13/03/2015 10:00
The total benefit to borrowers is estimated at €165 mn, after the Central Bank of Cyprus announced a cut in the deposit rates by 1% and the Cypriot banks cut their rates too, as evidenced by their announcements.
However, this benefit does not apply to all borrowers who may be in a difficult financial position due to the crisis, while in many cases it has no direct impact on their income available and the money that could be injected to the market.
Both in Bank of Cyprus and Hellenic Bank the interest rate cut on loans concerns loans linked to the base rate of the Bank, whether performing or non-performing. A large number of loans linked to the base rate of the European Central Bank (euribor) is not affected.
In Bank of Cyprus, the loans linked to the euribor stand at 45% while there are loans linked to the euribor in Hellenic Bank as well. The interest rate of these loans had declined with the cut of the European Central Bank base rate, which currently is at 0.23%. Another way to cut the interest rate of a loan linked to the euribor, is for the banks to reduce their margin of profit.
BOCY: We are the cheapest
Bank of Cyprus had announced that from March 1 interest rates of all loans linked to its key interest rate will be cut by 1%.
As the CNA reports, Bank of Cyprus managed through its accounting system from March 1 to translate the interest rate cut into an automatic immediate reduction of the installment for all borrowers. At the same time, borrowers may choose, if they wish, not to reduce the installment at this stage but to shorten the repayment period.
Sources of the bank said that despite the fact that other banks reported cuts in lending rates greater than 1%, the Bank of Cyprus remains the cheapest, since it already had the lowest lending rates. Moreover, the money saved by the borrower through the immediate reduction of the installment - that the bank managed to implement via its electronic system from March 1 - is money that can be injected directly to the market.
From the interest rate cut on deposits, the bank had a loss of €10 mn since many of the deposit rates were not reduced directly from March 1, as they are connected to the maturity of the bills and time deposits at a certain date.
In Bank of Cyprus the lending rate cut benefited 180,000 accounts of 94,000 customers with a total annual benefit for borrowers amounting to €57.4 mn.
2% cut in Cooperatives
The Cooperatives imposed a 2% interest rate reduction to all performing loans even to those linked to the euribor.
"We did it in a simple but integral way” chairman of the guardianship of Central Cooperative Bank Nicolas Hadjiyiannis told CNA.
At this stage, the Cooperatives system does not translate the interest rates cut to a reduction in installments, but to a reduction of the repayment period. The borrower in the Coop wishing to reduce his installment should request it from the Cooperative Credit Society, with which he cooperates through a specific process. Mr. Hadjiyiannis said, however, that the whole process should soon be simplified by computerized means, so that if the borrower wishes to reduce his installment, this is going to be made automatically.
How rates are formed after the 2% cut, this is different from Coop to Coop, depending on the previous rate. In some Coops, the previous rate was exceptionally high compared with other banks, thus the reduction brings interest rates at the same levels to those of other banks or Coops before the reduction.
As for the non-performing loans, they will enjoy 50% of the cut. If they ask for restructuring and if borrowers are consistent for six months, they will enjoy the rest of the reduction.
Mr. Hadjiyiannis reported that the Coops have fully passed the reduction of the deposit rate by 1% to the lending rates.
He expressed hope that the medium-term benefits will be important to everyone, stressing that “our medium-term interests are synonymous with our client's interests”.
As he said, the size of the injection that the Coops have put in the economy with their rate cuts is of €90 mn at the same time that all the others have put together €75 mn, according to the announcements of the banks.
"We have a quarter of the market, but we have put 65% of all benefits”, Mr. Hadjiyiannis said, adding that among the clients of the Cooperatives "there is a lot of movement, excitement and interest”.
Regarding the process of restructuring in Cooperatives, Mr. Hadjiyiannis noted that it is slower than they would like and therefore measures are constantly taken for its simplification the soonest possible.
HB: Greater margins for new loans
In Hellenic Bank, all loans linked to the key rate of the bank, performing or not, were cut by 1% from March 1.
Hellenic Bank had announced additional reduction of 0.35% in the new mortgage loans, auto loans and loans for purchase of land for the purpose of housing.
The interest rate cut led either to the reduction of the installment of the loan or the shortening of the repayment period depending on what the contract says or what the client chooses. The reduction in the case of Hellenic Bank is not related to loans that are linked to the euribor.
Chairwoman of Hellenic Bank, Irena Georgiadou had mentioned earlier that by reducing the lending rate by 1%, 20 thousand customers will be benefited while the total annual benefit from the reduced borrowing costs will amount to €13.5 mn.
At the same time, Hellenic Bank sources told CNA that with the implementation of the foreclosures law and the anticipated reduction of non-performing loans, there will be a margin for further rate cuts.
