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| Proposed levy on bank accounts |
Banks stocks in North America were under moderate pressure today in the wake of the stunning proposal by EU leaders to tax bank accounts in Cyprus as part of a bailout program to save the island country from bankruptcy. Across Europe, depositors recoiled at the idea and there were fears of runs on the bank — the panic-stricken withdrawal of funds that can cause the economy to collapse. The surprise decision by Euro zone leaders to part-fund a bailout of Cyprus by taxing bank deposits is a totally unforeseen and for most people incomprehensible seizure. Some speculation ran to the amount of Russian mafia money stashed in Cypriot banks. The EU struck the deal on Saturday to hand Cyprus rescue loans worth 10 billion euros ($13 billion), but defied warnings – including from the European Central Bank – and imposed a levy that would see those with cash in the island’s banks lose 6.75 percent on deposits under 100,000 euros and 9.9 percent for deposits over 100,000 euros. Parliament in Cyprus put off a vote on the measure – which has shaken depositors’ confidence in banks across the continent Those who favour the plan point to the “unique” conditions in Cyprus where the banks have made loans totalling more than eight times the country’s national output.
