Surprises from systemic banks in Cyprus continue, with the latest development being a small acquisition by the Bank of Cyprus, which purchased a portfolio of performing loans (€150 million) and deposits (€500 million) from Cyprus Development Bank.
Thirteen years after the March 2013 banking crisis, Cyprus’ banking sector has not only regained its credibility but is now characterized by strong profitability, solid capital bases, and expansion through acquisitions of credit institutions and insurance companies.
The focus has shifted toward growth, increasing market share, diversifying income streams, and returning capital to shareholders. At the same time, non-systemic banks in Cyprus are gradually disappearing as a result of acquisition strategies — mainly involving the takeover of healthy assets — which is reducing their number and strengthening major players.
This trend has already been seen with AstroBank, whose healthy assets were acquired by Alpha Bank, and now with CDB Bank’s assets being acquired by Bank of Cyprus. Other non-systemic institutions include the Housing Finance Corporation, Ancoria Bank, and smaller foreign banks operating in Cyprus.
Systemic banks are closely supervised by the European Central Bank and the Single Supervisory Mechanism (SSM), and are subject to stricter capital and risk management requirements. This results in less flexibility in lending, with stricter terms and collateral requirements.
Non-systemic banks, supervised by the Central Bank of Cyprus, are not subject to the same stringent regulations, allowing them greater flexibility in financing individuals and businesses. However, this flexibility has not been enough to counter consolidation trends.
Deal closes
The agreement between Bank of Cyprus and CDB Bank has now been finalized after months of negotiations, with only the healthy assets being acquired. The future of the bank’s 140 employees remains unclear.
Market rumors about CDB Bank’s sale had been circulating for over a year, with interest from both financial institutions and fintech companies seeking to obtain a banking license within the European Union. Applications from fintech firms have already been submitted to the Central Bank of Cyprus, though none have yet been approved.
The acquisition resolves supervisory concerns and removes another small bank from the market, further shrinking the non-systemic segment.
The Cypriot banking system is now structured around three main pillars:
- Bank of Cyprus as the leading institution
- Eurobank as a major banking and insurance group
- Alpha Bank as a third key player
A broader European trend
Bank consolidation is not unique to Cyprus but reflects wider trends across Europe. Mergers and acquisitions are becoming increasingly strategic for financial institutions, according to the European Banking Authority.
In 2025, several major deals stood out:
- Mediobanca was acquired by Monte dei Paschi di Siena
- BPCE acquired Novo Banco for €6.4 billion
- ABN AMRO acquired NIBC Bank for €960 million
These deals highlight a push toward consolidation, geographic expansion, and diversification of business models.
Limited exposure to the Middle East
Cypriot and European banks have limited exposure to counterparties in the Middle East, according to recent data from the European Banking Authority. However, escalating tensions could have indirect effects through higher energy prices, inflationary pressures, weaker economic growth, and supply chain disruptions.
In Cyprus, total exposure to Middle Eastern counterparties reached €162 million by the end of 2025, with only €22 million related to household loans.
Across the EU, total exposure stands at €132 billion, including €47 billion in loans to financial institutions and €33 billion to non-financial companies.
The non-performing loan ratio stands at 1.8% in the EU and 0.8% in Cyprus, with Cyprus also showing a higher coverage ratio (51.2% vs 41.4%).
Source: Theano Theiopoulou- Phileleutheros
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