Nicosia: Cyprus’ economy has shown remarkable resilience and adaptability despite repeated global shocks, while its banking sector continues on a path of stabilisation and strengthening, Central Bank Governor Christodoulos Patsalides said on Thursday. Addressing the Annual General Meeting of the Association of Cyprus Banks, in Nicosia, Patsalides praised the country’s economic transformation but warned that sustained progress depends on continued vigilance, domestic reform, and deeper European financial integration.
According to Cyprus News Agency, Patsalides emphasized the necessity for composure, alertness, and sound judgment in today’s environment, stating that international stability cannot be taken for granted. He highlighted the gradual transformation of the Cypriot economy into a more diversified, outward-looking, and resilient structure beyond just macroeconomic indicators.
On the banking sector, Patsalides noted significant progress, highlighting high capital adequacy, improved liquidity, and increased operational efficiency in banks. He pointed out the steady progress in managing non-performing loans and cleaning up bank balance sheets, underscoring the responsibility to maintain this momentum and build a reliable, strong, and competitive banking system.
The Governor assured that the CBC remains vigilant, investing in knowledge, transparency, technological transformation, and effective supervision. The Bank applies a strategy of flexible, proactive, and effective supervision to protect the system and support long-term financial stability and growth. Patsalides emphasized the CBC’s support for innovation aligned with responsible risk management and the promotion of stability as a key pillar of sustainable growth and prosperity.
He stressed the importance of addressing modern risks such as climate change, cyber threats, and challenges from artificial intelligence. The CBC is enhancing supervisory mechanisms for electronic money and payment institutions, with a focus on governance issues across all supervised entities.
Regarding the ECB’s recent monetary policy decision, Patsalides noted the central bank’s reduction of key interest rates by 25 basis points based on updated assessments of inflation prospects and monetary policy transmission strength. Inflation currently hovers near the ECB’s 2% medium-term target, with projections indicating an average of 2% in 2025, 1.6% in 2026, and a return to 2% in 2027.
Patsalides highlighted the need for deeper European integration, calling for full implementation of the Capital Markets Union and completion of the Savings and Investment Union to bolster Europe’s capacity to finance innovation and the green transition. He also advocated for supervisory coherence and the finalisation of the Banking Union with a common European Deposit Insurance Scheme and the establishment of a legal framework for a potential digital euro.
Governments, he concluded, must ensure the sustainability of public finances aligned with the EU’s economic governance framework and prioritize structural reforms fostering growth and strategic investments, particularly for small and open economies like Cyprus.