19/01/2012 07:04
Banks are engaged in defensive maneuvers to maintain their liquidity in the first weeks of 2012 ahead of this year’s challenges.
The deterioration of the economy and the impacts of the Greek crisis on the cost of money boost pressures on banks, which are called to prevent the outflow of the existing deposits and to gain new ones.
The latest telephone survey among the banks shows the interest rate increase and the strategies that the banks follow to maintain their liquidity.
For bills of €100 thousand, the banks offer rate of up to 5%.
Efforts focus on the “lock” of the annual bills or even the three-year ones.
The deposit products offer an escalating increase in deposit rates depending on duration, while some banks offer significant interest rate “premium” for bills of longer duration.
Pressures on deposits are considerable; in a few months only €3.8 billion have run off from the system.
According to latest Central Bank data, the level of deposits fell to €69.1 billion in November from €72.8 billion in May and €69.9 billion in December 2010.
The shrinkage of the economic activity puts pressures on the deposit stocks of the Cyprus residents.
At the same time, the connection of the banking system to Greece and the consecutive downgrades by the foreign agencies have changed the attitude of the foreign depositors.
Banks are exceptionally concerned about the dramatic increase in the cost of money in Greece reaching 7% on the annual bills in the past few weeks.
For the time being, the figures show that pressures from Greece are under control.
According to latest ECB data (see graph), interest rates in Cyprus rise but relatively slowly and are lower than those in Greece.
According to bankers, rates are not expected to drop despite pressures. The cost of absorbance of deposits will remain high, affecting lending rates and the prospects of recovery.
“Rates have stabilized high. We hope the need to absorb liquidity not to lead to new rate increases”, Head of Bank of Cyprus Retail Banking, Haris Puangare stated.
The deterioration of the economy and the impacts of the Greek crisis on the cost of money boost pressures on banks, which are called to prevent the outflow of the existing deposits and to gain new ones.
The latest telephone survey among the banks shows the interest rate increase and the strategies that the banks follow to maintain their liquidity.
For bills of €100 thousand, the banks offer rate of up to 5%.Efforts focus on the “lock” of the annual bills or even the three-year ones.
The deposit products offer an escalating increase in deposit rates depending on duration, while some banks offer significant interest rate “premium” for bills of longer duration.
Pressures on deposits are considerable; in a few months only €3.8 billion have run off from the system.
According to latest Central Bank data, the level of deposits fell to €69.1 billion in November from €72.8 billion in May and €69.9 billion in December 2010.
The shrinkage of the economic activity puts pressures on the deposit stocks of the Cyprus residents.
At the same time, the connection of the banking system to Greece and the consecutive downgrades by the foreign agencies have changed the attitude of the foreign depositors.
Banks are exceptionally concerned about the dramatic increase in the cost of money in Greece reaching 7% on the annual bills in the past few weeks.
For the time being, the figures show that pressures from Greece are under control. According to latest ECB data (see graph), interest rates in Cyprus rise but relatively slowly and are lower than those in Greece.
According to bankers, rates are not expected to drop despite pressures. The cost of absorbance of deposits will remain high, affecting lending rates and the prospects of recovery.
“Rates have stabilized high. We hope the need to absorb liquidity not to lead to new rate increases”, Head of Bank of Cyprus Retail Banking, Haris Puangare stated.
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