Cyprus Banks on the International Scene

Cyprus Banks on the International Scene

Tax-news.com

Cyprus is not Greece, is the first thing to say about the Cyprus banking sector. It has experienced none of the problems of the Greek or Irish banks; domestic banking assets total 800% of GDP, with little exposure to toxic sovereign debt, and the loans to deposits ratio is 114%, signalling little reliance on debt funding.

Cyprus is also very unlike Greece, Italy or Spain in its tax regime, with what is still the lowest corporate tax rate in the EU, a factor which should not be underestimated and is highly attractive to companies – including banks – which need to establish a headquarters somewhere in the EU. If the government helps with other business-friendly measures, the island will surely attract a good flow of incoming financial services operators, who can then provide their services throughout the EU under the passporting directive. The Central Bank certainly has this as one of its objectives, and pursues policies which are very welcoming to foreign banks.

This includes entering Memoranda of Understanding with other countries’ financial regulators. Typically, such Memoranda define a general framework of mutual cooperation and exchange of information between the two supervisory Authorities, with a view to facilitating the consolidated supervision of cross-border establishments, and ensuring the safe functioning of credit institutions in their respective countries, in accordance with their national laws and regulations.

Also not to be forgotten in assessing the attractions of Cyprus as a financial center is its network of double tax treaties, particularly with the ex-member countries of the USSR. Cyprus figures high up on the list of ‘conduit’ countries for FDI into Russia and other Eastern European countries, and the flows of investment in one direction and tax-privileged dividends in the other must of necessity pass through Cyprus-resident banks.

The Central Bank’s list of financial institutions under its sway currently includes 44 entities, four of them being publicly-listed in Cyprus, with a further four local banks, nine being subsidiaries of foreign banks, eight being branches of other EU banks, seventeen being branches of non-EU banks, and two being representative offices.

The banking sector doesn’t only look outwards, of course, and in mid-2009 the European Investment Bank inaugurated unprecedented cooperation with three Cypriot banks, the Bank of Cyprus, Marfin Popular Bank and Hellenic Bank, to provide additional support in the financing of entrepreneurial activity in Cyprus. The agreement will provide facilities totalling EUR228m from the European Investment Bank; EUR120 will go to Bank of Cyprus, while Marfin Popular Bank and the Hellenic Bank will receive EUR50m and EUR58m, respectively.

The funds will be used to provide finance to small- and medium-sized enterprises (SMEs) in the fields of industry, commercial services and tourism in Cyprus. The lending facilities signed with the Bank of Cyprus and Hellenic Bank will also be able to fund SMEs located in Greece.

For more information about business, taxation and investment in Cyprus, visit the Lowtax.net Cyprus Knowledge Base.

You can also read the Tax-news.com Cyprus Review 2010-2011 for free here.

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Howard Sterling, who focuses on cross-border international licensing especially in Health Tech, High Tech and Clean Tech, shows the win-win-win of small innovative companies raising funds by going to complementary, larger industrial partners, many times from another country, since the leading company needs innovative products and has cash.Education and Honors: BS at Columbia University in Economics, 1962, with Honors, Cum Laude, Phi Beta Kappa; LLB from Harvard Law School, 1965, Magna Cum Laude, Harvard Law Review Editor: Law Review Note on Broker Dealer Bankruptcies. Senior Honors Seminar Thesis on Broker Dealers Going Public; Published in the UCLA Law Journal. Legal and professional background includes the following: Law Firm: Founder and Senior Partner, Rifkind & Sterling, Beverly Hills, California: 1965 1983, premier West Coast Boutique law firm specializing in Securities Law, IPOs especially for technology and biotechnology companies; Did over 100 IPOs. Investment Banking, 1983-2008, •Rooney Pace, started and headed Investment Banking 1983-1987 •HJ Meyers, investment banking, 1988-1991; also reorganized and sold my deceased father-in-laws time share business, Preferred Equities. •Oscar Gruss & Son, started and headed Investment Banking, 1991 1994 In Israel focused on Israeli Technology and Healthcare, did 11 Israeli IPOs and was co-CEO of Nitzanim Venture Fund, one of the first USA-style venture funds in Israel. •Sands Brothers/Laidlaw, 1995 2005 COO of Venture …