Cyprus deposit rates slide lower

Bank of Cyprus and Marfin Popular Bank have slashed their deposit rates sharply lower, with the 3 and 6 month fixed deposit rate now at 4.25%, down 175 basis points from the 6% rate offered only three weeks ago. The 1 month fixed deposit was quoted at 2.75% while the 12-month fixed deposit is now quoted by the two largest banks at 4.00%. 

The drop in rates is likely to be followed by the other banks. The decision of the banks to slash their deposit rates is in line with pressure from both the Finance Minister Charilaos Stavrakis and Central Bank Governor Athanasios Orphanides who have been urging the banks to cut deposit rates in order to accelerate the decline in borrowing costs charged to consumers and businesses. 

Last week, the Minister of Finance in cooperation with the Central Bank announced the injection of EUR 1 bln into the local economy to ease the liquidity situation, which involves extending government guaranteed lending to municipalities, semi-governmental organisations and Cyprus Airways to be used as collateral from commercial banks/coops to secure additional liquidity from the ECB at a rate of 2%.
Nevertheless, despite the sharp reduction in deposit rates by the two major banks, interest rates on term deposits remain substantially higher than other euro-zone member states, which are quoting euro deposits under 1%.