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Higher bank charges spark public anger

central bank cyprus
The Central Bank of Cyprus

The decision of Cypriot commercial banks to impose new charges on clients has sparked a fierce reaction from customers, trade unions, some political parties and interest groups.

In the case of the Bank of Cyprus, the charge for a current account went up from €3 every three months in January of 2020, to €6 every three months in the first few months of 2021, while starting in February of 2022, this will rise to €12 every three months.

For Hellenic Bank clients, the cost for a current account two years ago was set at €2 per month, while the new cost will be €2.90 per month. For savings accounts, Hellenic Bank will up the annual cost from €5 per year to €5 for every three months, an annual increase of €15.

The Bank of Cyprus will also be charging €20 per year for savings accounts, with no charge having been previously imposed on such accounts.

On Monday, the Association for the Protection of Borrowers (Syprodat) called for the intervention by the Central Bank, labelling the decision as “unacceptable and provocative”.

On the same day, Cyprus Consumers’ Association president Marios Drousiotis told the CyBC, that “the only reaction can come from the Governor of the Central Bank and the finance minister”, explaining that “these are the only two officials who can do something about this”.

Andreas Matsas, the head of Sek trade unions federation, speaking on the same show, said that “there are things that could have been avoided”, noting that simple transactions, such as proof of payment, could cost the consumer €5.

On Tuesday, the Central Bank of Cyprus (CBC) released a statement saying that it will “look into the issue of increased charges by Cypriot banks and will take any appropriate action within the framework of its responsibilities”.

CBC Governor Constantinos Herodotou took to Twitter to promote the CBC’s position.

“The Central Bank submitted a package of measures to the Ministry of Finance in February of 2020 for the imposition of reasonable fees on services provided through the payment account with basic features to enhance consumer access to these services,” Herodotou said, referring to personal accounts that offer clients basic banking products and services.

“Under the current law, the power of the CBC to intervene in the pricing policy of banks is limited to this type of account,” Herodotou added, explaining that this package by the CBC was fully adopted by the Ministry of Finance through the issuance of relevant decrees in August of the same year, which also included the imposition of a charge limit of €36 per year for such accounts.

The statement by the CBC also noted that “through these decrees, no charges are to be imposed on clients who are deemed as vulnerable, as defined by the relevant ministry”.

Moreover, regarding the annual charge limit of €36, the central bank said that “through the package of proposals given to the Ministry of Finance, the CBC enabled an (average) consumer to perform all the banking operations needed on a daily basis by paying the maximum amount of €36 per calendar year”.

The CBC statement added: “It is understood that if the consumer completes a low number of transactions or if they choose the online route for processing the transactions then the amount they will be asked to pay will clearly be less than €36.”

It clarified that these charges were only applicable to ‘payment accounts with basic features’, which may differ from current or savings accounts that are not subject to the same level of protection in terms of ‘reasonable fees’.

“Therefore, consumers wishing to be subject to the protection of reasonable fees may request the opening of a ‘payments account with basic features’ or request the conversion of existing current and/or savings accounts into a basic one,” the CBC said.

Giorgos Koukoumas, the Akel spokesperson, said that “at a time when the Cypriot people are subject to an unprecedented wave of high prices, banks are coming to sharply increase their charges for the daily transactions of citizens”.

“It is not enough that the cost of borrowing in Cyprus is twice as high as the average cost of the Eurozone, the banks come to impose new increases for their services,” Koukoumas said.

The composite cost of borrowing for businesses in Cyprus was 3.03 per cent in October of 2021, compared to the Eurozone average of 1.43 per cent. For households, the same indicator was 2.19 per cent in Cyprus, while the Eurozone average stood at 1.31 per cent.

Meanwhile, Hellenic Bank sources echoed the statement by the central bank, saying that the changes announced were “based on the decree by the Ministry of Finance and in no case do they contravene it”.

Hellenic Bank’s basic account costs €1.50 per month to maintain and this includes the issuance of a debit card.

Sources at Hellenic Bank said the new changes were aimed at “simplifying and packaging banking services”, and they advised customers to keep as many accounts as they really need,” The sources explained that “maintaining and managing an account incurs costs to banks, which owe it to their depositors to remain viable”.

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