Technocrats Turn Their Attention to New Zealand For Cyprus-Style Deposit Tax

AUSTRALIA-BANKING-COMPANY-ANZOccupy Corporatism – by Susanne Posel

Government officials in New Zealand are taking a tip from Cyprus and pushing for a similar solution to be implemented in the Kiwi nation, according the Green Party. Dr. Russel Norman, co-leader of the Green Party stated: “Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts.”  

The current monetary plan implemented is the Retail Deposit Guarantee Scheme (RDGS) that expires at the end of 2013. English, finance minister,explains that during the last global financial crisis this plan offered assurance to nations that financial institutions were “safe”.

Now only a small portion of banks are covered by the RDGS which translates to protection for “only $2 billion of the $210 B New Zealanders have on deposit and will not be extended beyond 31 December this year. Looking ahead, the Government is considering a number of permanent options to manage any future financial market difficulties.”

English complains that banks cannot properly monitor and insure deposits while anticipating “future financial market difficulties.”

For this reason, English has publically endorsed the Open Bank Resolution(OBR) which outlines that should a bank fail under the OBR, depositors would be subject to a portion of their deposits confiscated by technocrats to pay for that bank’s bailout.

English states that the OBR “aims to provide continuity of core banking services, allow the banking system to get back to normal and limit the costs to taxpayers” while “maintaining investor confidence.”

Norman explains that: “The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank. Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat. While the details are still to be finalized, nearly all depositors will see their savings reduced by the same proportions. Bill English is wrong to assume everyday people are able to judge the soundness of their bank. Not even sophisticated investors like Merrill Lynch saw the global financial crisis coming. If he insists on pushing through this unfair scheme, small depositors can be protected ahead of time with a notified savings threshold below which their savings will be safe from any interference.”

While the New Zealand government is insisting that the OBR be adhered to, Norman asserts: “Open Bank Resolution is unprecedented in the world. Most OECD countries run deposit insurance schemes which protect people’s deposits up to a maximum ranging from $100,000 – $250,000. “OBR is not in line with Australia, which protects bank deposits up to $250,000. A deposit insurance scheme is a much simpler, well-tested alternative to Open Bank Resolution. It rewards safe banks with lower premiums and limits the cost to taxpayers of a bank failure. Deposit insurance will, however, require the Reserve Bank to oversee and regulate our banks more closely – a measure which is ultimately the best protection against bank failure.”

The Reserve Bank in New Zealand is gearing up to implement the OBR; a policy that is reserved for “extreme cases like insolvency” to protect shareholders and creditors. The Reserve Bank can put a freeze on any account and deposit since they have now the mechanisms and will have met the financial requirements as of July 1st of 2013.

For the OBR can be enacted, English will have to give his approval. The chain of command dictates that once a locally incorporated bank has failed, a statutory manager is assigned to access the bank’s liabilities and part of those liabilities is deposits from customers because they can be extracted before the next trading day.

Over last weekend, Cypriots stormed ATMs, extracting as much of their funds in bank accounts as possible because of an agreement between the government of Cyprus and the International Monetary Fund (IMF) to pay back the $13 billion bailout by syphoning money from customer deposits.

The IMF released a statement on March16th wherein Christine Lagarde, managing director of the IMF said: “I welcome the agreement reached today to address Cyprus’ economic challenges. The IMF has always said that we would support a solution that is sustainable, that is fully financed, and that appropriately allocates the burden sharing. I believe that the agreed package meets these three objectives. On this basis, I intend to make a recommendation to our Executive Board for the IMF to contribute to the financing of the package.”

The agreement Lagarde referred to is an “adjustment program” of the Cypriot financial system allegedly enforced to encourage “sustainable and balanced growth” of the nation.

In order to deter money laundering through Cyprus banks, an audit would be implemented. Financial assistance by the IMF and CBE would be given in exchange for a tax to be passed onto the people of Cyprus as the first phase of the scheme. In addition, “further measures concern the increase of the withholding tax on capital income, a restructuring and recapitalization of banks, an increase of the statutory corporate income tax rate and a bail-in of junior bondholders.”

Cypriot President Nicos Anastasisades asserted that the government had no other option; with regard to accepting the bailout. He claimed that his country was in a state-of-emergency.

The costs were then turned over to the citizens in the form of a tax, or a levy, to recoup funds. The central bankers are currently in the process of draining customer accounts of every citizen in Cyprus.

Anastasisades claims the European Central Bank (ECB) was threatening to halt much needed money which would have crippled Cyprus banks further and confirmed the expected financial collapse.

According to Anastasisades, this levy will rescue the banking institutions. The decision to allocate private banking deposits from customer accounts was made to ensure that billions of dollars would be salvaged. The government estimates that due to the deposit levy 5.8 Euros will be acquired from the people of Cyprus.

Customers with less than 100,000 Euros will be charged a one-time tax of 6.75% while those with more money in their account will be charged 9.9% until the bailout money is recouped.

According to Joerg Kraemer, chief economist of the German Commerzbank: “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product.”

Kraemer has been able to extract his money out of his private savings accounts before the same situation occurs in Italy.

Disseminating the tax to citizens who make deposits to their banks to pay back the money’s loaned out for the bailout was altered slightly from every depositor with less than €100,000 at 6.75% and those over that amount at 9.9% to smaller depositors with up to €100,000 would be taxed at 3%; savers with €100,000 to €500,000 would be taxed at 10%; and those with more than €500,000 at 15%.

The facts still stand that the people of Cyprus have not defaulted while their cash is being stolen for simply making a deposit into a bank. Regardless of insurance coverage by the Cypriot version of the FDIC, because the government accepted a bailout by the IMF, the well-designed scheme redirects money into the coffers of the Eurozone finance ministers.

Beyond the concept of a wealth tax, this “levy” punished citizens for having a bank account. In the short term this means a bank run – in the long term this could have resounding consequences for both the current Cypriot government and the people.

Finance ministers in Greece are telling themselves that this is a “unique” situation and not to “worry” although signs point to the danger that could be imposed by not taking this warning seriously.

Governmental deposit insurance can become solvent just as corporations can. And in fact, the deposit insurance appears to be a simple scheme to allow for trust between the public and the government as a mediator between them and the banking institutions.

However, when the time comes to collect, the government simply shrugs their proverbial shoulders and decries inadequate funding to replace customer deposits. To mitigate damages, banks have imposed ATM withdrawal restrictions.

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