articles | 12 November 2019

Cyprus makes significant progress in investment funds sector

Significant progress achieved in the Cyprus investment funds industry was highlighted at an International Funds Summit in Nicosia with 580 participants.

“Cyprus has not only been able to make an entry to this promising and dynamic industry, but it has actually been able to register a steady and impressive growth,” said Finance Minister Harris Georgiades addressing the conference.

He said the government has decided to provide seed capital to an alternative investment fund through the 2020 budget with the aim of providing equity financing to SMEs beyond the traditional methods of lending.

Georgiades said for the last five years Cyprus has been one of the fastest growing economies in the EU with a medium-term outlook equally positive and currently has the largest fiscal surplus in the EU “which allows us to maintain macroeconomic stability and promote tax and other incentives.”

He also noted that Cyprus is on an upgrade path from all credit rating agencies which maintain positive outlooks for the economy.

“We are retaining the reform momentum, fully realising that more needs to be done with a dozen significant reforms currently pending approval.”

Central Bank Governor Constantinos Herodotou said he is ready to cooperate with the other national institutions in promoting the investment funds sector but also in tackling the challenges facing Cyprus.

He said there are signs for an economic slowdown in the eurozone due to persistent risk factors such as Brexit and trade tensions, noting that Cyprus has seen a more resilient growth path with a fastest growing outlook than the euro area average.

“Any external shocks to the eurozone will be the same for Cyprus. The difference in numbers means that we have biggest buffers and cushions from a GDP growth perspective. It means we can absorb more without entering in very low growth numbers.”

Herodotou said immense progress has been achieved with the size of Cypriot banks, in terms of assets, dropping from eight times the island’s GDP to a more manageable 2.8 times of GDP,

The banks’ capital position in terms of CET1 ratio has improved from 14.2% in mid-2016 to 16.2%, higher than the eurozone average.

He said the reduction of private Non-MFI debt has been on a downward path but will take time to decline further, recalling that Non-Performing Loans have declined from the peak of €28 billion to €9.5 billion mainly through transfers to credit-acquiring companies.

“From a wider economic point of view this is a concern, which means we need to keep an eye on that, but the banking sector is stabilised because it has dealt with this problem efficiently.”

Herodotou said, adding that if the island’s two largest banks conclude the next NPLs sales successfully, it would take them very close to the threshold required by the SSM regulation.

He said the Central Bank has the issue of client onboarding on its radar and spearheads the drive for the creation of a joint platform that would provide the relevant documentation on all banks “without relaxing the rules”.

Cyprus Investment Funds Agency chair Angelos Gregorides said that benefiting from a fully harmonised legal framework on a par with other competitive jurisdiction, Cypriot investment funds are now listed in major global platforms.

“We have come a long way in a very short time to bring the Cypriot legal framework at par and competitive among other jurisdictions in the EU resulting in formidable growth with assets under management more than trebling in the past two years.”

Gregorides said the funds industry in Cyprus is developing into a vital part of the financial sector while operating in a highly competitive global market.

“Therefore, we should continue to provide a solid, respected and trusted environment by firstly ensuring our business environment encourages firms to locate funds in Cyprus.”

Source: Financial Mirror

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