What Cyprus Teaches Us About Safe Deposit Boxes
Between 2012 and 2013, the Republic of Cyprus experienced a financial crisis that set a troublesome precedence not only for other countries in Europe, but in other parts of the world as well.
Today, we’ll take a look at what Cyprus teaches us about safe deposit boxes in the midst of bank bail-ins and an economic crisis.
The Cyprus Bank Bail-In At a Glance
On March 25, 2013, a €10 billion international bailout by the Eurogroup, European Commission, European Central Bank and International Monetary Fund (IMF) was announced as a solution to the economic turmoil the country was facing. In turn, Cyprus had to agree to close the Laiki Bank and impose a one-time bank deposit levy on all of its uninsured deposits, as well as 47.5 percent of uninsured deposits in the Bank of Cyprus.
As reported by the BBC in 2013, “People in Cyprus have reacted with shock to news of a one-off levy of up to 10% on savings as part of a 10bn-euro (£8.7bn; $13bn) bailout agreed in Brussels.” Citizens in Cyprus with less than 100,000 euros in their accounts would have to pay a one-time tax of 6.75%, while those with funds greater than 100,000 euros lost 9.9% of their deposits.
This meant that depositors had no option but to take losses. One day their savings were safe and sound in the bank but the next day, people were frozen out of their savings. The public was shortchanged, to say the least, all because the government and its banking system had accumulated too much debt. The worst part is it happened without a warning.
What this Means for The Rest of the World
The Cyprus Bail-In set a dangerous precedent for European countries and other parts of the world as well. It provided a proof-of-concept of sorts for other governments and for big financial institutions. If Cyprus can use depositors’ hard-earned money to get out of a rut, then other countries could replicate it and on an even bigger and ominous scale; as we have seen in Australia with the passing of the Financial Sector Legislation Amendment (Crisis Resolution Powers And Other Measures) Bill 2017 bail-in law.
To add to the shock and uncertainty, in 2017, Greece, as a countermeasure to its failing banking system, had confiscated the contents of bank controlled safe deposit boxes as well as securities and wealth stored in private homes. Greeks could not withdraw the cash they left in safe deposit boxes as a result of the level of capital control the government had implemented.
Governments and financial institutions tend to take drastic measures during economic turmoil, so there’s no telling when this same event will happen in other parts of the world. Even in the case of Australia’s bank deposit bail-in law, the government could steal your savings in the event of a nationwide financial emergency.
With the knowledge of what Cyprus teaches us about safe deposit boxes, it’s important to know that there is a smarter option for your safe deposit boxes; especially if you’re in Australia where there are private safe deposit box facilities on offer in every major region.
A Smarter Option for Safe Deposit Boxes
Today, independent facilities like Private Vaults Australia (PVA) are proud to offer secure storage completely separate to the banking system. To learn more about What Cyprus Teaches Us About Safe Deposit Boxes, contact PVA or read the the PVA blog for more interesting news, tips and ideas to guide you.
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