Cyprus bailout is unfair on depositors

Andrew Lilico appears on BBC Radio 5 Live Breakfast

Andrew Lilico appeared on BBC Radio 5 Live to discuss the proposed Cyprus bailout package in which citizens will experience a one-off tax on their deposits.

Dr Lilico stated that in principle, depositors should be exposed to risk when a bank goes bust as their deposits are in fact a loan to the bank.

"If you loan money to a chip shop and the chip shop goes bust then you'll own a chip shop. If you loan money to a bank and the bank goes bust then you should own a bank. That principle, which hasn't been really been respected in recent years is important to a healthy banking system."

Unforunately in Cyprus, they have not gone about this measure in a sensible way. They have spared bondholders from the tax, punished all banks rather than those that are bust and have not respected the euro deposit insurance limit.

Listen to the full programme here.Segment begins at 1:38.20.

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