Banks point to the aggregated data from previous months published by the Central Bank of Cyprus. This comes after political parties such as DISY, AKEL, and EDEK raised concerns about increases in lending rates and decreases in deposit rates. According to banking circles, this criticism has surprised the banks, as the July data does not reflect the actual reductions and increases of recent months.

The criticisms were triggered by data released by the Central Bank of Cyprus, which recorded an increase in lending rates and a decrease in deposit rates. Specifically, the rate for home purchase loans increased to 4.59% in July 2024, compared to 4.52% the previous month, while the interest rate for time deposits up to one year for households decreased to 1.96%, from 2.17% the previous month, according to the CBC.

Following the release of these figures, the focus is no longer on raising interest rates to combat inflation, but rather on reducing the gap between deposit and lending rates, which has sparked reactions. 

However, banking circles argue that these reactions are unjustified, noting that the fluctuations recorded in the Central Bank of Cyprus' statistics are minor and the comparison is based on the previous month rather than a broader time frame. 

Additionally, they pointed out that aggregate data from previous months show that deposit rates have actually increased, citing that in October 2022, rates were close to 0%, whereas now they have reached nearly 2%.

This is also their response regarding lending rates, as they claim these rates have generally followed a downward trend compared to previous months, regardless of what the data shows for a single month.

AKEL: "At a time when the European Central Bank has started reducing lending rates, banks in Cyprus, in direct opposition to this direction, are increasing them. This paints a picture of extreme exploitation of households and businesses by the banks, which is encouraged by the tolerance shown by the Christodoulides government and political parties that evidently do not tire of voting in favor of the banks. It is also provocative that while society continues to struggle with high costs for food, electricity, and rent, banks are recording even greater profits in 2024 compared to the already record-breaking profits of 2023. AKEL does not accept the government's cover-up policies and insists that banks must return part of their excessive profits to society. This is why we are pushing for the immediate passage of a proposal currently before the House of Representatives to create a social and borrower support fund, financed in part by taxing the banks' excessive profits. It is clear that no one expects the banks to significantly change their stance. However, society expects that the government and political parties will act in response to a simple question: Do they genuinely intend to support society, or will they continue to protect the interests of the banks?"

DISY: The trend indicated by the Central Bank's data, showing a gradual increase in lending rates and a decrease in deposit rates by commercial banks, is unacceptable and provocative. This is even more provocative given that the European Central Bank's current direction is to reduce lending rates. Banks must realize they are provoking society, households, and businesses. They need to understand that being in constant discord with the public interest will inevitably lead to serious reactions.

EDEK: "The socially insensitive and economically reckless behavior of commercial banks, as evidenced by the Central Bank’s data, shows that they are rushing to increase lending rates and reduce deposit rates in light of the European Central Bank's reduction of lending rates. This should not go unanswered by the state, Parliament, and society itself. The questions that Cypriot banks must answer are: Why are they increasing lending rates when inflation is at satisfactory levels? Why do they always increase lending rates before an expected reduction by the European Central Bank? Is it to prevent even the slightest reduction in their excessive profits? Why are the deposit rates they offer nearly zero, while they earn a 4% interest rate when depositing their reserves in the Central Bank? The provocative stance of the banks puts them at odds with society and the economy, which they risk destabilizing with their decisions. It is imperative that a drastic solution is found soon to rein in the banks’ excessive behavior."