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Cyprus banks under stronger liquidity pressures

THE liquidity pressures that the banks in Cyprus face have become stronger and stronger lately; according to latest Central Bank data, they continue to lose deposits and increase their loan portfolios. In December, the banks granted loans of 549 million euro, a quite small amount compared to other months but they lost deposits of 683 […]

THE liquidity pressures that the banks in Cyprus face have become stronger and stronger lately; according to latest Central Bank data, they continue to lose deposits and increase their loan portfolios. In December, the banks granted loans of 549 million euro, a quite small amount compared to other months but they lost deposits of 683 million euro.

According to the Central Bank of Cyprus, the total deposits in the system fell from €56.7 billion in November to €56 billion in December 2008. On the other hand and despite the cautiousness in the allocation of new loans, the lending balances reached €54.7 billion at the end of the year against €54.2 billion in November 2008.

The loans granted by the banks were frantic in 2008. On an annual basis, loan growth reached 33%, while deposits grew by 7%. In the last year, banks increased their lending portfolios by €13.7 billion, while their deposits grew by €3.5 million. This means that they lent €4 for every €1 they received in deposits.

The Q4 data are exceptionally interesting since they concern the critical period after the last phase of the financial crisis. The banks allocated loans of €2.8 billion and lost deposits of €0.5 billion. The deposits have been lost due to the outflow of accounts of both Cypriots and non-Cypriots including the Russians.

In early 2008, the banks had €10.1 billion more deposits than loans. Today, the depository “surplus” fell to €1.3 billion. It is worth noting that a significant part of deposits must be maintained for precautionary purposes.

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