Banks in Cyprus offer their customers higher interest rates on loans but less favourable conditions on deposits than in most euro area countries.
This was revealed by the European Central Bank (ECB) on Thursday 12th July.
Specifically, ECB data for May 20-24 show that the average interest rate on time deposits of up to one year for households in Cyprus fell to 2.02 per cent, from 2.16 per cent in the previous month. This is the third highest rate in the euro area. Only Slovenia (1.36 per cent) and Greece (1.83 per cent), which have lower deposit rates, fare worse.
Meanwhile, the average deposit rate for households in the euro area was 3.11% in May, compared with 3.14% in April. The highest deposit rates were recorded in Estonia (3.58%), Finland (3.55%) and France (3.54%). These are the countries at the top of the ECB ranking. On the other hand, the average interest rate on corporate deposits in the euro area was 2.29% in May, compared with 1.82% in Cyprus. These indicators show that Cypriot depositors do not keep their savings under the most favourable conditions and do not receive adequate remuneration for the funds invested.
Moreover, Cyprus has one of the highest lending rates in the euro area.
For example, the average interest rate on housing loans in the island nation is 4.35 per cent in Cyprus, compared with 3.76 per cent in the eurozone. As a result, the difference between housing loan rates and deposit rates is 2.33%, one of the highest rates in the euro area (4th). Incidentally, even in Greece the mortgage rate is lower than in Cyprus - 4.15%. Cypriot entrepreneurs also borrow at higher interest rates than entrepreneurs in other euro area countries - 5.31% against 4.74% (8th place in the euro area). As for consumer loans, the interest rate in Cyprus is 6.36%.
Interestingly, according to the European Banking Authority (EBA), Greece and Cyprus are among the leading countries in terms of the share of household deposits in the financing structure. At the same time, the EBA notes that European savers are increasingly putting their money into alternative investments.