The effect of the pricing policy of the Cypriot banks upon accession to the Euro area as at 31/12/2007.

Cyprus’ accession into the Eurozone has been a cornerstone on the modern history of the island. The research project is concentrating on the effect that Cyprus’ participation in the Euro Area will have on the banking and financial institutions. The new Euro Area environment is
characterized by “price stability” and that is achieved through an interest rate mechanism set by the European Central Bank. The interest rate levels however, are not disbursed uniformly within each member state. It was identified quite early in the research project that a number of factors are affecting the depositors and borrowers characteristics. Factors such as risk exposure, disposable income, alternative financing sources, average firm size, banking market concentration, asset and liability structure differ from one member state to another. For a banking institution, these particular factors, are enough to deviate from the interest rate benchmark that the European Central Bank is setting, in order to operate efficiently and profitable within each member state’s economic characteristics. The research project was concentrated on the level of the interest rates that exist between the different deposit and loan type products in the Cypriot economy and in the Euro Area.
Involving case description general analytic strategies, results were produced from the description of the Euro Area and Cypriot economies, the Euro Area MFIs against Cypriot banks and also at the end the Creek banks against the Cypriot banks. It was proved that during this transition period, there exists disequilibrium on the level of the interest rates between the Cypriot banks, the Euro Area MFIs and the Greek banks. It is also proved that these differences on the level of the interest rates are in favour of the Cypriot banks.

A project submitted to Middlesex University in partial fulfillment of the requirements for the degree of Doctor of Professional Studies.