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Greek bank deposits will be protected by EU until January 1, 2016…then all deposits can be ‘Cyprused’

Greek deposits will be protected under Dijsselbloem “firewall”…that is until January 1, 2016 hits and Greece becomes subject to a bank resolution process supervised and enforced by the BRRD. Then deposits can be haircut.

Alex Christoforou

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Post originally appeared on Zerohedge.

Earlier today, tucked away from the public’s eyes, there was another round of drama involving Greek securities this time focused on Greek senior bank bonds which promptly tumbled back to post-referendum/pre-bailout #3 levels.

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The catalyst was Friday’s pronouncement by Jeroen Dijsselbloem who said depositors will be shielded from any losses resulting from the restructuring of the nation’s financial system, but that senior bondholders would certainly be impaired and probably wiped out. In other words, once again the superpriority of various classes has been flipped on its head with general unsecured liabilities ending up senior to, well, senior bank claims.

As Bloomberg reported earlier today, while “Greece’s third bailout will spare depositors in any restructuring of the nation’s financial system, senior bank bondholders may not be so lucky, according to comments from Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem. The bondholders will be in line for losses if Greek lenders tap into any of the financial stability funds set aside in the new bailout.”

“Bondholders were overly optimistic because bail-in of senior bonds was not explicitly mentioned before,” said Robert Montague, a senior analyst at ECM Asset Management in London. “Today they were brought back down to earth with a bump.”

Which is bad news for bondholders, but the biggest losers will once again be depositors who represent the vast bulk of unsecured Greek bank liabilities.

Going back to Friday’s statement by the Eurogroup president, he specifically said that “the bail-in instrument will apply for senior bondholders, whereas the bail-in of depositors is explicitly excluded.”  Which is confusing considering that bank stocks were broadly unchanged and in some cases rose. Of course, this makes no sense because as even a first year restructuring associate will tell you, according to traditional waterfall analysis, even the lowliest bond impairment means an equity wipeout. And yet, Greek bank equities are still trading at far more than just tip/nuisance value. Which, to repeat, makes no sense.

But that is not surprising: little of what Europe is doing with Greece makes any sense. Other agree:

It is not clear how they will make it possible to bail-in bonds while excluding deposits, but as we have seen in other problematic situations, where there is a will there will be a way,” said Olly Burrows, London-based financials analyst at brokerage firm CRT Capital. “We call Dijsselbloem’s solution a bail-up: part bail-out, part bail-in and part cock-up.

And yet, it appears that following the weekend, Europe realized that it is now openly flaunting the conventional restructuring protocol.

As a reminder, Greece’s euro-area creditors made adoption of the European Union’s Bank Resolution and Recovery Directive, or BRRD, a precondition of the bailout. The directive, which makes it easier to impose losses on senior creditors, should rank senior unsecured bondholders and depositors equally, said Olly Burrows, London-based financials analyst at brokerage firm CRT Capital.

This is something which Dijsselbloem may not have been aware of when he said that one senior class would be impaired while another pari passu group of liabilities, i.e., depositors, would be protected. As noted above, that makes no sense.

Which is probably why earlier today, Bloomberg followed up with a report that a recapitalization of Greek banks will exclude all depositors from losses until the EU’s Bank Recovery and Resolution Directive rules go into effect on Jan. 1, citing an EU official.

Needless to say this was vastly different to Dijsselbloem’s blanket guarantee statement, and suggests that depositors will indeed be bailed-in (if mostly those above the €100,000 insured limit, although as European history has shown, rules will be made up on the spot and we would not at all be surprised if deposits under the insured limit are also confiscated), but not right now: only after BRRD rules come in place on the first day of 2016.

Europe’s eagerness to promise depositor stability is transparent: the finmins will do everything in their power to halt the bank run from banks which will likely be grappling with capital controls for months if not years. Still, absent some assurance, there is no way that the depositors would be precluded from withdrawing all the money they had access to, which in turn would assure that the €86 billion bailout of which billions are set aside for bank recapitalization, would be insufficient long before the funds are even transfered.

