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Cyprus interest margins high

06/02/2015 07:25
Cypriot banks have among the highest interest margins in the euro area, according to European Central Bank data processed by StockWatch.

According to the figures, the difference between the lending and deposit rates of Cypriot banks is relatively high, partly reflecting the need to generate income to cover the additional risk taken.

The margin of Cypriot banks in business loans is the second largest in the eurozone after Greece, reaching 3.25%.

In business loans, banks charge interest rate of 5.88% and in deposit products they pay rate of 2.63% - in both cases the highest in the eurozone.

In Greece, the rate of banks in business loans amounted to 3.35%.

Cypriot banks have the largest amount of non-performing loans in the eurozone.

Apart from Cyprus and Greece, the margin of banks on business loans in Malta and Slovenia is high as well.

In the eurozone, the relevant banks’ margin amounts to 2.02%.

As regards to the margin of Cypriot banks in mortgage loans, it is the fourth largest in the eurozone and amounts to 2.41%.

Largest margins are observed in banks in Portugal (2.68%), Latvia (2.64%) and Slovenia (2.54%).

In the eurozone, the margin of banks in mortgage loans is 1.83%.

CB ready to intervene

The Central Bank is concerned about the level of interest rates in Cyprus and it will try again to intervene in the market to push them down.

Under political pressure and the businesses’ and households’ demand to cut interest rates, the study of a technocratic team will be submitted to the CB Board next week.
The study will propose various methodologies concerning the imposition of lower deposit rates aiming at ultimately lower lending rates.

Bankers are warning, however, that expectations of immediate reduction in lending rates should be moderated. They estimate that it is difficult for the lending rates to be reduced by one percentage point, as targeted by the CB, as market conditions are not helpful for such large reductions.