When the EU offered a bailout loan to Cyprus this week, residents were shocked to discover what the offer entailed: a levy on the country's bank accounts. Incredulity and outrage spilled off the Mediterranean island nation. In a global economy, the situation has raised a crucial question: Can we trust our banks?
We are worried. Because we feel betrayed. We feel betrayed from Europe. What is happening, it's unbelievable. It didn't happen anywhere else and it shouldn't be happening. It's not fair.
People in Cyprus are anxious for their government to fend off possible financial ruin -- but they can't believe what the European Union wanted. The EU offered Cyprus another bailout loan, but only if a levy was placed on the country's bank accounts.
Essentially, the savings deposits Cypriots thought were insured would be harvested. The EU thinks of it as a kind of tax. Cypriots think of it as bank robbery.
Earlier this week, a bill that would allow the bailout plan to proceed was defeated in the Cypriot parliament. The government is now considering capital restrictions as it gets ready to reopen banks next week. But now, depositors across the world wonder if the money they've been storing in savings and chequing accounts is also vulnerable to needy governments.
Marshall Auerback of The Institute for New Economic Thinking
According to the Canadian Bankers Association
, 86 per cent of Canadians have a favourable impression of banks in Canada, with 94 per cent having a favourable impression of their own bank.
But Marshall Auerback
, Director of Institutional Partnerships at The Institute for New Economic Thinking, says the situation in Cyprus has created a "crisis of trust." He points out that many in the United States have moved their money out of large banks and into community banks, or credit unions. Geraint Anderson - Financial analyst turned novelist
For more, we spoke to Geraint Anderson
who left behind his life as a financial analyst in London after witnessing immoral, illegal, and corrupt deals in the banking industry. His latest book is Payback Time
-- a novel about a group of friends who take revenge on a bank by manipulating markets and dodging regulators. Sherry Cooper - President, Sherry Cooper and Associates
We were also joined by Sherry Cooper
, former chief economist for the Bank of Montreal Financial Group. Despite the news from Cyprus and other banking fiascos in the last couple of years, Cooper believes Canadians should remain confident in our banking system.
This segment was produced by The Current's
Sujata Berry, Hassan Santur and Pacinthe Mattar.
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Other segments on today's show:
Afghanistan: On the road in Kabul
Checking-In: Listener Response