Will New Zealand Follow Cyprus? Govmnt Policy May Alienate FXCompanies and Investors
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Legal precedents which arise as a result of government action can on occasion lead to sudden implementation of such action on a global scale.
The recent proposals in Cyprus to impose a “haircut”, a move whereby the government taxes bank deposits, on all accounts in the nation has generated widespread discussion internationally.
As the future of Cyprus’ forex industry still hangs in the balance following the Cypriot Parliament’s decision yesterday to veto the haircut, other jurisdictions are looking at going down the route of dipping into private bank deposits.
Potential Unlimited Bank Tax in New Zealand
The New Zealand government is now understood to be pursuing a policy whereby a depositor haircut can be imposed for all future bank failures. Discussions on this were initially opened by The Reserve Bank which consulted with registered banks on pre-positioning banks’ systems to ensure compatibility with the Open Bank Resolution (OBR) policy back in March 2011.
There is now speculation that the government is reopening these talks which would represent an important step in a government-wide process to fully implement the OBR policy.
The plan would not limit the haircuts to any percentage, but would simply set in place a law allowing the banks and the government to steal whatever is necessary from depositors to prop up the failing bank institution. Under such a law, depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.
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