Taxing bank deposits.

[footy123]

Wow Nigel,it seems the whole island is going crazy about this Whats your opinion on the matter and imparticular....property prices?

Thanks...Terry Liversidge

[Nigel Howarth]

Hi Terry,

Yes - I read about this - depositors with over €100,000 in Cypriot banks are to lose 9.9% and those under €100,000 are to lose 6.75%. They're also imposing a "withholding tax" on interest earned and increasing corporate tax to 12.5%.

According to Reuters news agency, almost half of the depositors in Cyprus are believed to be non-resident Russians - so there may be some reaction from the Russian Government in the coming days.

It's been reported that the banks have put a block on sending money out of the country, but you can still withdraw cash (I withdrew €200 this morning from a cash machine).

Monday is a public holiday here (Green Monday) - so we're not going to see much happening before Tuesday.

The move will certainly erode investor confidence and will put further downward pressure on property prices.

But we still have the non-performing loans to deal with - and the draft memorandum of understanding talked about setting up a 'bad bank' like NAMA in Ireland to take on the assets underpinning these loans. If this happens, property prices will drop further as the Bad Bank will be purchasing the collateral (i.e. property) at a heavy discount.

Regards,

[Nigel Howarth]

I think it's on all bank deposits - we'll have to wait for more information to be released.

Rgds,