Insider Business Haircut on interest rates of deposits

Haircut on interest rates of deposits

Not only big depositors in Cyprus banks won’t be earning any interest but they will also have to pay to keep their money there. For the first time ever, Cyprus banks are introducing a negative interest rate on big clients.

Hellenic Bank has already sent out letters informing clients whose deposits are in the millions that their interest rate is to be turned into a negative one. In other words, they will now have to pay the bank overhead.

However, Hellenic Bank notes that this measure mainly applies to semi-governmental organisations and big welfare funds. And that it does not apply to deposits of households and of small to medium-sized enterprises.

The negative interest rate appears to have been set at -0.4% which is what banks are charged by the European Central Bank to deposit their liquidity.

The Hellenic Bank policy is expected to be followed by the island’s other lenders which are currently providing zero interest rates on deposits, anyway. It is a matter of time before they turn into negative rates.

The new interest rate policy appears to be the result of excess liquidity in banks, based on the results for the first quarter of the year. Hellenic Bank has cash and deposits in central banks amounting to €4.21 billion, while Bank of Cyprus has €3.91 billion.

This means that Hellenic Bank pays the European Central Bank €16.84m to deposit its money, while Bank of Cyprus pays €15.64m. The new measure will affect, inter alias, government revenue from the special defence levy (30% on interest rates).

Banks have very high operation costs within an extremely low interest rate environment and this limits their revenues.  The result is that profitability is limited. At the same time, the European Central Bank’s low interest rate policy will continue for much longer than anticipated.

Central Bank of Cyprus data shows that total deposits in the island’s banks amounted to €48.36 billion in June, of which €38.52 million concerned residents within the country.

 

Read more:

https://in-cyprus.com/deposit-rates-and-interest-rates-on-consumer-credit-fall-in-june-home-loan-rates-rise/

 

Top Stories

UK helps employers with slow phase-in of job shield costs

British finance minister Rishi Sunak offered fresh help to employers hit by the coronavirus shutdown on Friday, announcing that future contributions they must make...

One new Covid-19 case from repatriations

There was one new Covid-19 case in Cyprus, the Health Ministry said on Friday, from a total of 2363 tests, bringing the total number...

Limassol: Dead body found in warehouse

  A body has been found in the light shaft of a warehouse on Nicos Georgiou street in Limassol, philenews reports. It said the body of...

Holy Synod to allow weddings during pre-Christmas fasting period

As a result of Covid-prompted wedding postponements, the Holy Synod has decided to allow wedding ceremonies during the pre-Christmas fasting period this year until...

President to discuss phase 3 with scientific advisors on Tuesday

  The team of scientists advising the government on the coronavirus outbreak are due to hold a new meeting with President Nicos Anastasiades on Tuesday...

Taste

Local cuisine: An introduction

Rich in fresh ingredients and tasty herbs, offers the very best of Mediterranean culinary delights. Head out to a tavern and feast on a...

Spiced lamb with beetroot salad and scented yoghurt

Lay the lamb on a tray, skin side down. Rub with crushed garlic, sprinkle with spices and ground pistachios, wrap in plastic wrap and...

Easy seafood pasta with white wine sauce

Ingredients: 2-3 tbsp olive oil 1 garlic clove, chopped 2-3 tablespoons of whipped cream 1/3 cup white wine 300g spaghetti, roughly broken 300-400g of...

Traditional salads that will blow your mind away

This traditional salads will make you actually love salads! Cyprus may be famous for souvla and kleftiko but if you try the traditional salads with...