The past four years have been marked by a series of crises and developments that have disrupted the global energy market, trade, geopolitical balances, and state-to-state relations. Cyprus, which is situated as a link connecting the Middle East and Europe, has been negatively impacted only to emerge as a source of stability in a region characterized by broader destabilization following the terrorist attack in Israel on October 7 and subsequent events.
Accordingly, the banking sector is shown to be the most crucial component of domestic economic stability, an essential partner of the government, and an effective agent towards social stability. Furthermore, Cypriot banks continually invest in technological projects, enhancing their infrastructure, developing NEW products, and differentiating themselves compared to the past with a greener and digital approach.
Focusing on the last year, we note below the main developments that determined the course of our organization:
Inflation, rising interest rates and the energy crisis
The large and persistent increase in inflation from the postpandemic period until recently led to a tightening of monetary policy with consecutive interest rate hikes by the European Central Bank. Consequently, a significant number of loans were affected, and Cypriot banks proceeded with numerous loan restructurings and renegotiations. This major effort had important and meaningful results as no substantial increase in NPLs was recorded.
In that framework, extended debates took place at the level of the House of Representatives, more broadly in the political sphere, by society and in the media for many months. The main arguments were about what the banks did to support households and companies during the significant interest rates increase period. Striking the right balance between cost efficiency and provision of the best services is always a challenge, and even more so at times of economic upheaval. Nevertheless, the constructive role of the banking system over the past crises stands out as banks were demonstrably part of the solution in helping households and businesses cope with the effects of the pandemic and of geopolitical instability.
Month-long discussions and suspensions of foreclosures
At the same time, almost throughout 2023, the issue of the Legal framework for foreclosure procedures was intensively debated and culminated at the adoption of amending legislation. The banks entered the dialogue with a constructive approach and, in a demonstration of good will, voluntarily suspended foreclosures for certain types of loans, thereby providing the required time to work out a consensus that was ultimately adopted by the House of Representatives by the end of 2023.
The Association’s professional personnel worked intensively and methodically during the previous year, having once again managed to deliver positive results to their members in the interest of the sector, the economy and society.
All things considered, the Association and its member banks remain confident about the future and aim to work together with the government and all other stakeholders to help Cyprus become an ideal place to invest, work and live. Through implementation of best practices, support of innovative enterprises and promotion of digitization as well as green finance, banks are fulfilling their role in attaining this vision and supporting households and businesses.
