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Why Did Cypriot Banks Keep Buying Greek Bonds?

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http://uk.reuters.com/article/2013/04/30/uk-cyprus-banks-investigation-insight-idUKBRE93T05A20130430

One day last October, a memory stick containing special software for deleting data was placed into a desktop computer at Bank of Cyprus.

Within minutes, 28,000 files were erased, according to investigators who had wanted to copy the data for an official report into the collapse of the Cypriot banking system.

The deleted files included emails sent and received in a crucial period in late 2009 and early 2010 when Bank of Cyprus, the biggest lender on the island, spent billions of euros buying Greek bonds - at a time when international banks were cutting exposure to the heavily indebted Athens government.

Those Greek bonds lost most of their value in last year's EU-sanctioned bailout, playing a key role in plunging Cyprus into an economic maelstrom. When banks turned to Cyprus's own cash-strapped government for help in plugging holes in their balance sheets, Nicosia too needed an international rescue.

Now people in the small euro zone republic, who have lost money and face years of grim austerity, want to know who decided to plough their savings into the doomed public accounts of their bigger neighbour, and why. But answers are proving elusive, not helped by the mysterious wiping of data at Bank of Cyprus.

There has been public speculation about backroom diplomatic deals or misplaced solidarity with Cypriots' fellow Greek-speakers.

But executives at the failed banks argue that Greek bonds seemed a good investment at the time - though that view is at odds with that of many bankers elsewhere in Europe, who were doing all they could to limit their own exposures to Greece.

Is this going to have something to do with brown envelopes being exchanged?

It seems incredible that they've deleted 28,000 files, although I'd hardly describe the deletion software as "special".

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Is this going to have something to do with brown envelopes being exchanged?

Most of the story appeared earlier in The Cyprus Mail on April 7. Your question is answered in the comments:

[quote

]None of these bonds were bought by virtue of an issue by the Greek authorities - that is directly from Greece.

Instead, they were bought on the so called ''secondary market'' - the biggest seller being Deutsche Bank and other European banks.

The charm of secondary market is that there is always a chance to transfer money without even buying anything.

A total commission of 98Million Euros was paid by the BoC to the German brokers for this service.

The Alvarez and Marshal) report clearly points to other places one can look for answers.

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But Greek bonds had very high yields, l0 times the German bund yield, but just as safe as bunds because they were in the euro and it was all for one and one for all, until it wasn't. Basically it was a no-brainer - they speak Greek, we speak Greek, German bunds offer 3%, Athens is offering 30%, Russian mafia are happy if we pay them 5% on money they nicked in the first place. Frankly any bank in Cyprus which took the safe option and invested in Germany would have had precisely zero customers. It's like someone hijacks your car, points a gun at your head and says, "Drive at max speed towards that cliff." Your options are: die now or die later. You choose later.

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But Greek bonds had very high yields, l0 times the German bund yield, but just as safe as bunds because they were in the euro and it was all for one and one for all, until it wasn't. Basically it was a no-brainer - they speak Greek, we speak Greek, German bunds offer 3%, Athens is offering 30%, Russian mafia are happy if we pay them 5% on money they nicked in the first place. Frankly any bank in Cyprus which took the safe option and invested in Germany would have had precisely zero customers. It's like someone hijacks your car, points a gun at your head and says, "Drive at max speed towards that cliff." Your options are: die now or die later. You choose later.

But Greek bonds were also expensively insured.

Just as big a question is why Cyprus (financial leaders) took the haircut after paying a fortune in insurance.

More brown envelopes?

This whole incident shows how bankster corruption is at the heart of the EU.

Note how quickly Mario Draghi sent a note to Nicosia that Cyprus' Central Banker 'couldn't be fired'.

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Most of the story appeared earlier in The Cyprus Mail on April 7. Your question is answered in the comments:

The Alvarez and Marshal) report clearly points to other places one can look for answers.

Interesting. The gist of the story is that BOC sold off virtually all of its Greek bond holdings by December 2009 and the board was informed of this fact on 10 December. The CEO then decided to reverse this decision and without informing the board and the bank spend the next 9 months buying up vast quantities of the things.

The question seems to be what motivated the CEO to take this extraordinary course of action. Was it simple Fred Goodwin style incompetence or did political considerations come into play?

