WASHINGTON, March 18 (Reuters) – A proposal to include a tax
on insured bank deposits in Cyprus sets an “incredibly dangerous
precedent” and undermines confidence in Europe’s handling of the
euro zone crisis, the head of a global banking association said
on Monday.
Tim Adams, managing director of the Institute of
International Finance, said a weekend announcement that Cyprus
would impose a one-off tax on bank accounts as part of a 10
billion euro bailout by the European Union had reignited
concerns over the euro zone crisis.
The announcement broke with previous practices that
depositors’ savings were sacrosanct. Cyprus will vote on the
decision on Tuesday.
“Crossing the Rubicon of addressing insured deposits and
undermining the explicit guarantee – you can call it a tax or
whatever you want – but essentially the broken guarantee opens
up lots of different possibilities for destabilizing effects in
the short term, medium term and long term,” Adams told Reuters
in an interview.
“The next time there is a crisis in any one of these
countries, depositors are going to ask themselves, why am I
going to stick around to see if the same set of rules are
applied or not? I do think it is an incredibly dangerous
precedent, without question,” he added.
The IIF is the world’s largest international lobbying group
for financial firms, with more than 450 members. It was the lead
negotiator for private-sector creditors during Greece’s private
debt write-down last year.
