At Forbes, Tim Worstall has some thoughts on the oddities now apparent in how the Cyprus banking crisis has played out so far:
Now that we’re seeing the real numbers coming out about who loses what in the Cyprus haircut/bank consolidations there’s something very strange about the numbers. Whiffy even, and that’s not with a good odour to it either. For, as far as I can tell at least, the haircuts are far larger than they need to be in order to make good the damage that we were told about. I’m therefore coming around to the idea that this wasn’t what we’ve been told it was, a story of Russian offshore deposits and tax avoidance. Rather, it’s two banks which invested regular domestic deposits into just terrible opportunities and then lost it all.
I don’t think I can make the case absolutely but I think it’s a case worth at least investigating.
[. . .]
But back to the point I’m trying to work through here. We’ve been told that the immediate cause was all about all that foreign money which flooded the country’s banking system. Yet when we look at the amount that is being raised by the haircuts it doesn’t look as if the two bankrupt banks had all that much of those foreign deposits. It looks very much like the banks which had the deposits didn’t invest badly and thus didn’t go bankrupt. So the problem isn’t therefore one of all that foreign money.
Rather, it’s a problem of where those two banks invested their deposits. And it looks as if this was largely in Greek Government and Cypriot Government bonds. Which is why they are bust.