Banks have been criticised for being slow in responding to the recent ECB interest rates hike
Cyprus’ main banks are set to increase interest rates on deposits this year after a period of 10 years during which they were paying close to zero interest, but this might yet take a while.
The increase in the deposit rate was on the cards even before the European Central Bank raised interest rates by 50 basis points 10 days ago. It was the sixth time the ECB raised interest rates for euro countries, increasing the deposit rate it pays banks overnight to 3 per cent and the minimum refinance rate it lends banks overnight to 3.5 per cent.
People have been complaining that banks in Cyprus have been slow to increase deposits rates which remain below 1 per cent, but this is set to change, although it is not happening as fast as some would like.
Central Bank Governor Constantinos Herodotou appeared to have applied some pressure on bank bosses a few days ago. After a meeting on Tuesday with chief executives of the banks, a Central Bank announcement said the governor urged the banks to proceed as soon as possible with the evaluation of their data with regard to the level of their deposit rates.
The banks were taking their time, perhaps as a way of compensating for the fact that for years deposits incurred a cost to banks.
“Deposit rates are going to rise as we go through the year but bear in mind that for about the same time as banks were paying their depositors near zero per cent, they were charged at -0.5 per cent by the ECB for their overnight deposits,” said Ioannis Tirkides, senior economist at the Bank of Cyprus.
“Banks absorbed considerable losses over a long period of time, when their Net Interest Margins, the difference between the average rate at which they lend and the average cost of their deposits, dropped considerably lower,” he added.
Full story here:-
https://cyprus-mail.com/2023/03/26/deposit-rates-to-rise-but-not-just-yet/