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I posted at the time that it was blindingly obvious that the EU engineered the bail out so that value could be lost by bond holders but no official default declared so vast quantities had been wasted on CDs insurance . This of course meant CDs sellers won and CDs buyers lost but the EU didn't care because they wanted to avoid the word 'default'

The real winners were those holding Greek bonds issued under the auspices of English law because they have to be honoured in full . Again these may well be owned by non EU banks ( almost certainly us hedge funds ) so as I suspected at the time , the bail out may well have been a massive EU taxpayer funded 'gift' to non EU funds who could benefit just so the politicos could avoid the word default .

In sure the EU defenders will be on here soon criticising Farage instead of looking at their masters' behaviour

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Interesting. The gist of the story is that BOC sold off virtually all of its Greek bond holdings by December 2009 and the board was informed of this fact on 10 December. The CEO then decided to reverse this decision and without informing the board and the bank spend the next 9 months buying up vast quantities of the things.

The question seems to be what motivated the CEO to take this extraordinary course of action. Was it simple Fred Goodwin style incompetence or did political considerations come into play?

so one man orders departments to start hoovering up these bonds, and all the other board members didnt know?

what do they do all day?

I would suggest that under English Law, there was serious Violations of the Company's Acts.

Ignorance is NO EXCUSE in law for Directors.

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But Greek bonds were also expensively insured.

Just as big a question is why Cyprus (financial leaders) took the haircut after paying a fortune in insurance.

More brown envelopes?

This whole incident shows how bankster corruption is at the heart of the EU.

Note how quickly Mario Draghi sent a note to Nicosia that Cyprus' Central Banker 'couldn't be fired'.

It was the inevitable result of the Greek "bail-out."

I explained at the time that it wasn't "bankers" who were losing money in the right off, it was ordinary savers and pension holders. But everyone on here said it was magic money made out of thin air and that I was talking rubbish.

Hopefully after what happened in Cyprus we wont here any more of this "bank make money out of thin air" ruubish on here.

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It was the inevitable result of the Greek "bail-out."

I explained at the time that it wasn't "bankers" who were losing money in the right off, it was ordinary savers and pension holders. But everyone on here said it was magic money made out of thin air and that I was talking rubbish.

Hopefully after what happened in Cyprus we wont here any more of this "bank make money out of thin air" ruubish on here.

credit, which is interchangeable with money since the advent of cheques, credit cards and other electronic means, IS made out of thin air.

It is the air left in the wake of movement of money.

just like Profit on a balance sheet....it is yet to materialise.

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It was the inevitable result of the Greek "bail-out."

I explained at the time that it wasn't "bankers" who were losing money in the right off, it was ordinary savers and pension holders. But everyone on here said it was magic money made out of thin air and that I was talking rubbish.

Hopefully after what happened in Cyprus we wont here any more of this "bank make money out of thin air" ruubish on here.

The two things are not necessarily conradictory.

When banks produce money 'out of thin air', as they do (in simple terms), by whatever direct or indirect means, the increase in money supply is ultimately inflationary, and thus hits savers and pension holders. Sometimes the link is more obvious than at other times, but the effect is ultimately the same.

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The two things are not necessarily conradictory.

When banks produce money 'out of thin air', as they do (in simple terms), by whatever direct or indirect means, the increase in money supply is ultimately inflationary, and thus hits savers and pension holders. Sometimes the link is more obvious than at other times, but the effect is ultimately the same.

True but not if the extension directly leads to the otherwise latent production of goods and services which will give tangency to the extra nominal money . In this case the creation is not inflationary .

The problem is that most recent monetary expansion is effected in order to chase already existing produce and assets hence it becomes inflationary , firstly we see assets bid up them we see money lose its value against other necessities such as food , oil etc

The increasing effects of this are slowly negated by falls in value of luxuries such as flash cars , holidays etc but these drop off eventually once central banks can't incentivise credit extension any further .

Inflation is a coming boys , its as sure as gravity

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Having worked (briefly) in the IT dept of a bank, I find that part of the story quite plausible.

If anyone has ever dealt with an internal audit function within ANY corporation the most likely event is that there are twenty people with back ups but they have all forgotten what the rotating algorithm passwords were to open them after audit mandated they be changed every six hours

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  • 243 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
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      • up 5%



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