The European Banking Authority (EBA) released its annual assessment of European banking risks this week, revealing the ranking of Cypriot banks concerning interest payments on household deposits and their capital returns, highlighting Cyprus’ banking performance among other European institutions.
The report noted that Cypriot banks are positioned second to last among European banks in terms of interest payments on household deposits, according to data disclosed by the EBA.
The report outlined that Cypriot banks paid an average of 0.0417 per cent interest on household deposits in 2023, up from 0.0158 per cent in 2022, placing them in the penultimate position among European banks. Bulgaria’s banks were ranked lowest at an interest rate of only 0.0018 per cent.
In contrast, the highest interest rates for household deposits were reported in Liechtenstein’s banks at 2 per cent, followed by Iceland at 1.7 per cent, Poland and Norway at 1 per cent, Romania at 0.9 per cent, Hungary at 0.8 per cent, and France, Luxembourg, and the Czech Republic at 0.7 per cent.
Additionally, Cypriot banks secured the second position in capital returns among European banks for the year 2023, boasting a 26.3 per cent return on their capital, marking a stark increase from the 6.9 per cent recorded in 2022.
The top spot in terms of capital returns was held by Hungarian banks with a capital return of 28.7 per cent, soaring from 5.1 per cent in 2022. Latvian banks secured the third position with a 25.8 per cent return, followed by Lithuanian banks at 25.3 per cent and Romanian banks at 23.3 per cent.
The EBA report also underlined the resilience of the EU banking sector despite risks stemming from interest rate changes, stating that “the EU banking sector has proven resilient after the banking turmoil of March 2023”.
It noted that bank capitalisation remains at high levels, with the Common Equity Tier 1 (CET1) ratio at a robust 16 per cent, while profitability has supported bank payments.
However, it highlighted the risks posed by sluggish economic growth and increased interest rates.
Furthermore, the report acknowledged that liquidity remains high but has started stabilising from the elevated levels observed during the Covid-19 pandemic.
Finally, the EBA mentioned that market funding costs have risen, yet deposit interest rates “remained relatively low and may increase in the future”.
