CONFIDENCE IN CYPRUS BANKING SECTOR BEING RESTORED

The Cyprus banking system has been handed a clean bill of health according to independent evaluations. The Cypriot banking sector, which is now fully recapitalized, is currently in the process of implementing changes mandated by the stricter regulatory framework, both at the domestic and EU level. A new Single Supervisory Mechanism is being implemented, while major steps are being taken towards a Banking Union, which will help restore confidence in the European banking system. A tangible sign of improvement in the sector is the lifting of restrictions, which is progressing according to the set road map. Competitive conditions appear to function well in the domestic banking market since banks can be seen to scale up their promotion of products and services in line with the lifting of restrictions. The recent credit rating upgrades as well as the successful sovereign bond issue that marks the re-entry of Cyprus in international markets are welcome signs that the economy is on the right track. Other encouraging signs are the recapitalization of two banks by foreign investors, as well as the first quarter results of banks, which point towards a stabilization of non-performing loans and a tentative return to positive returns. In Cyprus, three banks as well as the cooperative credit sector will be under the direct supervision of the European Central Bank (ECB), while a number of banks that are subsidiaries of Greek financial institutions will be under the indirect supervision of the ECB. These structural and regulatory changes offer reassurance to depositors and investors. At the same time, the Cypriot economy and banking sector continue to maintain their traditional advantages. The geographic location of the island together with the multilingual and highly qualified work force offers an attractive proposition to international clients of banks. In addition, Cyprus banks maintain correspondent networks around the world and offer extensive working hours through their IBUs as well as a broad use of internet banking services.