The potential sale of a substantial stake in the Bank of Cyprus’ equity, along with geopolitical developments, took centre stage at the Cyprus International Business Association (CIBA) forum, which took place on Tuesday in Limassol.
It should be noted that Bloomberg recently reported that AB CarVal Investors and Caius Capital are interested in selling their shares in the Bank of Cyprus, which together amount to 14.65 per cent of the bank’s equity.
Speaking at the forum, Demetris Efstathiou, Executive Director of Blue Diagonal and independent board member of Hellenic Bank, emphasised that the Cypriot banking system does not require additional foreign shareholders in terms of capital support.
He highlighted their high capital adequacy, excessive liquidity, and depositor security post-2013 crisis due to conservative banking strategies and profitability.
“Therefore, the Cypriot banking system does not need additional shareholders,” he said.
“Foreign shareholders can bring new technologies and approaches, but in terms of capital, the banking system does not need additional foreign ownership,” Efstathiou added, noting the recent acquisition of 55.3 per cent of Hellenic Bank by Greek lender Eurobank.
Economist and Sapienta Economics director Fiona Mullen concurred on the significant liquidity characterising the Cypriot banking system.
However, she mentioned that the two systemic banks in Cyprus, meaning the Bank of Cyprus and Hellenic Bank, jointly constitute almost 80 per cent of the banking system.
She added that additional foreign shareholders in the Bank of Cyprus should not be considered concerning, citing similar occurrences in other jurisdictions.
During discussions on global economic developments, Mullen noted that “everyone should prepare for a Trump presidency,” echoing Efstathiou’s view.
She suggested that Donald Trump is favoured for a return to the White House in the upcoming presidential elections and could influence the Cyprus issue due to his stance on UN peacekeeping operation cost savings.
Efstathiou estimated that Americans saw their daily lives adversely affected after the coronavirus pandemic.
“And when they see their comfort affected, citizens usually vote for change,” he said.
Both agreed that the European economy lags behind the US economy, which exhibits strong growth rates despite a high public debt exceeding 100 per cent of GDP.
“The European economy is struggling, affected by the war in Ukraine, adverse energy developments, and excessive regulation,” Efstathiou said.
Mullen noted that changes and the strengthening of the far-right in recent European elections might lead to deregulation, particularly in terms of the green transition.
Elsewhere, Christos Pashalides, senior economic adviser to the European Commission, said that geopolitical tensions pose a challenge to the EU’s model of jointly addressing challenges.
Additionally, he noted that beyond geopolitical tensions, Europe’s productivity lags behind despite a strong labour market.
“In the current competitive environment, Europe must unleash the power of entrepreneurship, and close its productivity and innovation gap compared to other regions,” he stated.
Regarding Cyprus and the European Commission’s recommendations, Pashalides said that Cyprus must address delays in implementing the €1.2 billion Recovery and Resilience Plan, a plan that is ambitious and transformational, consisting of 50 per cent reforms and 50 per cent investments.
He also mentioned the need to improve the governance of semi-governmental organisations and state-owned enterprises based on best international practices.
Furthermore, he underscored the importance of improving the electricity grid to facilitate further integration of renewable energy sources into the country’s energy mix.
Meanwhile, Deputy Minister to the President Irene Pikis provided an update on the long-term vision for Cyprus as a model nation, in reference to the Vision 2035 initiative.
Vision 2035 aims for Cyprus to be a top global destination to live, work, and do business. Introduced in 2022 and endorsed by the current administration in March 2023, it prioritises economic resilience and growth.
Pikis said the government remains “committed to this strategy since it fundamentally ensures the long-term sustainability of the economy and at its core, the strategy aligns with our goals for economic resilience and growth”.
“Our vision is for an economically and socially prosperous country to live in, with modern infrastructure, that utilises green energy and the advantages and opportunities provided by technology and digitisation,” she stated.
“We aspire to live in a country that is safe, with a skilled and qualified workforce that will claim high-quality jobs based on a new production model – diversified and enriched; a competitive economy with enhanced exports of both products and services and an attractive destination for foreign high value-added investments,” Pikis added.
