Bank of Cyprus and Marfin, both of which have Cypriot shareholders, are the only banks that still pay interest rates of over 4% per year on six-month deposits in euros, while six-month deposits in lei come with an interest rate of 6.3% per year, the highest interest rate on the market.
Bank of Cyprus last week transferred its whole portfolio of deposits to Marfin, but it can now start to attract new clients, having kept in its offer all savings products despite going through an unprecedented crisis in April. Then its operations were suspended for a month amid massive deposit withdrawals, which were sped up by the Cypriot crisis that broke out in mid-March.
As far as deposits in lei are concerned, there are still six or seven banks that pay interest rates of over 6% a year, i.e. at least half a percentage point more than the market average.
Piraeus, ATE Bank and Marfin pay interest rates of 6.25% per year on leu deposits.
However, fewer banks are now paying interest rates above 6% per year on leu deposits and 4% per year on euro deposits after liquidity increased – the central bank resumed liquidity injections on the market and inflation started to decline again.
The most drastic interest rate cut targeted deposits in euros, which had been the most attractive savings products in the past few months thanks to high interest rates and to exchange rate volatility. Bank clients moved EUR2.5 billion from deposits in lei into foreign currency deposits, but the trend has lessened lately.
“Expectations concerning the forex market will not determine a rapid move towards deposits in lei because not many expect the leu to continue to visibly appreciate. However, thanks to the significant interest rate differential, combined with expectations of stability on the forex market, we could see a slight balancing of growth rates of deposits in lei and in foreign currency,” comments Vlad Muscalu, senior economist of ING Bank.
At market level, interest rates on euro deposits fell to 3.2% a year in February, according to data of central bank BNR. On leu deposits, the average interest rate is 5.5% a year, but many large banks lowered standard interest rates to around 4% a year back in 2012.
Banks with Greek shareholders have in the past few years had to keep interest rates up amid clients’ fears over problems facing parent banks in Athens.
(English version by Daniela Stoican)