According to an Aug. 14 Eurogroup statement an asset quality review of Greek banks will take place before the end of the year,

“We expect a comprehensive assessment of the banks – so-called Asset Quality Review and Stress Tests – by the ECB/SSM to take place first,” European Commission spokeswoman Annika Breidthardt tells reporters in Brussels. “And this naturally takes a few weeks.”

In other words Europe is stalling for time: time to get more Greeks to deposit their cash in the bank now, when deposits are “safe” and while everyone is shocked with confusion at the nonsensical financial acrobatics Europe is engaging in.

But once Jan.1, 2016 rolls around, it will be a vastly different story. This was confirmed by the very next statement: “I must also stress that, depositors will not be hit” in this year’s review, she says.

In this year’s, no. But the second the limitations from verbal promises of deposit immunity expire next year, everyone who is above the European deposit insurance limit becomes fair game for bail-in.

Dijsselbloem concluded on Friday that “Depositors have been excluded from the bail-in because in the first place it’s concerning SMEs and private persons. But it is only concerning depositors with more than 100,000 euros and those are mainly SMEs. That would again lead to a blow to the Greek economy. So the ministers said we will exclude them explicitly, it would bring damage the Greek economy.

Right, exclude them… until January 1, 2016. And only then impair them because Greece will never again be allowed to escape a state of permanent “damage” fo the economy.

As for Greeks and local corporations whose funds are parked in a bank and who are wondering what all this means for their deposits, here is the answer: for the next 4.5 months, your deposits are safe, which under the current capital control regime doesn’t much matter: it’s not as if the money can be withdrawn in cash and moved offshore.

However, once January 1, 2016 hits and Greece becomes subject to a bank resolution process supervised and enforced by the BRRD, all bets are off. Which likely means that as the Greek bank balance sheet is finally “rationalized”, any outsized deposits will be promptly Cyprused.

For our part, we tried to warn our Greek readers about the endgame of this farcical process since January of this year: we will warn them again – capital controls or not, pull whatever money you can in the next few months because once 2016 rolls around, all the rules change, and those unsecured bank liabilities yielding precisely nothing, and which some call “deposits” will be promptly restructured to make the Greek financial balance sheet at least somewhat remotely viable.

References:

http://www.zerohedge.com/news/2015-08-17/greek-deposits-become-eligible-bail-january-1-2016

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High-ranking Ukrainian official reports on US interference in Ukraine

It is not usually the case that an American media outlet tells the truth about Ukraine, but it appears to have happened here.

Seraphim Hanisch

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The Hill committed what may well have been a random act of journalism when it reported that Ukrainian Prosecutor General, Yuriy Lutsenko, told Hill.tv’s reporter John Solomon that the American ambassador to that country, Marie Yovanovitch, gave him a “do not prosecute” list at their first meeting.

Normally, all things Russia are covered by the American press as “bad”, and all things Ukraine are covered by the same as “good.” Yet this report reveals quite a bit about the nature of the deeply embedded US interests that are involved in Ukraine, and which also attempt to control and manipulate policy in the former Soviet republic.

The Hill’s piece continues (with our added emphases):

“Unfortunately, from the first meeting with the U.S. ambassador in Kiev, [Yovanovitch] gave me a list of people whom we should not prosecute,” Lutsenko, who took his post in 2016, told Hill.TV last week.

“My response of that is it is inadmissible. Nobody in this country, neither our president nor our parliament nor our ambassador, will stop me from prosecuting whether there is a crime,” he continued.

Indeed, the Prosecutor General appears to be a man of some principles. When this report was brought to the attention of the US State Department, the response was predictable:

The State Department called Lutsenko’s claim of receiving a do not prosecute list, “an outright fabrication.” 

