The Cyprus banking system holds the highest liquidity in the eurozone and stands well ahead of second-place Greece, with a substantial gap separating it from Finland’s banking system.
Banks risk falling profitability indicators if they fail to use their liquidity sufficiently to lend generously to the market, whilst low interest rates offer opportunities to issue new loans to increase revenues even if margins decline, contributing to economic growth.
According to the latest official ECB statistics for the second quarter of 2025, Cypriot banks have the lowest loan-to-deposit ratio in Europe at 50.3%, followed by Greece at 60.4%.
Cyprus loan-to-deposit ratio lowest in Europe at 50.3%
The notable element is that Cypriot banks have cheap funding from Cypriot households, as most of their deposits carry lower interest rates than the lowest in the eurozone.
The loan-to-deposit ratio shows the percentage of deposits a bank converts into loans.
It expresses the bank’s dependence on external financing for lending activity, where a higher ratio means greater dependence on non-deposit funding sources, whilst a lower ratio indicates a stronger deposit base to cover its loans.
If the loan-to-deposit ratio stands at 100%, this means a bank has lent one euro to its customers for every one euro it received as deposits. This means the bank will not have significant liquidity reserves to handle expected or unexpected problems.
The eurozone average ratio stands at 94%.
The ratios across European banking systems show Cyprus at just 50.3% (the lowest), followed by Greece at 60.4%.
Next come Latvia at 63.7%, Slovenia at 64.7%, Lithuania at 66.1%, Malta at 72.1%, Croatia at 73.3%, Belgium at 76.6%, Italy at 77.4%, Portugal at 77.8%, Ireland at 79.4%, Spain at 85.4%, Estonia at 89.7%, Luxembourg at 94%, Germany at 94.9%, the Netherlands at 99.5%, Austria at 106.1%, France at 107.8%, Slovakia at 113%, and Finland at 152.3%.
Liquidity coverage ratio reaches 335% in June 2025
Another significant element that counts particularly is the liquidity coverage ratio, which essentially shows a credit institution’s ability to cover net liquidity outflows for a 30-day period under conditions of intense financial stress, using high-quality liquid assets.
It constitutes a key supervisory indicator established within the framework of Basel III reforms, aimed at strengthening banks’ short-term resilience against liquidity crises.
A liquidity coverage ratio greater than or equal to 100% (the supervisory minimum threshold) indicates that the bank has sufficient liquidity to fully cover estimated 30-day outflows, strengthening depositor and supervisory authority confidence in the financial system.
The Cyprus banking sector’s liquidity coverage ratio reached 335% in June 2025.
