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Banks on a fight for deposit rates

22/03/2012 07:57
Banks are forced to offer deposit rates above 5% to deal with the liquidity problems in the market and the uncertainty for the developments in Greece.

The signs for the future course of the deposit rates are unfavourable in the first quarter of 2012, as there seem to be no factors that could contribute to the reversal of the trends in the market.

The banks give everything to prevent the outflow of deposits to competitors, offering flexible products of long duration to “lock” new deposits.

The every-day battles determine the cost of money for the rest of the economy, which is one of the highest in Europe.

Depositors claim the maximum interest rate and the contacts between the branches and the central administration for the offer of higher rates are more and more frequent.

“Interest rates have stabilized to high levels. We have observed a more frequent renewal of bills close to the maximum rate lately”, Head of Bank of Cyprys Retail Banking, Haris Puangare told StockWatch.

Hopes that 2012 would signal the gradual reduction of the cost of money have been denied.

“The situation remains stagnant”, Head of Laiki Bank Retail Banking, Giorgos Markides told StockWatch.

The problems in banks have boosted the negotiating power of the depositors, who try to win as much as they can.

“The trend of deposit rates in the past two months is upward due to the lack of other sources of liquidity”, General Manager of Hellenic Bank Retail Banking, Giorgos Karageorgis said.

Banks and Coops are concerned about the cost of money and demand certain arrangements.

“We cannot offer rates of 5.25%, 5.50% and 6%”, Strovolos Coop Manager, Demetrakis Stavrou stated.

“The trends are upward”, he added.

“The Central Bank of Cyprus and the Coop Development Superintendent must intervene”, he noted.

According to European Central Bank data, the interest rate for absorbance of deposits in Cyprus stood at 4.28% in January 2012, the highest in the past 22 months.

Despite the increase in deposit rates, trends are milder than those of Greece, where rates have jumped higher due to the crisis.

The corresponding Greek rate climbed to 4.79%.