Letters have also been sent out to concerned parties, Phileleftheros reported on Friday, adding that the deposit charge is basically translated into a negative interest rate.

The new data affects state and semi-governmental organisations (except universities and educational institutions) as well as financial institutions – a category that includes brokerage firms, insurance companies, Forex and fund managers.

The new charge will be if effect as from the first business day of March 2020 when the deposit rate for this particular group of depositors will turn from zero to negative.

Specifically, there will be a charge on the cost of current accounts, savings accounts, and direct access of 0.50% annually on the daily credit balance of the account for these clients. This charge is compared or corresponds to a negative interest rate of 0.4%.

Bank of Cyprus charges liquidity costs on 12-month time deposits at 0.10%. The daily term deposit charge corresponds to a negative interest rate of 0.4%.

The cost of liquidity on three month long deposits from March will be charged 0.30% at maturity on the daily balance which is translated to a negative 0.4% interest rate. Reserved deposits are exempt from this polciy.

What is certain is that the phenomenon of negative returns is coming closer to depositors and this is part of a European Central Bank policy which charges banks with a negative interest rate of -0.50% for excess liquidity.

Banks have no choice but to start charging interest rates to big depositors, large corporations and institutional investors.

Larger European lenders have long begun to apply negative interest rates. It seems that banks in Cyprus will not apply this measure to retail banking customers, at least for the time being.

Source: In-Cyprus