Receiving Wide Coverage ...
Good Euros and Bad Euros: The accomplished fact of losses for large depositors to resolve Cyprus' insolvent banks rippled through markets, newspapers and the commentariat. German Chancellor Angela Merkel's hard line against the offshore banking haven prevailed, but fresh worries that depositors in other countries with weak banks might flee reinvigorated doubts about the viability of the euro. An interview in the FT with Eurogroup President Jeroen Dijsselbloem was a focal point. He said that now that financial markets have achieved a state of relative calm, losses for bank creditors instead of taxpayer bailouts are in order. Later he appeared to walk back those remarks, saying rescue deals should be tailored to specific situations.
The Journal ran a lengthy tick-tock of the chaotic standoff over Cyprus' fate. "In the end, this deal ended up looking like a more severe version of an early proposal floated by Germany and the International Monetary Fund to close the country's two biggest banks—a plan that had been rejected by Cypriot president Nicos Anastasiades 10 days earlier." (There must be an app to excise the details about the diets of continental mandarins from such accounts. Baby potatoes, M&Ms, who cares?)
An article in the Times looked at the fallout among ordinary Cypriot depositors and the evaporation of trust in the country's banks. They're still closed as officials scramble to figure out how to impose capital controls to keep money from flying abroad. A bride-to-be plans to withdraw all her cash even though she has less than 100,000 euros, and is therefore protected from losses. "You just get the sense that they don't know what they are doing," she said.
An analysis in the Times reviewed some takeaways from the Cyprus deal, including "a strong message that if the euro zone is going to work, with a banking union that has credibility, there will be no more 'casino economies,' little islands like Cyprus with banking sectors many times larger than their gross domestic product, that do not follow the rules and make everyone else vulnerable." And editorial said that the deal is fairer than an earlier plan that would have also imposed losses on small depositors, but was rejected by Cyprus' parliament. Still, Cyprus faces impoverishment. "The way to prevent financial catastrophes like this is to impose strong centralized regulations on all banks and recapitalize or restructure weakened ones. Most important, the policy makers need to scrap austerity programs that are making it nearly impossible for the European economy and financial system to recover."
The Journal made a tour through recent historical precedents that suggest it could be years before big depositors' claims are sorted out. Other pieces examined reaction in the market for senior bank debt, which has been relatively mild so far, and the predicament for Cyprus' Russian community. "Heard on the Street" said Cyprus may need more bailouts now that its banking sector — a huge part of its economy — has collapsed.
The Atlantic's Matthew O'Brien and Reuters' Felix Salmon dissected the Dijsselbloem communications contretemps (try spelling that five times fast). O'Brien wrote, "The Dijsselbloem plan was really a plan for the end of the euro. There only would have been one way to stop the inevitable bank runs: capital controls." Under the headline "The Dijsselbloem Principle" (if you're expecting to learn what it takes to make a great vacuum cleaner, stop here), Salmon wrote, "The chances of European banks being allowed to fail are higher now than they were pre-Cyprus. As a result, we should expect uninsured deposits to continue to flow from the periphery of Europe towards the center. Which in turn means extra pressure on Italian and Spanish banks, just when it's least needed."
Tim Johnson Retirement: The chairman of the Senate Banking Committee is expected to announce today that he won't seek reelection in 2014. He could be succeeded in the post by Sen. Sherrod Brown. American Banker, Wall Street Journal
Wall Street Journal
Fannie and Freddie's regulator plans to file a rule today that would "ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance." American Banker reported last month that the Federal Housing Finance Agency had killed a separate plan by Fannie to lower the cost of the coverage.
"The U.K.'s Financial Services Authority on Monday set out rules on regulating benchmark rates, the latest in a string of reforms aimed at stamping out a repeat of the alleged widespread attempts by banks to rig interbank lending rates."
The Plain Dealer: Retiring PNC Chief Executive James Rohr gave an exit interview to the Cleveland newspaper, which revisited the downfall of hometown institution National City and PNC's acquisition of it in 2008. More provocatively, Rohr says that "too small to protect" is a bigger worry than "too big to fail." He's afraid that computer hackers will burrow into "a smaller bank or another bank and come to us through them. You're only as strong as your weakest link."