The banking sector has enhanced its strength and resilience through 2023, despite the turmoil of recent economic and geopolitical events, Cyprus Central Bank governor Constantinos Herodotou said.
In his speech on Wednesday at the TechIsland Summit in Limassol, the governor said the banking sector has maintained a high liquidity level, with its Liquidity Coverage Ratio standing at 318% in March, compared with the European Union average of 162.8%.
He said 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 banking sector’s ability to absorb future shocks.
Furthermore, he noted that Non Performing Loans 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 banking sector has successfully weathered recent shocks, the uncertain economic environment leaves no room for complacency.
“Banks should continue improving their balance sheets and adapting to the changing environment in which they operate; digital advancement sits at the core of this adaptation process.
“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 CBC has established an Innovation Hub to further encourage, promote, and support domestic financial innovation.
“It aims 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.
It enables contactless banking, offers financial services employees the possibility to work remotely, and provides a customer-oriented, efficient product.
“Undoubtedly, technological advancement comes with challenges and risks; these risks must 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”.
