2020 Cyprus Country Report
The 2020 Cyprus Country Report features in-depth articles on the economy, foreign direct investment, international trade and headquartering as well as detailed sector profiles and insights from Cyprus’ 100 most influential political, economic and business leaders shaping the future of their country and its industries.
The 2020 Cyprus Country Report features in-depth articles on the economy, foreign direct investment, international trade and headquartering as well as detailed sector profiles and insights from Cyprus’ 100 most influential political, economic and business leaders shaping the future of their country and its industries.
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The unfolding<br />
of Covid-19<br />
into a global<br />
pandemic<br />
will inevitably<br />
lead to<br />
unprecedented changes to the<br />
global economy which clearly<br />
impacts the banking sector<br />
worldwide. In this rapidly<br />
evolving economic environment<br />
the management of banks<br />
had to adapt their strategy<br />
accordingly in an effort to<br />
mitigate risks and plan ahead<br />
for the future. The fact that<br />
the impact is asymmetric,<br />
per sector, clearly leads to<br />
new opportunities for growth<br />
and changes in strategic<br />
priorities. With the above in<br />
mind, areas for growth for the<br />
year ahead include: digitisation<br />
drive, liquidity management<br />
solutions, focus lending in<br />
growth sectors, expansion of<br />
disintermediation and drive<br />
in wealth management.<br />
Costas Argyrides<br />
CEO<br />
cdbbank<br />
BALANCING THE REGULATORY BURDEN<br />
In the past five years, EU banks have been faced<br />
with an ever-increasing regulatory burden with<br />
stricter ECB guidelines and compliance requirements<br />
– forcing institutions to grapple with<br />
finding a balance where financial stability can<br />
be safeguarded without suppressing economic<br />
growth.<br />
The global challenges sparked by the Covid<br />
pandemic have brought a welcome, but temporary,<br />
respite as regulators have decided to postpone<br />
deadlines, the enforcement of upcoming<br />
regulations, and even provided some temporary<br />
simplification of regulations to give flexibility to<br />
capital markets and the banking sector. However,<br />
the landscape remains complex in terms of<br />
banking regulatory and supervisory standards,<br />
with no comprehensive long-term initiative to<br />
permanently reduce the regulatory burden by focusing<br />
on better regulation, rather than just more<br />
regulation.<br />
Some key changes now under discussion<br />
relate more to capital markets. Instructed by the<br />
European Commission, the High-Level Forum<br />
(HLF) published a report where it sets out a series<br />
of clear recommendations aimed at moving the<br />
EU’s capital markets union forward. This initiative<br />
was welcomed by the European banking<br />
sector as it will help remove regulatory obstacles<br />
and would allow for market-based financing and<br />
banking finance to work better together – rather<br />
than being mutually exclusive – to meet the needs<br />
of companies and investors, and to promote economic<br />
growth in the EU.<br />
DIGITAL SOLUTIONS THROUGH FINTECH<br />
The regulatory pressures are a global challenge<br />
for financial institutions, and part of the solution<br />
is to invest in new tech to enhance efficiency,<br />
profitability and prospects. A well-functioning<br />
banking system is a precondition for<br />
the sustainable development of every economy<br />
and embracing a digital future with more transparency<br />
will certainly help to achieve this goal.<br />
The last decade has seen a surge in new tech,<br />
solutions, tools and platforms coming into the<br />
market, but in its wake have also come concerns<br />
regarding transactional security and trust –<br />
aspects that are increasingly crucial in the world<br />
of financial technology (fintech) and achieving<br />
healthy competition in banking for consumer<br />
benefit.<br />
Banks are currently working on new and<br />
cost-effective services, while tackling various<br />
other issues and challenges operating in a rigorous<br />
regulatory, supervisory and legal framework.<br />
Crucial to succeeding in this new reality<br />
is better cooperation between the two main<br />
channels of service provision, banks and tech<br />
companies. This would bring the best solutions<br />
for the clients, high-end digital platforms<br />
and fully compliant procedures at every level of<br />
payment or transaction – through tech such as<br />
blockchain.<br />
A silver lining of the pandemic has been that<br />
the implementation of many digital strategies<br />
have been accelerated in <strong>Cyprus</strong> due to the circumstances.<br />
Almost every aspect of the economy<br />
can be faster and more efficient with the use of<br />
better tech solutions. These developments have<br />
also opened up more interesting investment opportunities<br />
and growth prospects for the <strong>Cyprus</strong><br />
economy, not only in banking but in key sectors<br />
such as education, health and tourism, as well as<br />
the start-up ecosystem and technology sector in<br />
general.<br />
FOCUS ON SUSTAINABILITY<br />
The broad-based economic recovery of <strong>Cyprus</strong><br />
continued straight through to 2019, significantly<br />
exceeding eurozone dynamics, and the country’s<br />
banks had gone from strength to strength until<br />
the pandemic hampered this strong performance<br />
with widespread economic disruption and the<br />
Cypriot economy expected to contract by around<br />
7% in <strong>2020</strong>, before returning to healthy growth<br />
rates in 2021.<br />
The reforms and firm steps to strengthen its financial<br />
institutions in the past few years have not<br />
been in vain and have bolstered the sector, and<br />
multiple assessments have proved a high level<br />
of compliance across the banking industry, with<br />
some statutory requirements even more demanding<br />
than in other EU member states. Despite the<br />
current unpredictability of the global economy,<br />
<strong>Cyprus</strong> banks remain stable and the country continues<br />
to offer interesting investment opportunities<br />
that can be tapped into, such as distressed<br />
assets and loan portfolios, mergers and acquisitions,<br />
private equity and venture capital projects,<br />
as well as financing of infrastructure projects,<br />
such as tourism development and oil and gas<br />
projects.<br />
Although there are challenges ahead, a fresh<br />
focus on digital solutions and strong corporate<br />
initiative, coupled with the supervisory authorities’<br />
more accommodative policy to give banks<br />
flexibility to support the economy, there is<br />
ample reason to believe that sustainable growth<br />
is possible in the banking sector in the next few<br />
years. n<br />
Discover more at www.cyprusprofile.com<br />
Sector Profile<br />
<strong>Country</strong> <strong>Report</strong> CYPRUS <strong>2020</strong> 61