The Minister of Finance, Makis Keravnos, and the Governor of the Central Bank of Cyprus, Constantinos Herodotou, jointly delivered messages on the importance of maintaining financial stability at the Annual General Assembly of the Association of Cyprus Banks.

Both Keravnos and Herodotou emphasized that while the banking sector has improved, challenges persist. Herodotou stressed the significance of a stable legal framework as a prerequisite for maintaining financial stability. He explained that foreclosures are not an end in themselves but rather a means to pressure creditors and borrowers towards sustainable restructuring.

Herodotou also stated that the Central Bank of Cyprus is open to discussing proposals addressing potential weaknesses and is committed to dialogue with all entities and authorities.

Regarding non-performing loans, Herodotou pointed out that they decreased from 44% to 9.5% of total loans by the end of 2022. However, he emphasized that this percentage remains higher than the EU average of 1.8% and primarily affects large banks. He further noted that the uncertain economic environment may further strain households and businesses in meeting their obligations.

The Governor emphasized the utmost importance for banks to implement expedited restructuring processes with reduced charges and no additional costs, particularly for vulnerable customer categories.

During his own address, Minister of Finance Makis Keravnos, underscored the government's commitment to ensuring macroeconomic stability and exercising fiscal discipline and financial stability. “This approach aims to sustain economic growth and create more employment opportunities.” Keravnos acknowledged the significant progress made by the Cypriot banking sector, which boasts a strong capital base and robust liquidity. However, he also acknowledged existing challenges and risks, citing recent banking fluctuations in the US and Switzerland.

Keravnos identified effective risk management, technological innovation in cybersecurity, and compliance with European Central Bank directives and supervisory mechanisms as key challenges for Cypriot banks. He expressed satisfaction with the banks' efforts to absorb increased costs from rising interest rates and determine deposit interest rates. The Minister assured close monitoring of these developments and anticipated positive steps from all banks.

"Banks are well aware," he added, "that the continual improvement of the financial sector is intricately linked to economic stability, which in turn relies on the sound financial condition and sustainable viability of our households and businesses, the majority of which are small and medium-sized enterprises."

In addition, Mr. Keravnos underlined that a decisive prerequisite for economic stability is the establishment of a stable economic policy that ensures sustainable growth within a framework of fiscal discipline and financial stability. "This requirement constitutes an enduring policy of the Government led by President Nikos Christodoulides," he noted.

Within this context, he underscored that the main projection anticipates a growth rate of approximately 2.8%, a rate three times higher than the eurozone average, while the fiscal balance remains in surplus and is estimated to reach an average of 2.3% of GDP during the 2023-2026 period.

Lastly, he stated that the government will continue its policy to address inflation and precision, in addition to the specific measures already implemented and announced. "The government's objective is not only to sustain economic expansion, namely an increase in GDP, but also to recognize that growth is a prerequisite and to strive for the development of the real economy," he emphasized.