12/06/2015 11:00
Deposit rates in Cyprus have dropped to the lowest level in 15 years following trends of the rest of Europe and the signal for drastic cuts given in February by the Central Bank.
Depositors, who until recently could find rates close to 2.5-3%, are now required to settle for rates below 2%.
Interest rates on new deposits are the lowest since 2001, when ECB started collecting data for Cyprus.
During the banking bubble, deposit rates had exceeded 6% and in some cases even reached 7.5%.
Until very recently, Cyprus had the lead in offering high interest rates in the eurozone.
Banks are trying to prevent deposit outflows by offering high interest rates and locking on long-term deposits, but following the Central Bank’s intervention in February, banks’ movements are controlled and limited.
The intervention aimed to reduce lending rates and deposit rates by one percentage point.
Today, banks and cooperatives offer deposit rates for twelve months duration from 1.35% to 2%, while in some cases they can reach up to 2.20%.
Cooperatives offer rates up to 2.15%.
Competition seems to have increased in banks and cooperatives, with depositors seeking to find the best possible rates and taking into account the significant increase in the taxation of interest income.
The phenomenon of deposits dispersion in various banks in order to provide coverage by the deposit protection scheme, which covers up to € 100 thousand per person, per bank, is also observed.
The effort of the banks is to have further convergence of Cypriot interest rates with the European rates. In eurozone, the average interest rate for new deposits is 0.90% while in Cyprus it is about twice as that.
Depositors, who until recently could find rates close to 2.5-3%, are now required to settle for rates below 2%.
Interest rates on new deposits are the lowest since 2001, when ECB started collecting data for Cyprus.
During the banking bubble, deposit rates had exceeded 6% and in some cases even reached 7.5%.Until very recently, Cyprus had the lead in offering high interest rates in the eurozone.
Banks are trying to prevent deposit outflows by offering high interest rates and locking on long-term deposits, but following the Central Bank’s intervention in February, banks’ movements are controlled and limited.
The intervention aimed to reduce lending rates and deposit rates by one percentage point.
Today, banks and cooperatives offer deposit rates for twelve months duration from 1.35% to 2%, while in some cases they can reach up to 2.20%.
Cooperatives offer rates up to 2.15%.
Competition seems to have increased in banks and cooperatives, with depositors seeking to find the best possible rates and taking into account the significant increase in the taxation of interest income.
The phenomenon of deposits dispersion in various banks in order to provide coverage by the deposit protection scheme, which covers up to € 100 thousand per person, per bank, is also observed.
The effort of the banks is to have further convergence of Cypriot interest rates with the European rates. In eurozone, the average interest rate for new deposits is 0.90% while in Cyprus it is about twice as that.
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