“We have seen reports of the allegations,” a department spokesperson told Hill.TV. “The United States is not currently providing any assistance to the Prosecutor General’s Office (PGO), but did previously attempt to support fundamental justice sector reform, including in the PGO, in the aftermath of the 2014 Revolution of Dignity. When the political will for genuine reform by successive Prosecutors General proved lacking, we exercised our fiduciary responsibility to the American taxpayer and redirected assistance to more productive projects.”

This is an amazing statement in itself. “Our fiduciary responsibility to the American taxpayer”? Are Americans even aware that their country is spending their tax dollars in an effort to manipulate a foreign government in what can probably well be called a low-grade proxy war with the Russian Federation? Again, this appears to be a slip, as most American media do a fair job of maintaining the narrative that Ukraine is completely independent and that its actions regarding the United States and Russia are taken in complete freedom.

Hill.TV has reached out to the U.S. Embassy in Ukraine for comment.

Lutsenko also said that he has not received funds amounting to nearly $4 million that the U.S. Embassy in Ukraine was supposed to allocate to his office, saying that “the situation was actually rather strange” and pointing to the fact that the funds were designated, but “never received.”

“At that time we had a case for the embezzlement of the U.S. government technical assistance worth 4 million U.S. dollars, and in that regard, we had this dialogue,” he said. “At that time, [Yovanovitch] thought that our interviews of Ukrainian citizens, of Ukrainian civil servants, who were frequent visitors of the U.S. Embassy put a shadow on that anti-corruption policy.”

“Actually, we got the letter from the U.S. Embassy, from the ambassador, that the money that we are speaking about [was] under full control of the U.S. Embassy, and that the U.S. Embassy did not require our legal assessment of these facts,” he said. “The situation was actually rather strange because the funds we are talking about were designated for the prosecutor general’s office also and we told [them] we have never seen those, and the U.S. Embassy replied there was no problem.”

“The portion of the funds, namely 4.4 million U.S. dollars were designated and were foreseen for the recipient Prosecutor General’s office. But we have never received it,” he said.

Yovanovitch previously served as the U.S. ambassador to Armenia under former presidents Obama and George W. Bush, as well as ambassador to Kyrgyzstan under Bush. She also served as ambassador to Ukraine under Obama.

Former Rep. Pete Sessions (R-Texas), who was at the time House Rules Committee chairman, voiced concerns about Yovanovitch in a letter to the State Department last year in which he said he had proof the ambassador had spoken of her “disdain” for the Trump administration.

This last sentence may be a way to try to narrow the scope of American interference in Ukraine down to the shenanigans of just a single person with a personal agenda. However, many who have followed the story of Ukraine and its surge in anti-Russian rhetoric, neo-Naziism, ultra-nationalism, and the most recent events surrounding the creation of a pseudo-Orthodox “church” full of Ukrainian nationalists and atheists as a vehicle to import “Western values” into a still extremely traditional and Christian land, know that there are fingerprints of the United States “deep state” embeds all over this situation.

It is somewhat surprising that so much that reveals the problem showed up in just one report. It will be interesting to see if this gets any follow-up in the US press.

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Bercow blocks Brexit vote, May turns to EU for lifeline (Video)

The Duran Quick Take: Episode 112.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss Theresa May’s latest Brexit dilemma, as House of Commons Speaker John Bercow, shocked the world by citing a 1604 precedent that now effectively blocks May’s third go around at trying to pass her treacherous Brexit deal through the parliament.

All power now rests with the Brussels, as to how, if and when the UK will be allowed to leave the European Union.

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Via Bloomberg


Theresa May claims Brexit is about taking back control. Ten days before the U.K. is due to leave the European Union, it looks like anything but.

House of Commons Speaker John Bercow’s intervention, citing precedent dating back to 1604, to rule out a repeat vote on May’s already defeated departure deal leaves the prime minister exposed ahead of Thursday’s EU summit in Brussels.

