Fresh pressure to be put on Cyprus banks to lower lending rates

The government and parliament on Tuesday will put fresh pressure on Cyprus banks to lower their lending rates to prevent a new toxic loan crisis, Philenews reports.

This will take place during a House Finance Committee debate in the presence of Finance Minister Makis Keravnos and Central Bank of Cyprus Governor Constantinos Herodotou.

A new toxic loan crisis is looming after six consecutive increases in interest rates by the European Central Bank since last summer.

Following the ECB’s latest moves, the interest on refinancing operations stood at 3.5% and for deposits at 3%.

The average mortgage rate in July was 2.5%, and the maximum could reach 3%.

In the next 10 days, the Finance Minister will meet again in separate meetings with bank leaders who will be asked to change their policies on both lending and deposit rates.

Under debate on Tuesday will also come the possible imposition of a one-off tax on banks’ windfall profits.

At the same time, Keravnos will again call on banks to offer incentives to borrowers who re-pay their loan dutifully and to also increase deposit rates.

The Minister believes that the gap between lending and deposit rates is wide. And that it is unjustified to increase lending rates in the country as inflation has come down – specifically to 2.4% these days.