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Cyprus banks still face liquidity problems

In May, the “liquidity level” in the Cyprus banking system (deposits minus loans) stood at just €1.8 billion against €1.99 billion in April and €8.5 billion a year ago.

DESPITE receiving two injections amounting to €2 billion in early 2009 from the government, liquidity in the Cyprus banking system continues to remain extremely low.

Since the start of the year deposit interest rates have fallen by more than 300 base points, which has resulted in a reduction in the flow of deposits into the system.

Since early 2009, €1.4 billion of additional deposits have flowed into the system, pushing their total to €55.6 billion by late May. However, the net inflow is less that the €2 billion government injections in January and April.

So far this year, residents of Cyprus have deposited €1.4 billion, non-resident EU nationals deposited €0.2 billion, while non-EU residents withdrew €0.2 billion.

By the end of March 2009, the banks had allocated loans amounting to €5.9 billion to companies actively involved in the property sector, including more than €3.1 billion new loans to land developers and real estate agents.

The total loans in the system reached €55.6 billion in May from €54.4 billion in December 2008.

In May, the “liquidity level” in the banking system (deposits minus loans) stood at just €1.8 billion against €1.99 billion in April and €8.5 billion a year ago.

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