The Central Bank of Cyprus (CBC) has published its latest bulletin titled “Cyprus Interest Rates in a European Context: Analysis and Comparison”, offering a comprehensive examination of Cypriot lending and deposit rates within the broader euro area framework.

The bulletin is based on already published statistical data from both the European Central Bank (ECB) and the CBC.

It aims to provide the public with a clearer understanding of banking interest rates in Cyprus and how they compare with euro area benchmarks.

According to the report, lending rates on existing balances in Cyprus are approaching the euro area median, with the margin effectively neutralised at 0.0 per cent for households and limited to 0.4 per cent for non-financial corporations (NFCs).

This suggests that borrowing costs for both households and businesses in Cyprus are now broadly aligned with those observed across the euro area.

Regarding new loans, the CBC said that Cyprus’ interest rates are comparable to the euro area median.

The weighted average rate margin for new lending to households stands at minus 0.3 per cent, meaning it is slightly below the euro area median, while for business loans, the corresponding margin is just 0.1 per cent above the euro area figure.

The report showed that the margin for businesses shows greater variability relative to the euro area median, likely due to smaller market dispersion, though the overall levels remain broadly consistent.

In contrast, the deposit rates in Cyprus continue to diverge sharply from the euro area, standing at the lowest level among member states.

The CBC attributes this deviation mainly to the high liquidity levels of Cypriot banks, which are among the highest in the euro area, and to the limited size of the Cypriot banking market.

Indicatively, in June 2025, the Liquidity Coverage Ratio (LCR) in Cyprus stood at 335 per cent, compared with a median of 183 per cent and an average of 162 per cent in the European Union.

The CBC explains that this abundant liquidity reduces the need for banks to compete for deposits, thereby keeping deposit interest rates at low levels.

Similarly, new deposits in Cyprus show no significant deviation from the low deposit rates observed in existing balances.

Deposit rates for new deposits continue to rank at the lowest level in the euro area, for the same reasons previously mentioned, primarily high liquidity and the small scope of the domestic banking market.

Through this analysis, the CBC underscores that while Cyprus’ lending rates are now closely aligned with euro area averages, its deposit rates remain the lowest, reflecting structural features of the island’s banking system.