S&P Global Ratings revised the outlook on Bank of Cyprus from stable to positive on Thursday, while affirming the bank’s long-term and short-term credit ratings at “BBB-” and “A-3”, respectively.

According to S&P, the revision of the outlook primarily reflects the agency’s view that economic risks for banks operating in Cyprus are declining.

The agency notes that Bank of Cyprus could benefit from a more supportive economic environment.

In S&P’s assessment, Cyprus’s strong economic growth in recent years is expected to support the creditworthiness of the private sector.

“The economy has benefited from a thriving services sector—particularly tourism and information, technology and communications services—driven by the relocation of businesses to Cyprus,” the agency underlines.

S&P also notes that the Cypriot economy has demonstrated resilience to various events, including regional conflicts and trade wars.

“We believe that private-sector creditworthiness is strengthening, even as we acknowledge that Cyprus’s high per capita GDP, measured in U.S. dollars, may overstate the average prosperity of domestic residents due to the relatively high share of foreign investment in the country,” it adds.

S&P expects this positive trend to continue, supported by labour market conditions, strong growth in real incomes and significant investment, including funds from the EU’s Next Generation EU programme.

However, the U.S.-based ratings agency continues to believe that Cypriot banks face “high risks” stemming from the country’s position as an international financial centre.

“This constrains our ratings on banks incorporated in Cyprus,” it states, adding that Cyprus, as a small and open economy, remains vulnerable to external shocks.

The agency believes that Cyprus’s economic performance is more cyclical than that of countries of a similar size.

In addition, S&P notes that existing inherent cross-border risks related to anti-money laundering (AML) and counter-terrorist financing (CFT), arising from Cyprus’s role as an international financial centre, pose risks for banks in terms of compliance costs, potential fines and their relationships with correspondent banking services.