Nicosia, Cyprus. The Central Bank of Cyprus said ECB interest rate changes continue to be transmitted more weakly in the Cypriot banking sector than in most euro area countries, according to an analysis released with April 2026 interest rate data. The largest divergence was recorded in deposit rates, which remain the lowest in the Eurozone.
Deposit rate transmission
The analysis found that Cypriot banks pass on ECB rate changes to depositors to a more limited extent and, in some cases, also to borrowers. The most significant gap was observed in deposit interest rates.
According to the CBC, Cyprus deposit rates represent the largest deviation from the Eurozone average, particularly during the period of ECB rate increases, when banks transferred only part of the hikes to savers compared with other member states.
The same limited adjustment was also observed during the recent period of falling ECB rates, indicating a generally subdued transmission mechanism in both directions of the interest rate cycle.
Household and business deposits
The pattern was especially evident in new fixed-term deposits by households and businesses, where Cyprus continues to record one of the weakest performances in the transmission of ECB monetary policy.
The average rate on new household fixed-term deposits of up to one year stood at 1.20 per cent in April 2026, significantly below the Eurozone median of around 1.8 per cent.
The figures indicate that Cypriot savers continue to receive lower returns on deposits than most of their euro area counterparts despite broader monetary policy developments.
Lending trends
In contrast, the CBC said the transmission of ECB rate changes to mortgage lending in Cyprus is broadly in line with Eurozone levels. This indicates that households seeking housing credit are experiencing a more typical pass-through of monetary policy than on the deposit side of the banking system.
However, the situation differs in the corporate lending segment, where business loan rate transmission remains weaker than in other euro area countries during both rising and falling ECB interest rate periods.