NICOSIA, Jan. 6 (Xinhua) -- Total bank liquidity rose to its highest point ever in November, 2019, reaching 14.4 billion euros (16.1 billion U.S. dollars), according to Central Bank of Cyprus (CBC) data released on Monday, and forced banks to resort to negative deposit interests for the first time.
Banks accepted deposits amounting to 48.6 billion euros in November, 2019, against new loans which amounted to 34.2 billion euros in the same month, leaving them with a costly surplus, according to CBC data.
The CBC data showed that the liquidity of Cypriot banks started dropping in mid-2007 and reached its lowest point in 2013, the year of the financial crisis, when banks had granted loans exceeding deposits by 17 billion euros, about the same amount as the annual Gross Domestic Product of Cyprus.
From then on, bank liquidity has been on the rise.
Banks of EU countries have to deposit their surpluses with the European Central Bank (ECB), which currently charges 0.5 percent per year for the safekeeping of customers' money.
The excessive liquidity of the Cypriot banks resulted mostly from their hesitation to grant new facilities out of fear of increasing the non-performing loans in their portfolios.
Latest CBC data relating to July, 2019, showed non-performing facilities, which are the legacy of the 2013 economic and banking crisis, standing at 9.681 billion euros, or 29.6 percent of total loans.
Hellenic Bank CEO Ioannis Matsis said recently that his bank is looking for ways to invest its surplus liquidity so as to avoid negative interest charges by ECB.
Hellenic Bank said in a circular just mailed to its customers that it will charge 0.60 percent on large deposits over 100,000 euros, slightly higher than the charge imposed by ECB on deposits.
Bank of Cyprus also notified its customers that it will impose a negative interest of 0.5 percent, the same as that of ECB, on all deposits except those by educational and philanthropic institutions.
Banks have also lowered their interest on deposits and increased charges on consumer loans, also making other adjustments, as a way to counter the impact of the cost from surpluses on their profitability.
Banks do not pay any interest at all on small current account deposits, and have also lowered their interest rates on house purchase loans and on big loans of over 1 million euros, as a way of attracting customers from among the business community.