Cyprus Banking Decision Reduces Investor Confidence in Banks

Since the global financial crisis first began in 2008, many American and European investors with holdings in traditional options such as stocks and bonds have lost their trust in the major global financial firms, including most of the major banks. Although the recovery has been slow, the recent decisions by the European Union, with regards to the trouble in Cyprus; did little to encourage more confidence and trust in the European Banking system. In fact, many analysts believe that it has done the opposite and frightened investors away from yet another of the established investments, that have traditionally occupied portfolios.

As a result of the European Union’s decision to confiscate consumer savings over 100,000 euros in banks in Cyprus, and then convert them into shares for the bank, has caused investor confidence to drop significantly. This approach forces the clients of the bank to make an investment into something that already has already has a lengthy history of losing money. What kind of investor in their right-mind would do that? Regrettably, the actions of EU officials will only encourage investors in Cyprus and across the European Union, to keep their money out of the banking systems because nowadays (just like stocks, bonds and real estates) these traditional investments are risky too. The only answer for most, has been to invest their money elsewhere.

As investors have been pulling their money out of the banks and the stock markets in the last few years, they have begun to explore other avenues of investment, to grow their savings and personal wealth. Because many have found that the alternative investment market has been less risky and more rewarding, the mass exodus of billions of dollars of investor funds from the banks and the stock markets and into alternative options, has likely contributed to the crisis that lingers today. Regardless, who can blame investors for taking their money out of any type of investment that is losing money? After all, that is the goal of every investment-seeker. Get more money out, than they originally put in.

In a market that was once dominated by the traditional methods of investing, such as stocks, bonds and banks, there has been a significant shift in investor confidence. The change in investor thinking has encouraged the shift of investment dollars toward alternative investing options and has changed the investment landscape, all over the world. Options that have demonstrated they can consistently deliver investment profits to investors, will always be more popular with the investment community. And nowadays it would appear that alternative investments have continued to outperform the traditional options to invest and more and more investors are moving swiftly to capitalize on the opportunities.


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