Brokerage Accounts "Cyprus'ed" ?

Discussion in 'Economics' started by nepenthean, Apr 27, 2013.

  1. In view of the recent legislation in the EU and now Canada about bureaucrats commandeering a percentage of bank deposits and even brokerage accounts, can anyone tell me if one has an Interactive Broker account in Hong Kong, will her account fall under US jurisdiction if she is a US citizen?

    So if by way of US government edict, private accounts are raided for 10%, will US citizen account holders in IB Hong Kong be raped as well. It seems to be they would be, but I just want further insight.

    I inquired via email to IB already but have yet to receive a reply. I also used the 'search' function, which turned up nothing relevant.

    Kind thanks in advance.
  2. luisHK


    There is no IB HK, the account will fall part under IB LLc (US) and part under IB UK, depending on the products traded.

    What happened to brokers holding accounts in cypriot banks ? Did individuals recover their money if they held under 100K in it, or was the whole brokerage account frozen disregarding of individual subaccounts ?

    I'm not following much the Cyprus situation but if corporate accounts over 100K euros have been frozen, there must have been a sharp unemployment increase overnight.
  3. Agreed, I looked at the IB H.K. Page and there is nothing about IB being incorporated there, so it is basically a U.S. account being managed/facilitated out of H.K.

    I opened my account with IB America but when I access account management I get routed to H.K.

    The fact that I'm not American is scant consolation in the event that sort of fund confiscation occurs. Non-Cypriots got hit as hard as locals, harder if you consider they typically had the larger accounts.

    Never thought highly of politicians in general, but the current lot are the scum of the earth.
  4. It is being blown out of all proportion.

    Cyprus initially wanted to avoid hitting its tax haven depositors too much and so wanted to apply a haircut evenly across all accounts. The EU finance minsters initially said "OK, if that's what you really want." Then Cyprus rejected what had been their own proposal and the EU said fine again.

    There is no legislation in the EU or Canada or the U.S. along the lines of what you suggest, beyond that fact that if a bank or broker goes bankrupt, then yes, uninsured depositors only get a proportionate share of what's left.

    This is nothing new and is exactly what happened with PFG just last year, where account holders have so far recovered ONLY 30% of account value!

    It has also happened occasionally with U.S. banks that went under where uninsured depositors have sometimes lost most of their deposits.
  5. Concentrate on things more likely to happen this year or next.

  6. Please review Canada's 2013 budget.

    Bernanke did not say there will not be a Cyprus situation in the US if there is a run on the USD. Another Fed Governor said something affirming that as well.
  7. I think the major point of concern is the initial proposal to give deposits below €100,000 a haircut along with the rest, despite the fact that those deposits were supposedly covered by the Cyprus Deposit Protection scheme.

    It is not quite the same as taking losses from futures accounts, where we have known all along there is no protection and were lulled into a sense of comfort by the 'nobody has suffered losses as a result of broker default' or whatever the spiel was before MFG and PFG hit.

    As for Bank failure in the US, are customer losses despite FDIC protection? The initial proposal in Cyprus was the equivalent of telling US bank customers who are covered by FDIC up to $250,000 that they will have to take a loss, never mind what we told you before.

    This time the outcry caused a rethink. Can we really be confident next time will be the same?

    I don't lose any sleep over it, have always kept the minimum needed in my brokerage accounts, but am considering moving funds out of Thailand to Singapore. There is a deposit protection scheme here, but given the excesses of the current government, I would probably sleep a little better with less money here.
  8. The initial proposal was that way because that was the only thing the Cyprus negotiators would agree to initially in an all-night meeting where everyone lost touch with their senses and came up with that compromise. They wanted to minimize losses of their large foreign depositors so that they could hang on to their offshore tax haven status, which was the basis of their economy.

    This argument only applies to a tax haven and does not generalize beyond that. The EU has said afterward that one of their EU wide principles should always be honoring of 100,000 Euro deposit insurance. To do otherwise would cause bank runs as they know now.

    Those who lost on U.S. bank failures had more than the FDIC maximum. FDIC has always honored its guarantee. But incidentally it is under-funded and there is no way it could cover a large series of bank failures unless Congress bailed it out. The U.S. itself has not guaranteed the FDIC.

    But yes I agree that you may be well-advised to move funds to Singapore from Thailand.
  9. I'm OK with allowing for the fact that anything can happen anytime particularly if the origins are political. What I think is absurd is believing because one person, society or country goes insane in a particular way that means there is a reasonably chance of other people, socities or countries following suit.

    I think the liklihood of the US or Canada giving financial accounts of any sort a haircut (bank, brokerage, futures) in the foreseable future is very slim. I believe those who fixate on "out bets" are wastig time and energy to saisfy a need for drama. Markets provide plenty of drama and I have no need to supplement that which naturally occurs.
  10. and just about the time you think you are at least covered up to 250k, then you have to start worrying what 250k will be worth when you get it back
    #10     Apr 28, 2013