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1st LD Writethru: Central Bank of Cyprus orders lowering of bank rates

Xinhua, February 17, 2015 Adjust font size:

The Central Bank of Cyprus (CBC) ordered banks on Monday to lower their rates by one percentage point in a bid to help revive the recession-hit economy of the bailed-out eastern Mediterranean island.

A CBC statement said its governing board decided to change downwards the maximum deposits rate by one percentage point and urged banking institutions to reduce their lending rates by as much.

"The Central Bank will be closely following the trends in lending rates and it will decide on additional measures if needed," the CBC statement added.

The Cypriot economy has been in recession for 14 quarters in a row but is expected to return to a modest positive growth this year.

The Central Bank statement did not specify what additional measures it would take, but informed sources said that the Central Bank had warned banks in meetings last week that it would impose penalties on banks which will not offer proportionally lower lending rates.

The deposits interest rate was up to now estimated on the basis of three percentage points plus the Euribor, that is the average fluctuating interest rates at which European banks borrow funds from one another. The Euribor currently stands at 0.259 percent for interbank loans maturing in a year.

That means that banks must from now on offer a maximum deposits rate of about 2.26 percent and lower all their lending rates by one percentage point. Endit