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Big Banks In Small Countries:The Case of Cyprus

Listed author(s):
  • Constantinos Stephanou


    (Senior Financial Economist at the World Bank and currently on secondment at the Financial Stability Board)

A large banking system has served Cyprus well to date. It has supported the country’s outward-oriented, services-driven economic model and has significantly contributed to output and employment. The question going forward is whether banking system growth can continue indefinitely and at what cost. This paper argues that systemic risks are important for Cyprus given its banking system size and structure - in particular, the presence of big domestically-owned banks. It recommends that the authorities take a more macroprudential approach to financial sector oversight, that they engage in an immediate and significant fiscal consolidation effort, and that they introduce a set of prudential measures for systemically important banks that are customized to the needs of Cyprus.

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Article provided by University of Cyprus, Economics Research Centre in its journal Cyprus Economic Policy Review.

Volume (Year): 5 (2011)
Issue (Month): 1 (June)
Pages: 3-21

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Handle: RePEc:erc:cypepr:v:5:y:2011:i:1:p:3-21
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  1. Bank for International Settlements, 2010. "Macroprudential instruments and frameworks: a stocktaking of issues and experiences," CGFS Papers, Bank for International Settlements, number 38.
  2. International Monetary Fund, 2010. "United Kingdom; Selected Issues Paper," IMF Staff Country Reports 10/337, International Monetary Fund.
  3. International Monetary Fund, 2009. "Cyprus; Financial Sector Assessment Program: Financial System Stability Assessment," IMF Staff Country Reports 09/308, International Monetary Fund.
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