Lawmakers want to include banks in a law banning usury and profiteering but the Central Bank said Cyprus must first ask the EU.
The issue was discussed in a joint session of the House Finance and Interior Committees.
Banks are exempted from the law, passed in 2011, but MPs now think it should change.
MPs do not even think they must ask the European Central Bank before changing the law – as a Central Bank (CBC) official warned.
“We are not saying we will be setting interest rates,” DIKO’s Angelos Votsis said, adding that there are countries that do not exempt banks from the law.
The reference rate is set by the Central Bank every three months and if exceeded it is considered a violation of the law.
Currently, the reference rate is set at 11 per cent and it has never gone over 12.5 per cent.
The CBC official said some EU state members, which have a maximum lending rate, also had rates ranging between 16 per cent and 25 per cent.
And there was another problem.
“When banks know there such a rate they tend to approach it,” the official said. “It is a double-edged sword.”