Poll: Why Didn’t the Cyprus “Bail-In” Cause a Bank Run?
The recent “bail-in” of Cyprus by the EU, IMF, and European Central Bank troika forced depositors in Cyprus banks to turn over about 40% of their assets to the banking system. This action hasn’t caused a bank run in the greater eurozone yet, so in a poll conducted in the CFA Institute Financial NewsBrief, we asked professional investors why this is the case.
Many investors feared that the usage of bank deposits for a “bail-in” of the banking system in Cyprus would cause a run on banks in other financially troubled countries in the EU. Why has this not happened?
Nearly 38% of 889 respondents believe that the public is taking a wait-and-see approach to consider how events in Cyprus unfold. The next two most common responses are that the situation in Cyprus is unique (23% of respondents) and that people remain unconcerned that the events in Cyprus could affect them (21% of respondents).
The combination of these three responses suggests that 82% of investors view the events in Cyprus as no immediate threat to the rest of Europe. In a fascinating juxtaposition, only 12% of respondents view the European banking system as solvent and only 6% view the existing depositor insurance as adequate. In total, these results imply that investors view the system as unsafe but believe the events in Cyprus are unlikely to affect the whole of Europe.
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