I already have gone on the record that the taxation of deposits in Cyprus is nothing short of theft. Regardless of a bloated banking system that was in shambles, taking depositors’ assets under this method is wrong and it does not just target Russians and offshore depositors evading taxes. It does not even just target the wealthy. This also targets the average person on the ground. The ripples are being felt elsewhere throughout Europe (and here in America) as it poses secondary and tertiary bank and regulatory risks.
Here is how the ADRs of the European banks are being hit in New York trading.
National Bank of Greece S.A. (NYSE: NBG) is at a new 52-week low with a drop of more than 7% to $0.92.
The Bank of Ireland (NYSE: IRE) is down almost 3% at $8.75.
The iShares MSCI Italy Capped Index (NYSEMKT: EWI) represents all of Italy and is down 3% at $12.20, as this nation has no government at the moment and is too big to bail out.
Even the major banking stocks are down: Deutsche Bank A.G. (NYSE: DB) is down 4% at $42.80, UBS A.G. (NYSE: UBS) is down 3% at $15.90, The Royal Bank of Scotland Group PLC (NYSE: RBS) is down 4.3% at $8.87, Lloyds Banking Group PLC (NYSE: LYG) is down 2% at $2.97, Barclays PLC (NYSE: BCS) is down 3.6% at $18.53 and Credit Suisse Group A.G. (NYSE: CS) is down 3.5% at $27.42.
Before you stress too much about this, the impact is being overblown by the doomsday crowd and it is being made fun of as inconsequential by some of the financial media. Cyprus is a nation of 800,000 or so inhabitants with an economy of less than 20 billion euros. Its banking system was extremely large compared to the economy and was in shambles. The nation needs its bailout dollars.
This is just not how to fix things.