Cyprus Central Bank Governor Constantinos Herodotou argues profitability and the need to find new banking products besides lending, is a big challenge for banks of a small country.
He said that geography, provided Cyprus’ banks with fewer opportunities to find new profitable products, but banks needed to find products other than borrowing to boost their profitability within sound risk management
Herodotou said Cyprus was lagging effective process of legal transactions and that Cypriot banks had to improve the enforcement of regulations that apply for the eurozone, through staff training for the benefit of the 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 the economy, he said that smaller banks should try more to improve their balance sheets following the success of larger Cyprus banks.
Herodotou 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”.
Financial technology is the next big challenge for the banks, which need to deal with the inevitable competition from tech giants like google.
A new economic model
Chairman of the Cyprus Economy and Competitiveness Council Takis Klerides said he was working on a project to create a new model for the development of the Cypriot economy.
Klerides said the project was expected to be completed by late 2021. The first deliverables, including strategic economic policy guidelines, are expected to be ready by mid-2020
The project was assigned to a consortium of experts with the participation of academics from Cyprus and abroad.
Klerides said the new model on 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.
Herodotou and Klerides made their comments at an Economic Policy Forum organised by Opposition party AKEL.
