Is the Cyprus banking sector considered to be overcrowded? If you look at the population size of Cyprus, you will most probably come to the conclusion that yes, it is quite oversaturated. There are 7 banks that have a full licence in Cyprus.
These banks are listed below in alphabetical order:
1. Ancoria Bank Limited.
2. Astrobank Public Company Limited.
3. Bank of Cyprus Public Company Ltd.
4. Cyprus Development Bank Public Company Limited.
5. Hellenic Bank Public Company Limited.
6. Housing Finance Corporation.
7. RCB BANK LTD.
On top of this list, there are 22 other subsidiaries and branches of foreign banks. The list of subsidiaries and branches are below:
1. Αlpha Bank Cyprus Ltd.
2. Eurobank Cyprus Ltd.
3. National Bank of Greece (Cyprus) Ltd.
4. Societe Generale Bank-Cyprus Limited.
5. Banque SBA.
6. Central Cooperative Bank PLC.
7. EFG Bank (Luxembourg) S.A.
8. First Investment Bank Ltd.
9. National Bank of Greece S.A.
10. Arab Jordan Investment Bank SA.
11. Bank of Beirut SAL.
12. BankMed s.a.l.
13. Banque BEMO SAL.
14. BBAC SAL.
15. BLOM Bank SAL.
16. Byblos Bank SAL.
17. Credit Libanais SAL.
18. IBL Bank sal.
19. Jordan Ahli Bank plc.
20. Jordan Kuwait Bank PLC.
21. LGB Bank S.A.L.
22. Public Joint-Stock Company Commercial Bank “Privatbank”.
23. JSC Bank of Georgia (the representative office).
Looking at the list, you may wonder why the Republic of Cyprus, (exclusively the Greek Cypriot part of Cyprus) requires so many banks. The answer lies in the fact that the Republic of Cyprus has managed to develop itself into a small international banking hub, competing with other regional hubs located in the Baltic States such as Latvia, Estonia, and Lithuania. Malta as a parallel country is barely a competitor.
The banking industry of the Republic of Cyprus has recently suffered several blows. The first was delivered by the banking crisis in 2013. It had roots in the Greek banking crisis when Cypriot banks heavily invested in Greek government bonds. When the 2013 banking crisis happened, the Cyprus government made the right decision to let the banks which have suffered the most from the fall of Greek bonds to burst. Many clients of the banks lost their trust in the banking system of Cyprus. However, the clients from Russia and Ukraine had few other alternatives for opening offshore bank accounts.
Many Russian speaking businessmen are not fluent in English. Therefore, customer support in Russian for them is a must. With the Latvian banking sector suffering from hefty penalties and fines, this led to the closure of some Latvian banks; and Cyprus banks re-emerged on the map. A smart move of the Cyprus government was to introduce the Cyprus passport for investment scheme; which brought much-needed funding to the Cyprus banking sector. Nowadays, everybody is understanding that the golden days are coming to an end on the island. Cyprus banks are facing the new reality of rigid AML regulations which are causing delays or even rejection of much-needed clients.
If prospective foreign clients for Cyprus banks are to be taken out of the equation, it should be concluded that a small island located in the corner of Europe does have too many banks, and consolidation in the Cyprus banking sector is the only viable option for future business; as it is difficult to imagine Cyprus banks could all survive on their own, given the recent reported losses.