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A Stark Reminder From Cyprus

When you look at the blog postings and news at the end of 2012, the hot topic was the expiration of unlimited FDIC coverage. Treasurers scrambled to determine what, if anything, to do with their millions in cash held on deposit. Three months later, the FDIC expiration is “old news” and very few treasurers would admit that they made any real changes. Banks continue to pass through an FDIC assessment on full balances yet the corporation is only receiving $250,000 in insurance. Even with that disparity, a sense of general acceptance has already replaced the fourth quarter sense of urgency as priorities shift to other projects scheduled for 2013.

Today’s announcement from Cyprus should shake up our complacency as companies and individuals face enormous losses with the closure of largely state-owned Popular Bank of Cyprus, also known as Laiki. The government will shift deposits below 100,000 euros to the Bank of Cyprus while the level of losses on uninsured depositors will be “under or around 30 percent.” While Cyprus has had a myriad of problems and some may say they had this coming, can we truly say that our banking network has fully recovered and is flawless?

Read More: Cyprus reaches last-minute deal on 10 billion euro bailout

Managing Partner
The Montauk Group, LLC.

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