Cyprus Finance Minister to boost Soc Insurance fund return

Cyprus Finance Minister Chariloas Stavrakis stated that the government is considering investing a large part the Social Insurance Fund reserves worth EUR 5.3 bln in banks and Cooperatives in order to take advantage of the exceptionally high interest rates offered for deposits and at the same time improve the performance of the fund.

About 98% of the reserves of the fund is currently placed in Cyprus government bonds earning a 5% return, while the other 1-2% is placed are on deposit with a number of Coops and commercial banks.
“We were earning 4.75% to 5% on the funds, but after a couple of phone calls, we managed to lift the interest rate to 6%,” said Stavrakis, an ex-senior banker who knows well how to negotiate a better price from banks.

He did not go into details with respect to the amounts involved in the newly locked rate deposits, but clarified that some of the EUR 100 mln or so funds placed with all commercial banks and Coops will be maturing in the next few months and a better pricing will be negotiated.
Nevertheless, Stavrakis said the government wants to allocate a higher percentage of the Social Insurance Fund reserves away from the low yielding bonds into bank deposits, property investments and when the time is right, invest in the equity market.
“Up to EUR 1.5 bln of funds could be shifted away as part of the diversification attempt with the objective to improve the Fund’s return,” said Stavrakis.