Newsroom
The Central Bank of Cyprus has decided to keep the country’s countercyclical capital buffer at 1.5%, a term that sounds technical but essentially means banks must continue keeping extra money in reserve for difficult times.
Think of it as a rainy-day fund for the banking system.
When lending grows rapidly and the economy is doing well, banks can become more exposed if borrowers later struggle to repay loans. The buffer is intended to ensure that banks have additional capital available to absorb potential losses instead of suddenly cutting lending or needing outside support during a downturn.
For the average customer, the decision does not mean a new fee, tax or 1.5% increase on a mortgage or personal loan. It applies to banks and their financial exposure in Cyprus, not directly to borrowers or depositors.
However, it can influence how cautiously banks lend. Requiring them to hold more capital may discourage overly easy lending, but it also makes the banking system better prepared to continue supporting households and businesses if economic conditions worsen.
The 1.5% rate was set by the Central Bank in January 2025 and came into force in January 2026. Following its latest review, announced Tuesday, the regulator decided there was no reason to increase or reduce it.
The Central Bank reviews the rate every three months, looking at factors such as how quickly borrowing is growing compared with the size of the economy and whether lending appears to be moving above its long-term trend.