It was also stated that Hellenic bank has a comfortable liquidity, due to the increased flow of deposits and the non-dependence on the ELA and the ECB, which gives greater comfort in granting new loans.
However, this benefit does not apply to all borrowers who may be in a difficult financial position due to the crisis, while in many cases it has no direct impact on their income available and the money that could be injected to the market.
Both in Bank of Cyprus and Hellenic Bank the interest rate cut on loans concerns loans linked to the base rate of the Bank, whether performing or non-performing. A large number of loans linked to the base rate of the European Central Bank (euribor) is not affected.
In Bank of Cyprus, the loans linked to the euribor stand at 45% while there are loans linked to the euribor in Hellenic Bank as well. The interest rate of these loans had declined with the cut of the European Central Bank base rate, which currently is at 0.23%. Another way to cut the interest rate of a loan linked to the euribor, is for the banks to reduce their margin of profit.
BOCY: We are the cheapest
Bank of Cyprus had announced that from March 1 interest rates of all loans linked to its key interest rate will be cut by 1%.
As the CNA reports, Bank of Cyprus managed through its accounting system from March 1 to translate the interest rate cut into an automatic immediate reduction of the installment for all borrowers. At the same time, borrowers may choose, if they wish, not to reduce the installment at this stage but to shorten the repayment period.
Sources of the bank said that despite the fact that other banks reported cuts in lending rates greater than 1%, the Bank of Cyprus remains the cheapest, since it already had the lowest lending rates. Moreover, the money saved by the borrower through the immediate reduction of the installment - that the bank managed to implement via its electronic system from March 1 - is money that can be injected directly to the market.
From the interest rate cut on deposits, the bank had a loss of €10 mn since many of the deposit rates were not reduced directly from March 1, as they are connected to the maturity of the bills and time deposits at a certain date.
In Bank of Cyprus the lending rate cut benefited 180,000 accounts of 94,000 customers with a total annual benefit for borrowers amounting to €57.4 mn.
2% cut in Cooperatives
The Cooperatives imposed a 2% interest rate reduction to all performing loans even to those linked to the euribor.
"We did it in a simple but integral way” chairman of the guardianship of Central Cooperative Bank Nicolas Hadjiyiannis told CNA.
At this stage, the Cooperatives system does not translate the interest rates cut to a reduction in installments, but to a reduction of the repayment period. The borrower in the Coop wishing to reduce his installment should request it from the Cooperative Credit Society, with which he cooperates through a specific process. Mr. Hadjiyiannis said, however, that the whole process should soon be simplified by computerized means, so that if the borrower wishes to reduce his installment, this is going to be made automatically.
How rates are formed after the 2% cut, this is different from Coop to Coop, depending on the previous rate. In some Coops, the previous rate was exceptionally high compared with other banks, thus the reduction brings interest rates at the same levels to those of other banks or Coops before the reduction.
As for the non-performing loans, they will enjoy 50% of the cut. If they ask for restructuring and if borrowers are consistent for six months, they will enjoy the rest of the reduction.
Mr. Hadjiyiannis reported that the Coops have fully passed the reduction of the deposit rate by 1% to the lending rates.
He expressed hope that the medium-term benefits will be important to everyone, stressing that “our medium-term interests are synonymous with our client's interests”.
As he said, the size of the injection that the Coops have put in the economy with their rate cuts is of €90 mn at the same time that all the others have put together €75 mn, according to the announcements of the banks.
"We have a quarter of the market, but we have put 65% of all benefits”, Mr. Hadjiyiannis said, adding that among the clients of the Cooperatives "there is a lot of movement, excitement and interest”.
Regarding the process of restructuring in Cooperatives, Mr. Hadjiyiannis noted that it is slower than they would like and therefore measures are constantly taken for its simplification the soonest possible.
HB: Greater margins for new loans
In Hellenic Bank, all loans linked to the key rate of the bank, performing or not, were cut by 1% from March 1.
Hellenic Bank had announced additional reduction of 0.35% in the new mortgage loans, auto loans and loans for purchase of land for the purpose of housing.
The interest rate cut led either to the reduction of the installment of the loan or the shortening of the repayment period depending on what the contract says or what the client chooses. The reduction in the case of Hellenic Bank is not related to loans that are linked to the euribor.
Chairwoman of Hellenic Bank, Irena Georgiadou had mentioned earlier that by reducing the lending rate by 1%, 20 thousand customers will be benefited while the total annual benefit from the reduced borrowing costs will amount to €13.5 mn.
At the same time, Hellenic Bank sources told CNA that with the implementation of the foreclosures law and the anticipated reduction of non-performing loans, there will be a margin for further rate cuts.
It was also stated that Hellenic bank has a comfortable liquidity, due to the increased flow of deposits and the non-dependence on the ELA and the ECB, which gives greater comfort in granting new loans.
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