Cypriot banks can withstand current credit crunch

Despite pressures on the world and local economy, Cypriot banks’ capital adequacy is above the EU average, according to the latest data from the European Central Bank.

The combination of reduced provisions and increased profitability has helped Cyprus banks maintain capital adequacy at relatively high levels during significant challenges for the banking system.

According to data from the ECB, the Common Equity Tier 1 capital ratio for the banking system was 16.6% in the fourth quarter of 2022, down from 17.4% in Q3 2022 and 17.1% in Q4 2021.

While lower than in the same quarter last year, and in 2021, the capital level of Cypriot banks exceeds the EU average of 15.4%.

At 16.6% capital adequacy, Cyprus came in 15^th place above Hungary but below Ireland.

According to Hellenic Bank’s financial results for the first quarter of the year, their Capital Adequacy Ratio stands at 25.1%, and the Common Equity Tier 1 (CET 1) Ratio is at 19.3%, far exceeding the minimum supervisory requirements.

For the Bank of Cyprus, the Common Equity Tier 1 (CET1) Capital Ratio is 15.2%, and the Total Capital Adequacy Ratio is 20.3%.

Banks in Slovakia have the highest CET1 ratio with 21.6%, followed by Luxembourg with 20.9% and the Czech Republic with 20.5%.

Banks in Spain and Greece have the lowest capital ratios, with 13% and 14.4%, respectively.

In recent years, Cypriot banks have significantly strengthened their capital, following the supervisory authorities’ recommendations, to absorb possible shocks.

The strengthening of capital occurred mainly after the banking crisis of 2013, with banks offloading non-performing exposure and restructuring their business model, including staff reduction, and turning to digital solutions.

The sector’s capital had fallen to nearly 6% at the height of the banking crisis.