CBC Governor: Banking sector showing enhanced strength and resilience

The Cyprus banking sector has enhanced its strength and resilience through 2023, despite the turmoil of the recent economic and geopolitical events, Governor of the Central Bank of Cyprus, Constantinos Herodotou has said.

Addressing the TechIsland Summit in Limassol on 20 September, the Governor said that the Cyprus banking sector has maintained a high liquidity level, with its Liquidity Coverage Ratio standing at 318% in March 2023, compared with the European Union average of 162,8% (March 2023).

He also said that the Common Equity Tier 1 ratio (CET1) stood at 18.9% at the end of the second quarter of 2023, a rate which is a strong indication of the Cyprus banking sector’s ability to absorb future shocks.

Furthermore, he noted that the non-performing loans in the banking sector have been reduced drastically, with the ratio declining from 44% in 2017 to 8.7% in June 2023.

He noted that although, with the help of regulatory measures, the Cyprus banking sector has successfully weathered recent shocks, the uncertain economic environment leaves no room for complacency.

Banks, he went on to say, should continue improving their balance sheets and adapting to the changing environment in which they operate adding that digital advancement sits at the core of this adaptation process.

He said that the Central Bank of Cyprus has taken initiatives towards creating a binding bridge and fostering enhancement of technological advancement within the banking and payments sector.

The Governor also noted that in order to further encourage, promote, and support domestic financial innovation, the CBC has also established an Innovation Hub.

Its aim, he added, is to become an official platform for communication between the CBC, as a supervisory and regulatory authority, and businesses or startups active in Fintech.

Herodotou said that innovation in the financial sector has become a crucial necessity and it enables contactless banking, offers financial services employees the possibility to work remotely, and provides a customer-oriented efficient product. 

Undoubtedly, he continued, technological advancement comes with challenges and risks, adding that these risks need to be effectively managed and regulated so that financial sector participants and their customers reap the benefits of such technological advancement.

"Let me assure you of the Central Bank of Cyprus’ support to all efforts that point towards the direction of technological advancement and of our readiness to contribute within the framework of our legal mandate," he concluded.

(Source: CNA)