Bercow, whose cries of “Orrdurrr! Orrdurrr!’’ to calm rowdy lawmakers have gained him a devoted international following, is now the pivotal figure in the Brexit battle. May’s team privately accuse him of trying to frustrate the U.K.’s exit from the EU, while the speaker’s admirers say he’s standing up for the rights of parliament against the executive.

If just one of the 27 other states declines May’s summit appeal to extend the divorce timetable, then the no-deal cliff edge looms for Britain’s departure on March 29. If they consent, it’s unclear how May can meet Bercow’s test that only a substantially different Brexit agreement merits another vote in parliament, since the EU insists it won’t reopen negotiations.

Caught between Bercow and Brussels, May’s room for maneuver is shrinking. Amid rumblings that their patience with the U.K. is near exhaustion, EU leaders are girding for the worst.

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President Putin signs law blocking fake news, but the West makes more

Western media slams President Putin and his fake news law, accusing him of censorship, but an actual look at the law reveals some wisdom.

Seraphim Hanisch

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The TASS Russian News Agency reported on March 18th that Russian President Vladimir Putin signed off on a new law intended to block distorted or untrue information being reported as news. Promptly after he did so, Western news organizations began their attempt to “spin” this event as some sort of proof of “state censorship” in the oppressive sense of the old Soviet Union. In other words, a law designed to prevent fake news was used to create more fake news.

One of the lead publications is a news site that is itself ostensibly a “fake news” site. The Moscow Times tries to portray itself as a Russian publication that is conducted from within Russian borders. However, this site and paper is really a Western publication, run by a Dutch foundation located in the Netherlands. As such, the paper and the website associated have a distinctly pro-West slant in their reporting. Even Wikipedia noted this with this comment from their entry about the publication:

In the aftermath of the Ukrainian crisis, The Moscow Times was criticized by a number of journalists including Izvestia columnist Israel Shamir, who in December 2014 called it a “militant anti-Putin paper, a digest of the Western press with extreme bias in covering events in Russia”.[3] In October 2014 The Moscow Times made the decision to suspend online comments after an increase in offensive comments. The paper said it disabled comments for two reasons—it was an inconvenience for its readers as well as being a legal liability, because under Russian law websites are liable for all content, including user-generated content like comments.[14]

This bias is still notably present in what is left of the publication, which is now an online-only news source. This is some of what The Moscow Times had to say about the new fake news legislation:

The bills amending existing information laws overwhelmingly passed both chambers of Russian parliament in less than two months. Observers and some lawmakers have criticized the legislation for its vague language and potential to stifle free speech.

The legislation will establish punishments for spreading information that “exhibits blatant disrespect for the society, government, official government symbols, constitution or governmental bodies of Russia.”

Insulting state symbols and the authorities, including Putin, will carry a fine of up to 300,000 rubles and 15 days in jail for repeat offenses.

As is the case with other Russian laws, the fines are calculated based on whether the offender is a citizen, an official or a legal entity.

More than 100 journalists and public figures, including human rights activist Zoya Svetova and popular writer Lyudmila Ulitskaya, signed a petition opposing the laws, which they labeled “direct censorship.”

This piece does give a bit of explanation from Dmitry Peskov, showing that European countries also have strict laws governing fake news distribution. However, the Times made the point of pointing out the idea of “insulting governmental bodies of Russia… including Putin” to bolster their claim that this law amounts to real censorship of the press. It developed its point of view based on a very short article from Reuters which says even less about the legislation and how it works.

However, TASS goes into rather exhaustive detail about this law, and it also gives rather precise wording on the reason for the law’s passage, as well as how it is to be enforced. We include most of this text here, with emphases added:

Russian President Vladimir Putin has signed a law on blocking untrue and distorting information (fake news). The document was posted on the government’s legal information web portal.

The document supplements the list of information, the access to which may be restricted on the demand by Russia’s Prosecutor General or his deputies. In particular, it imposes a ban on “untrue publicly significant information disseminated in the media and in the Internet under the guise of true reports, which creates a threat to the life and (or) the health of citizens, property, a threat of the mass violation of public order and (or) public security, or the threat of impeding or halting the functioning of vital infrastructural facilities, transport or social infrastructure, credit institutions, energy, industrial or communications facilities.”

