Marfin to hike lending rates

MARFIN Laiki Bank will hike its lending rate by 50 basis points to 5.5 per cent this May, attributing the increase on increased costs of holding on to liquidity in the form of deposits.

The bank’s key deposit rate will remain unchanged at 4.25 per cent, the lender said.

Marfin retail banking director George Markides said the new rate would be effective May 17. The measure does not affect loans taken out before January 1, 2008, nor mortgages taken out after that date and which are connected to the base lending rate of the bank.

Marfin said the decision was taken after an assessment of present financial conditions and the present levels of Euribor. The Euro Interbank Offered Rate is a key gauge for financial markets assessing unsecured interbank euro lending mixed with interest rate expectations.

Lending rates in Cyprus are already considered high, and Finance Minister Charilaos Stavrakis has described Marfin’s hike as a negative development.

“I do hope that this rally on lending rates, which threatens the recovery of the Cypriot economy, doesn’t continue,” he said. Business groups also expressed misgivings.

Loans by Cypriot businesses are currently in the range of €50 billion, and an increase in lending rates would mean an additional burden on businesses and households, he said.

According to ECB data for January, Cyprus had the highest business lending rates in the euro zone, averaging at 6.19 per cent.

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