The chessboard of the banking sector is being reshaped by mergers, acquisitions, and the potential return of global financial giant Deutsche Bank as a correspondent bank in Cyprus.
At the Annual General Assembly of the Cyprus Banking Association on Thursday, its president Aristidis Vourakis announced that Deutsche Bank is actively considering returning to Cyprus.
“With particular satisfaction, I would like to note that Deutsche Bank, the most active European bank in international payments, is evaluating its return to Cyprus after efforts by the Association. It had withdrawn in 2016,” he stated. He added that merger initiatives are also accelerating.
“Two major mergers among the five largest banks are nearing completion, creating strong entities with European access that will offer new opportunities to Cypriot businesses and individuals,” Vourakis said.
Interest rates and financing
Meanwhile, interest rate policy remains a key concern for Cyprus’s banking sector. Speaking at the same event, Central Bank Governor Christodoulos Patsalides referenced the European Central Bank’s recent decision to cut rates by 0.25%, based on updated inflation forecasts.
“For banks, this requires constant vigilance and adaptability- both in financing the real economy and in managing risk,” he noted.
Finance Minister Makis Keravnos, also present, stressed the importance of banks offering more flexible lending conditions and more competitive interest rates.
“Our expectation is for banks to intensify financing of small and medium-sized businesses, green projects, and innovative initiatives, while ensuring the quality of their loan portfolios. It is also important they demonstrate greater flexibility in lending terms to improve access to capital for both businesses and households,” he said.
From the 2013 crisis to 2025 resilience
The sector’s evolution since the financial crisis was also highlighted, with the Finance Minister noting that banks have undergone significant transformation in recent years.
“We can state with confidence that the Cypriot banking system remains robust and resilient, having overcome major challenges and achieved a high level of transformation,” he said.
Central Bank officials described the sector’s transformation as remarkable, evolving from traditional local institutions into dynamic organisations integrated into the global financial system.
Cyprus Bankers Association Director General Michalis Kammas added that banks now show strong capital adequacy. Vourakis noted that consolidated profits exceeded €1 billion for the second consecutive year.
‘Crisis effects still visible’
Despite the strong performance of the past two years, the effects of the 2013 crisis continue to linger in both the banking sector and broader society, Vourakis cautioned.
“The sector’s profits for 2023 and 2024 have not yet offset the losses from the 2013 crisis. In fact, the losses from 2014–2022, not counting those from 2013, still significantly outweigh current gains,” he explained.
On the issue of non-performing loans (NPLs), he noted a substantial reduction in recent years- but added that, as a percentage, they remain higher than the European average.
“The NPL ratio has dropped to 6.2%, still above EU levels- but we must not forget the uniquely severe crisis Cyprus experienced in 2013,” he said.
He also pointed out that many NPLs are now owned by specialised non-bank entities.
“As a result, thousands of borrowers remain trapped in potential foreclosure procedures. The state’s initiatives- particularly the Finance Ministry’s rent-to-mortgage scheme- are valuable in this regard. Expanding and accelerating these efforts can only be seen positively,” Vourakis concluded.
The possible Deutsche Bank Cyprus return was presented as a vote of confidence in the country’s financial system and a signal of Cyprus’s re-integration into the European banking mainstream.
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