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ARTICLE · 19 MARCH 2013

Revision Of Interest Rate Ceiling On Loans

Elias Neocleous & Co LLC
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Law 72(I) of 2011 established a maximum rate of interest, the "reference rate", that can be charged on loans and made it a criminal offence to charge interest above that rate.

CyprusFinance and Banking
Andreas Neocleous
Andreas Neocleous
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Law 72(I) of 2011 established a maximum rate of interest, the "reference rate", that can be charged on loans and made it a criminal offence to charge interest above that rate. The interest rate ceiling is calculated by the Central Bank of Cyprus using a formula based on half the average bank lending rate of the previous year plus a margin of between 5 and 10 percentage points, which varies according to various risk factors.
The restrictions on interest rates do not apply to credit institutions or:

  • Loans where the lender and the borrower are legal persons which are deemed to be connected persons for the purposes of article 33 of the Income Tax Law.
  • Loans to legal persons where the capital out of which the loan is provided derives directly or indirectly from sources outside Cyprus provided that the amount of the loan exceeds €1,000,000 and the minimum drawdown amount is €500,000.

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