Cyprus has been hailed an ‘economic miracle’ once before during its long history.
Enjoying decades of uninterrupted growth before the global financial crisis, the country was branded an economic wonder after rebounding its economy through strict austerity measures after the 1974 Turkish invasion and subsequent division of the island. The island’s reputation as a financial centre was boosted during the Lebanese civil war in 1975-1990, when wealthy Middle Easterners abandoned Beirut for the safety of Nicosia.
After the collapse of the Soviet Union and the fall of the Berlin Wall, Russian and Eastern European businesses also began moving to Cyprus, attracted by the country’s advantageous tax regime, its legal system based on British law and the fact that Cyprus was the first country to enable visa-free access to Russian and CIS travellers.
Greek banks, as well as Russian, Eastern European and Lebanese banks began to officially set up shop in Cyprus to better service their clients, as funds and personnel flowed from their countries to the island. These events played a significant role in the development of the banking sector and the transformation of the country into both a thriving business and financial centre.
Cyprus’ accession to the EU in 2004 and subsequent adoption of the euro, established it as a transparent and EU-regulated business hub, removing the country from the list of global offshore jurisdictions. Cyprus’ status as a competitive investment gateway to Europe began to attract increasing business from Asian, Eastern European and Middle Eastern investors looking to expand and break into EU markets.
Over the decades, Cyprus’ appeal for the set-up of holding and finance companies, as well as foreign trading companies and regional headquarters, substantially increased the demand for banking services.
Today, due to growing global regulatory demands to establish business substance and transparency, Cyprus’ appeal as a cost-effective headquartering location for multinationals is on the rise – a trend sure to continue and further spur the evolution of the banking sector.