Pursuant to the document, in case of finding such materials in Internet resources registered in accordance with the Russian law on the mass media as an online media resource, Russia’s Prosecutor General or his deputies will request the media watchdog Roskomnadzor to restrict access to the corresponding websites.

Based on this request, Roskomnadzor will immediately notify the editorial board of the online media resource, which is in violation of the legislation, about the need to remove untrue information and the media resource will be required to delete such materials immediately. If the editorial board fails to take the necessary measures, Roskomnadzor will send communications operators “a demand to take measures to restrict access to the online resource.”

In case of deleting such untrue information, the website owner will notify Roskomnadzor thereof, following which the media watchdog will “hold a check into the authenticity of this notice” and immediately inform the communications operator about the resumption of the access to the information resource.
The conditions for the law are very specific, as are the penalties for breaking it. TASS continued:

Liability for breaching the law

Simultaneously, the Federation Council approved the associated law with amendments to Russia’s Code of Administrative Offences, which stipulates liability in the form of penalties of up to 1.5 million rubles (around $23,000) for the spread of untrue and distorting information.

The Code’s new article, “The Abuse of the Freedom of Mass Information,” stipulates liability for disseminating “deliberately untrue publicly significant information” in the media or in the Internet. The penalty will range from 30,000 rubles ($450) to 100,000 rubles ($1,520) for citizens, from 60,000 rubles ($915) to 200,000 rubles ($3,040) for officials and from 200,000 rubles to 500,000 rubles ($7,620) for corporate entities with the possible confiscation of the subject of the administrative offence.

Another element of offence imposes tighter liability for the cases when the publication of false publicly significant information has resulted in the deaths of people, has caused damage to the health or property, prompted the mass violation of public order and security or has caused disruption to the functioning of transport or social infrastructure facilities, communications, energy and industrial facilities and banks. In such instances, the fines will range from 300,000 rubles to 400,000 rubles ($6,090) for citizens, from 600,000 rubles to 900,000 rubles ($13,720) for officials, and from 1 million rubles to 1.5 million rubles for corporate entities.

While this legislation can be spun (and is) in the West as anti-free speech, one may also consider the damage that has taken place in the American government through a relentless attack of fake news from most US news outlets against President Trump. One of the most notable effects of this barrage has been to further degrade and destroy the US’ relationship with the Russian Federation, because even the Helsinki Summit was attacked so badly that the two leaders have not been able to get a second summit together.

While it is certainly a valued right of the American press to be unfettered by Congress, and while it is also certainly vital to criticize improper practices by government officials, the American news agencies have gone far past that, to deliberately dishonest attacks, based in innuendo and everything possible that was formerly only the province of gossip tabloid publications. The effort has been to defame the President, not to give proper or due criticism to his policies, nor credit. It can be properly stated that the American press has abused its freedom of late.

This level of abuse drew a very unusual comment from the US president, who wondered on Twitter about the possibility of creating a state-run media center in the US to counter fake news:

Politically correct for US audiences? No. But an astute point?

Definitely.

Freedom in anything also presumes that those with that freedom respect it, and further, that they respect and apply the principle that slandering people and institutions for one’s own personal, business or political gain is wrong. Implied in the US Constitution’s protection of the press is the notion that the press itself, as the rest of the country, is accountable to a much Higher Authority than the State. But when that Authority is rejected, as so much present evidence suggests, then freedom becomes the freedom to misbehave and to agitate. It appears largely within this context that the Russian law exists, based on the text given.

Further, by hitting dishonest media outlets in their pocketbook, rather than prison sentences, the law appears to be very smart in its message: “Do not lie. If you do, you will suffer where it counts most.”

Considering that news media’s purpose is to make money, this may actually be a very smart piece of legislation.

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