Cyprus’ Central Bank Governor Constantinos Herodotou pointed out on Friday that profitability and the need to find new banking products besides lending, was a big challenge for a small country’s banks. He was speaking at an Economic Policy Forum organized by Cyprus’ main opposition party AKEL.
Referring to the future challenges for the banks, he said that geography, provided Cyprus’ banks with less opportunities to find new profitable products, noting that the banks needed to find products other than borrowing to boost their profitability, always in the context of sound risk management
He also noted that Cyprus was lagging behind in effective process of legal transactions and that Cypriot banks had to improve the enforcement of regulations that are the same for the whole Eurozone, through staff training for the benefit of the country’s economy and businesses.
He also said that any discussion in the eurozone about regulations was also taking into account how the profitability of banks was affected.
As for Non-Performing Exposures (NPEs), a large amount of which is still a burden for Cyprus economy, he said that smaller banks should try more to improve their balance sheets following the progress of the larger Cyprus banks. He also said that more emphasis should be placed on proper loan restructuring, both from banks and credit acquiring companies, thus allowing households and businesses “to breathe”.
Concerning financial technology, he said that it was a big challenge for the banks, that need to be adjusted as soon as possible in order to be able to deal with the inevitable competition from tech giants like google.
Regarding money laundering in the Cypriot banking sector, he said that the progress was recognized by the recent Moneyval report, which notes that the Cypriot banking sector has become more effective in mitigating risks and that these efforts should continue.
A new model for Cyprus economic development
At the same forum, Chairman of the Cyprus Economy and Competitiveness Council Takis Klerides said that the Council was proceeding with a project aiming at creating a new model for the development of the Cypriot economy.
Klerides said that the project has already begun and was expected to be completed by the 2nd half of 2021. The first deliverables, including strategic economic policy guidelines, are expected to be ready by the 2nd half of 2020.
The Council’s proposal, he added, was adopted by the Government and included in the requests submitted to the European Commission`s Structural Reform Support Office, to secure funding and technical support for the implementation. Through the procedures of the European Commission, he said, the project was assigned to a consortium of experts with the participation of academics and other experts, both from Cyprus and abroad.
Klerides said that the new development model that would lead the country to sustainable development, should be based on extroversion, investment attraction, strong competitiveness, innovation, expansion and diversification of the productive base, by promoting production and business sectors and activities with high added value.