Legal Issues Of Cyprus Banking Crisis Relief

Throughout the process of the Cyprus banking crisis relief applied by theEuropean Union, there are numerous legal issues we should discuss and research.During the first round of the bailout deal，the government tends to levy a one-offtax on all deposit, which doesn’t conform to the doctrine of protecting thedepositors’ property interest and safety designed under the EU deposit insurancesystem. After the deposit tax bill was vetoed, Troika and Cyprus reached an finalagreement of banking restructuirng, in which the mandatory measure"debt-to-equity swap，，for uninsured depositors is contradicted to the rights andobligations contained by the ‘‘debt” legal relationship between bank and its savers.Meanwhile, in order to prevent the risk of bank run and capital outflow, Cyprustook measures of fiscal austerity and capital control, result in that with thenationality changes among the EU, the Euro lost the value and functions revealedby its legal nature of “beyond national borders currency，，.As a special supranational organization, EU established its own unique legalsystem. In order to guarantee this system practiced effectively among the membercountries, Law of the EU has been given the supreme legal authority to be priorand directly applied. Based on the EU law principles of fundamental rights，themeasures adopted in Cyprus banking crisis rescue are harmful to the propertyright of national people, also the agreement infringe the right of equality to thedepositors who were damaged in banking restructuring, and the entire depositorswere deprived of the right of reasonable expectation as well. Besides, Cyprusbanking crisis relief involve infringement that financial regulator internal failedto do corresponding supervisory duties, and EU didn’t implement its legal duty toact fairly of prudential regulation to member states’ financial system. During therescue process, government and EU exerted third party public power to raisemoney caused loss of citizen’s private property and neglected public interest insome kind of aspect.In the judicial review system of European Court of Justice, lawsuit of tortdamages and review to EU institutions’ nonfeasance, plus Cyprus domesticadministrative litigation system, can provide judicial remedy means for the damaged depositors in this bank bail-outs event. Whereas the theoreticalreasoning and burden of proof have practical difficulties, with the regulation ofimmunity provide protection to financial supervisory authoirties, Uninsureddepositors could hardly acquire realistic recover for their loss. Through theanalysis of Cyprus banking cirsis relief issues，it is enlightenment that legalregulation for multinational bank should be strengthen, in order to advancedprevent sovereign debt crisis cause damage to people’s interests, and duirng theprocess of banking rescue, the depositors’ property interest and relevant rightsshould also be attached importance.