot officials had previously said that large savers at Laiki ? which will be absorbed in to the Bank of Cyprus ? could lose as much as 80 percent. But they had said large accounts at the Bank of Cyprus would lose only 30 to 40 percent.
Asked about Saturday's announcement, University of Cyprus political scientist Antonis Ellinas predicted that unemployment, currently at 15 percent, will "probably go through the roof" over the next few years.
"It means that (people) ... have to accept a major haircut to their way of life and their standard of living. The social impact is yet to be realized, but they will be enormous in terms of social unrest and radical social phenomenon," Ellinas said.
There's also concern that large depositors ? including many wealthy Russians ? will take their money and run once capital restrictions that Cypriot authorities have imposed on bank transactions to prevent such a possibility are lifted in about a month.
Sarris, the finance minister, said that foreign branches of the Bank of Cyprus and Laiki Bank in countries such as Britain, Russia, Ukraine and Romania will eventually be sold. He also said that Cypriots would seek out new markets like China and the Arab countries while maintaining good business relations with Russians, "despite their bitterness."
Cyprus agreed on Monday to make bank depositors with accounts over 100,000 euros contribute to the financial rescue in order to secure 10 billion euros ($12.9 billion) in loans from the eurozone and the International Monetary Fund. Cyprus needed to scrounge up 5.8 billion euros ($7.4 billion) on its own in order to clinch the larger package, and banks had remained shut for nearly two weeks until politicians hammered out a deal, opening again on Thursday.
But fearing that savers would rush to pull their money out in mass once banks reopened, Cypriot authorities imposed a raft of restrictions, including daily withdrawal limits of 300 euros ($384) for individuals and 5,000 euros for businesses ? the first so-called capital controls that any country has applied in the eurozone's 14-year history.
The rush didn't materialize as Cypriots appeared to take the measures in stride, lining up patiently to do their business and defying dire predictions of scenes of pandemonium.
Under the terms of the bailout deal, the country' second largest bank, Laiki ? which sustained the most damaged from bad Greek debt and loans ? is to be split up, with its nonperforming loans and toxic assets going into a "bad bank." The healthy side will be absorbed into the Bank of Cyprus.
On Saturday, economist Stelios Platis called the rescue plan "completely mistaken" and criticized Cyprus' euro partners for insisting on foisting Laiki's troubles on the Bank of Cyprus.
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AP business correspondent Geir Moulson in Berlin and APTN reporter Adam Pemble in Nicosia contributed.
Source: http://news.yahoo.com/bank-cyprus-big-savers-lose-60-percent-135608668--finance.html
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After I had been running at night for more than a decade, a relatively under-the-radar service called Nextdoor got me to start running during the day. Almost nobody likes to exercise, and for many, overcoming the motivational hump of putting on your shoes and gym clothes can be trying on even the best of days. One evening late in January I had finally overcome this initial barrier to entry, and was just about to stop blogging to do my usual 30-minute nightly sprint when I got the email. “Woman robbed at gunpoint in Dogpatch, San Francisco” the subject line screamed. Unlike many of the emails I constantly receive, this was highly relevant to me, especially because, upon further inspection, the robbery had happened one block from my house. Until this email, I hadn’t given too much thought to Nextdoor, a service that I signed up for at the Allen & Co conference last summer, where co-founder Nirav Tolia?had given a talk about the local social network. The company started out as Fanbase in 2009, and was an attempt to create a user-generated content version of ESPN. Founders Tolia and Sarah Leary decided to pivot around May of 2010, and spent the next four to five months testing out different ideas. Fanbase officially pivoted to Nextdoor in September of 2010, starting out its pilot in Lorelei, a neighborhood in Menlo Park. Now a Facebook for your neighborhood, about half the Fanbase funding ended up carrying over, and Tolia and Leary ended up raising an additional $40.2 million for the new Nextdoor product. Initially enthusiastic, I had also invited my neighbors to use the platform, which had resulted in a de facto neighborhood support group (including the services of a pet psychic) when their adventurous cat Kiki went missing. I wrote a post about it for TechCrunch and then sort of forgot about it, rarely logging on to peruse the listings of free stuff and garage sales. Well I was certainly giving the service some thought now: “What if I had been that woman who was robbed?”"What if I had ventured out of my house just 15 minutes earlier?” I was still in my gym clothes, after so much effort, and feeling antsy from my day of work. Worse, I was now worried about a random stranger I had only heard about through the Internet, and I still needed a run badly.
While the number of seed financing deals has ballooned over the last few years as the cost of starting a company has fallen, the pace of Series A venture deals hasn’t kept up. Now it looks like the bottleneck between the seed stage and the Series A level has gotten even tighter, according to a survey from Fenwick & West, one of the best-known law firms for startups in Silicon Valley. In their annual survey of companies they work with, they tracked 61 transactions from last year, 56 the year before and 52 in 2010. What they found was that even fewer companies had raised Series A rounds by the end of the year after their seed deals closed. Only 27 percent of companies that raised in 2011 were able to pull a Series A round by the end of 2012. In contrast, 45 percent of companies funded in 2010 were able to secure a Series A round by the end of 2011. What’s interesting is that follow-on financings are picking up some of the slack here. More companies are relying on follow-on seed financings if they can’t get to a full A round. Twenty-three percent of companies funded in 2011 did follow-on seed rounds, compared to 12 percent of companies in 2010. Basically, the path from seed to proving you’re worth a Series A round is just getting longer. At the same time, traditional VC firms are getting more active at the seed level, and led about 34 percent of seed deals in 2012, compared to 27 percent in 2011. You can see that the average size of investment for VC funds in these seed deals rose slightly, while the average investment size from professional angels declined. Not only that, the deals themselves are starting to look more conventional. The use of preferred stock structures rose to 67 percent last year, from 59 percent in 2011. “It says two things. The leverage is changing a bit,” said Barry Kramer, a Fenwick partner in the corporate group. “Last year, the entrepreneur had a bit more leverage than they have right now to get the terms they want. But it’s also a reflection of how more sophisticated investors like venture capital groups are getting involved with seed financing and they’re saying — ‘This is how we do it.’” That said, it’s not all black and white. He pointed out that the