Kozhevnikova E., Sadokhina A., Yatisyshina P.
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Reasons of crisis in Cypriot banking sector:4
The current crisis of banking system in Cyprus had raised difficult moral dilemmas for Cypriot government, members of Euro Union and other affiliated governments. Cypriot banks became unable to secure the deposits due to several reasons: the Greek crisis, crisis in real estate sector. It provided relatively high income on deposits, which is always associated with risky investments. The macroeconomic situation in the world only worsened the situation. To sum up, the some of the banks simply lost the money of the depositors. In this case, the problem of allocation of losses appeared. Who should bear the losses for the mistakes made by Cypriot banks, which were aggravated by the multiple unfavorable circumstances? The depositors who brought their money to banks? All of them? Prosperous European countries? We should remember, that the ones who are in charge of this situation simply can’t cover that costs (banks have no liquid assets cover the losses). In this paper we discuss the impacts of different possible solutions of this problem from the point of ethics theories. We start we describing the background of the problem including time-line of facts, the reasons for crisis of Banking System, than we move on to reviewing different options of how to save Cypriot economy using theories of ethics. Time-line
* 14-15 March – EU-summit as a result of which was reaching the deal between Cyprus Euro Zone and IMF (International Monetary Fund) for a 10 billion Euro bailout on condition that Cyprus imposes a one-off levy of 6,75% to insured deposits (under 100 000 Euro) and 9,9% to uninsured deposits (over 100 000 Euro). So that Cyprus will provide 5,8 billion Euros to secure the 10-billion bailout. * March 16 – first day of Cyprus Bank closure after the government announced Bank holidays. * The idea of imposing a tax on ordinary depositors resulted in mass protest-demonstration of Cypriots, citizens also protested against Germany dictating such hush conditions. It had also caused anxiety in other countries – for setting such an extraordinary and threatening precedent. * March 19 – the Cyprus Parliament rejects a 10 billion Euro bailout package (lawmakers voted 36 against 19 abstaining) arguing that it is unacceptable to take money from regular account holders. The chairmen of the Cyprus Investor Association said Parliaments’ rejection of the deal «will buy us some time to see if we can come up with a better agreement» * The President of Cyprus Nicos Anastasiades proposed to make an exception for deposits with less that 20 000 Euros to calm the public, but that didn’t work out either * The failed vote intensified the relationship between Cypriot government and EU. Cypriots accused EU for pressing them to accept an unacceptable deal that heats ordinary savers and pensioners. In return, German officials and IMF stated that they didn’t force Cypriot government to impose the deposit on depositors but that one way or another the country must come up with the rest 5,8 billion Euros to secure the bailout. * The next step included testing to which extent Russia would be willing to assist Cyprus in this difficult situation. Investments of Russian depositors accounted for about 20 billion Euros in Cypriot banks, so Russia is for sure an affiliated party. Russian officials reacted furiously to the proposed tax deposit bank * March 22 – Cyprus adopted legislation that allows the government to split the Cypriot lenders into good banks and bad banks and creates resolution framework to wind...