Barclays has a long-standing presence in Cyprus. Having first started in the retail banking sector some decades ago, international corporate banking services and wealth management services now form Barclays’ core operations on the island.
Barclays is a global banking group and operates in over 50 countries. Could you give us an overview to Barclays’ development in Cyprus?
We have been in Cyprus for more than 70 years. Some 15 years ago, we sold our retail branch network to Hellenic Bank to focus purely on international banking in Cyprus. After completing a rebranding process five years ago, we now fall under Barclays wealth management division. We have two offices in the country, a head office in Nicosia and an office in Limassol and employ around 50 people. Today, we mainly provide international corporate banking services to companies that have set up in Cyprus, as well as wealth management services to a wide client base.
As an established player in Cyprus’ banking sector, could you give us an overview of the banking landscape in Cyprus and how it has developed?
The market is very competitive, dominated by Bank of Cyprus, Marfin Popular Bank and Hellenic bank. Over the last six or seven years, we have also seen an influx of Greek banks who saw Cyprus as an opportunity to attract deposits and to fund their lending books in Eastern Europe. There are also a good number of foreign banks in Cyprus, including Barclays, which is the main global bank with a domestic presence. Initially, when the credit crunch occurred, the Cypriot banks were in a very good position, since they did not have exposure to toxic assets, however, with the recent turbulence in Greece and the eurozone crisis, things have changed. People are concerned about what is happening to the Cypriot banks that have exposure to Greek debt. The economic forecast for the next few years is also a bit gloomy and has also impacted the banking sector with the banks seeing a rise in non-performing loans.
If Greece should be forced out of the euro, do you see this being a major blow to Cyprus?
If Greece defaults, it will hit the banks in Cyprus and they will have to raise some capital. Some will find it a straightforward task because they are healthy from an operating income perspective. The domestic Cypriot banks have very high capital ratios. In fact, the domestic banks already started raising capital over a year ago to substantial levels and well above regulatory requirements. However, if they have to write-off additional portions of Greek debt, they will need to raise additional capital and this might result in a changing banking landscape and the Greek banks that have come here could see a reduction in market share. I think this offers an opportunity for other banks, and in particular Barclays, to increase their own market share.
What are the major drivers of Cyprus’ International Finance Centre?
Company formation is the main sector, while investment funds and insurance are two smaller sectors in which the professionals in Cyprus try to diversify in. The trust sector is also seen as an area of growth potential. Establishing a trust in Cyprus is a very straightforward process and Cyprus’ legal foundation in this area is strong, with a trust law that has been developed according to UK law.
Where is the bulk of the company formation business driven to and by whom?
The biggest source of business is still Russia and Eastern Europe. However this also includes, for example European companies who are trying to gain a foothold in the Russian market via Cyprus. Poland is also another market which has been growing because of the favourable tax treaty between Cyprus and Poland and the good performance of the Polish economy. The Cypriot entrepreneurs have done a good job in entering the market at an early stage, so they benefitted from an early-mover advantage perspective. We have also seen flows from other regions, including the Middle East and Europe. India is also growing at the moment given Cyprus’ advantageous tax treaty with that country and we are seeing flows both ways i.e. Indian companies investing in Europe via Cyprus, but also funds and firms investing in India via Cyprus. There is also a lot of talk about China as an area of future growth, however the true potential has not really materialised yet in my opinion.
From what regions is Barclays attracting business and what are the main banking services that are required?
Barclays has a relatively diverse customer base, spanning a range of countries and industries. From a banking point of view, our customers mainly require transactional type of banking where holding company structures that are established in Cyprus to channel their investments through the island. We have also seen a significant growth in wealth management as clients look to maximise their return on funds and as domestic savings and deposits have gone up.
Cyprus has long been a pass-through location for business and money, however, the country has not yet been successful in establishing itself as a location for asset management. Is that an area that Barclays can develop more?
Historically, Cyprus has captured much of the straightforward flow business whilst the more sophisticated services are potentially being offered in other locations. We do see this as an opportunity for Barclays because we are part of a large group which can offer a wide range of services. We have already started to leverage our global capabilities and to offer a number of products directly to our clients in Cyprus. For example, in January 2011, we launched a full range of investment services in Cyprus. Brokerage is another area where we are recording demand from clients. We have trading desks in various jurisdictions which we can leverage to offer services to our local clients.
What are your priorities for the next years?
We have doubled revenues over the last three years. We plan to do this again over the next few years. We will continue to invest in other products and services, including cash-management capabilities for corporates operating in multiple jurisdictions. In addition, we will invest further in our sales capability by investing in our people and recruiting new talent from the market. We also have the competitive advantage that we can leverage our extensive network. Our objective is to operate as one bank across various jurisdictions and there has already been collaboration on a cross-border basis for the benefit of our clients. As a bank we remain rock solid on funding, liquidity and capital and we remain committed to supporting our clients in Cyprus, and to further growing our business.