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U.S. banking industry looks to settle Cyprus worries
American banks are looking to assuage concerns that a hotly contested tax on bank accounts in Cyprus could have an impact on U.S. bank accounts.
In a statement released Monday, the chief economist for the American Bankers Association said the turmoil brewing in Cyprus has "no implication" for U.S. bank accounts.
"Simply put, U.S. insured depositors are safe and their deposits are protected by a strong FDIC fund, a financially secure banking system and the full faith and credit of the U.S. government," said James Chessen, the industry group's top economist.
The most contentious piece of that agreement is a one-time tax on all bank deposits, ranging from 6.75 percent to 9.9 percent depending on the amount of money in the account. That proposal, which comes as part of an agreement that would have the European Union send $13 billion relief package to the nation, has been hotly contested by the public. The rarely-seen bank account tax is also driving concerns that it could provoke a bank run at the nation's financial institutions, and the panic could in turn spill over to other European nations grappling with their own fiscal challenges.
The ABA's statement looks to assuage concerns that U.S. bank accounts could be impacted by any spillover from that controversy. Noting that the insurance fund run by the Federal Deposit Insurance Corporation currently has over $25 billion in reserves, the industry group says that no insured depositor has ever lost in a bank failure. And with the American financial crisis several years in the past, they contend the industry is in a good position to weather any potential storm.
"The U.S. banking industry has rapidly returned to health with strong earnings, lower losses and significant increases in capital," Chessen said.
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