Cypriot banks hold the highest levels of liquidity in the eurozone but maintain the lowest loan-to-deposit ratio, according to the Cyprus Borrowers Association (Syprodat).

The association said that “to strike a balance between stability and growth, Cyprus needs a more flexible and targeted lending policy that better supports businesses and households”.

In its statement, Syprodat said that “according to recent data, Cypriot banks rank first in the eurozone in terms of liquidity, a fact that reflects their stability and capital adequacy.”

However, the association added that “at the same time, they show the lowest loan-to-deposit ratio, meaning they grant proportionally fewer loans compared with their available funds.”

“This creates a striking contrast,” the association continued. “On one hand, the banking system is strong, with the Liquidity Coverage Ratio (LCR) reaching around 335 per cent, well above the European Central Bank’s minimum requirement of 100 per cent.”

“This development clearly demonstrates the resilience and capacity of Cypriot banks to withstand potential economic pressures or unforeseen crises,” Syprodat said.

It added that “it also strengthens the confidence of depositors and investors alike”.

The association stressed, however, that “behind this positive image of stability lies a conservative lending policy“.

“The loan-to-deposit ratio in Cyprus stands at 50.3 per cent, the lowest in the eurozone, while the corresponding ratio in Greece reaches 60.4 per cent and the European average is around 94 per cent,” Syprodat said.

“This means that only half of the banks’ available funds are channelled into the market as loans, limiting liquidity flows to businesses and households,” the association added.

What is more, Syprodat warned that low lending activity slows economic growth, as businesses struggle to finance new investments or expand their operations.

“Households face obstacles in accessing housing or consumer loans, which limits demand and, consequently, overall economic activity,” it said.

“At the same time, banks themselves lose potential income from interest, as a large portion of their liquidity remains inactive,” the association added.

“Thus, while the system appears healthy, in practice it does not fully utilise its capacity to contribute to the real economy,” Syprodat explained.

To achieve balance between stability and growth, the association argued that a revised and more dynamic lending strategy is required.

“The revision of lending criteria, the provision of state guarantees for viable investment projects, and greater transparency towards citizens could play a decisive role,” Syprodat said.

It added that “stronger cooperation between banks, government, and the private sector could create new financial instruments to support green investments, innovation, and small and medium-sized enterprises, which remain the backbone of the Cypriot economy”.