Nicosia: Cyprus' financial services landscape has changed markedly over the past decade, Governor of the Central Bank of Cyprus Christodoulos Patsalides said on Monday in his opening remarks at the 13th Banking, Payments and Fintech Forum and EXPO in Nicosia. Noting that Cyprus' domestic economy continues to perform robustly, he highlighted that growth remains significantly above the euro area average at around 3.5%, supported by services, tourism, and professional activities. Additionally, public debt is on a downward trajectory, and labor market conditions remain favorable and close to full employment.
According to Cyprus News Agency, the Governor emphasized that the Cypriot banking sector stands as a pillar of resilience and an enabler of growth. He pointed out that the Common Equity Tier 1 (CET1) ratio is roughly ten percentage points above the euro area average, and liquidity ranks among the strongest in Europe. Moreover, he noted that in line with European trends, the financial services landscape in Cyprus has changed markedly over the past decade, with the country now hosting a growing community of digital payment players, such as Electronic Money Institutions and Payment Institutions, although most of this business is conducted outside Cyprus.
Referring to the impact of artificial intelligence (AI), he said that recent surveys indicate that more than 70% of financial institutions globally are already using, piloting, or exploring AI-based applications for various functions including customer interaction, credit assessment, fraud detection, trading, and risk management. While these technologies offer efficiency gains and analytical power, they also challenge existing business models, introduce new operational and model risks, and increase dependencies on data and third-party providers.
Innovation, he continued, must be embraced but always anchored in sound risk management, strong governance, and a clear commitment to financial stability. He stressed that in a world defined by rapid technological transformation and heightened global risk, maintaining trust in money and in financial institutions is paramount. The Central Bank of Cyprus, as a member of the Eurosystem, remains fully committed to this objective, working with European partners to support a resilient, innovative, and inclusive financial system.
Referring to the European Central Bank's Financial Stability Review of November 2025, he mentioned that it underscores that financial stability risks remain elevated, although broadly contained. Despite the challenges, the European economy has demonstrated resilience, and similarly, euro area banks have shown resilience to recent shocks amid strong profitability and ample capital and liquidity buffers.
The Governor noted that the European banking sector is undergoing profound transformation, with technology as the primary driver of change. He pointed out that digital banks are gaining market share, while innovation is revolutionizing payments through the utilization of new technologies. Within this evolving payments ecosystem, the introduction of the digital euro represents an important strategic response. Europe's digital currency aims to preserve public access to central bank money in digital form, support Europe's monetary sovereignty, enhance resilience in retail payments, and foster innovation while maintaining high standards of privacy and security. Importantly, the digital euro is designed to complement, not replace, cash and private payment solutions.
"In this context, it is essential for the financial industry to remain well informed, to engage proactively, and to navigate effectively the changes ushered in by new technologies," the Governor concluded.