ECB highlights Cyprus challenge in moving household savings into long-term investment

Nicosia, Cyprus. The European Central Bank has warned that euro area households hold a large share of their wealth in cash and low-yield deposits, with Cyprus facing a particular challenge in encouraging longer-term investment.

The Central Bank of Cyprus has said the country ranks among EU states with the lowest levels of financial literacy, particularly among young people.

Euro area household savings

In a blog post published this week, the ECB said around one-third of euro area household financial assets, worth almost €10 trillion, remained in cash and low-yield bank deposits.

Around 80 per cent of households did not own stocks or other market-based financial instruments, the ECB said, with participation substantially lower than in the United States.

The difference was particularly pronounced among wealthier households. More than 65 per cent of the wealthiest 20 per cent of US households held listed shares, bonds or mutual funds, compared with less than 45 per cent in the euro area.

Financial literacy in Cyprus

The issue is particularly relevant for Cyprus, where households continue to hold substantial sums in bank deposits and financial literacy remains comparatively weak.

Central Bank of Cyprus governor Christodoulos Patsalides has previously said Cyprus consistently ranks among EU countries with the lowest levels of financial literacy, with young people recording the weakest performance among age groups.

According to findings from the Organisation for Economic Cooperation and Development’s 2023 survey cited by Patsalides, 58.8 per cent of young people in Cyprus reached the basic level of financial knowledge, compared with 80.1 per cent of people aged 40 to 49.

Barriers to investment

The ECB said financial knowledge, perceived risk and trust were major barriers to investment, particularly for households that were not financially constrained.

Limited understanding of financial products can contribute to low trust and heightened perceptions of risk, making financial literacy an important factor in household participation in capital markets, it said.

The Central Bank of Cyprus’ latest lending data also underline the importance of deposits to household finances. The average interest rate on new euro-denominated household deposits fell to 1.27 per cent in July 2026, from 1.42 per cent in June.