It is rare for a country’s bankers to talk proudly of how they have slashed the sector’s assets-to-gross domestic product (GDP) ratio and cut the value of deposits by 30%, but in Cyprus they are doing just that. Seven years after a banking crisis that led to an unprecedented bail-in, the eurozone’s first capital controls and a €10bn rescue package from international partners, the Cypriot banking sector has undergone a remarkable turnaround.
Cleaner, leaner and better capitalised, Cypriot banks are less reliant on foreign depositors and less exposed on the asset side. But the country still faces challenges with a substantial non-performing loan (NPL) burden that is now unlikely to shift in the near future. The global coronavirus crisis will take its toll and, combined with the growing cost of investments in technology, this may lead to a further round of consolidation.
