Cyprus’ banking system liquidity fell by €4.5 billion in 2024 compared to the previous year, reaching €19.2 billion by year-end, according to data published on Wednesday by the Central Bank of Cyprus (CBC).

The figures were outlined in the CBC’s annual report titled The Implementation of Monetary Policy in Cyprus, covering developments in 2024.

According to the report, the portfolio of monetary policy bonds linked to the Asset Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP) decreased by €1.1 billion during the year.

It stood at €6.5 billion at the end of 2024, down from €7.6 billion in 2023.

Moreover, excess liquidity in the banking system also declined, falling from €22.9 billion at the end of 2023 to €18.5 billion by the end of 2024.

The CBC attributed this reduction mainly to repayments of the European Central Bank’s targeted longer-term refinancing operations (TLTROs), along with a modest increase in required reserves.

The minimum required reserves held by the ten credit institutions eligible for participation in monetary policy operations in Cyprus increased from €500.3 million at the end of 2023 to €526.7 million at the end of 2024.

With the deposit facility rate in positive territory since 2022, the CBC said that placing excess liquidity with the central bank has become increasingly attractive for commercial banks.

“As a result, banks have minimised the excess liquidity held in their current accounts beyond what is needed to meet minimum reserve requirements,” the CBC stated.

The report also highlighted that the most significant asset categories for the banking sector during 2024 were loans, deposits, and debt securities.

The report also showed that loans increased from €25.3 billion in 2023 to €27.6 billion in 2024.

Deposits and cash equivalents, however, declined from €24.5 billion to €20.4 billion, again largely due to repayments of TLTRO funds.