Cyprus is a tiny island country which is at a brink of bankruptcy, but there are many lesson that investor should remember and avoid costly mistake. Cyprus banking crisis is not new. They first requested bailout in June 2012 and I did mention in article posted in June that EU had no money left to pay Cyprus or any Country. http://www.freefdawatchlist.com/2012/06/where-is-money-in-efsf-to-support-bank.html
The result is after 8 month of drag, Cyprus was forced to cut 62.5% of the depositor money over 100k to get 10B bailout. If we go by math, those who had over 100k will loss 62.5%.
So,
100k or below will be left with 100k.
200k will be left with 137k.
300k will be left with 175k.
500k will be left with 225k.
1M will be left with 437k.
On an average Bank in US is already charging customer with average of 12% -15% on their checking and 5% on their saving account and there is reason behind it and it can be consider as early sign of failure.
The lesson that can be learned from Cyprus bank crisis is:
1. Never ignore the reality. Cyprus was in trouble and it gave all the early indication that its going to fail.
2. Go by the rule: If the bank says it can only insure 250k,then don't over invest in one bank. Split up the deposit in multiple national bank upto the amount that can be insured.
3. Don't be complacent: Who thought Home prices will never go down before 2007.
US national debt is close to $17 trillion dollar and for past 4 quarter the budget deficit is over 1 trillion dollar. What happened in Cyprus can happen in US. This doesnt mean one should start stuffing money inside their mattress or invest in risky asset like stock market.
