Herodotou: Bank sector is liquid and resilient

08:09 - 13 July 2023

Economy

Cyprus’ banking system is resilient with very high capital and liquidity ratios, Governor of the Central Bank of Cyprus Constantinos Herodotou told the Annual New York-Eastern Mediterranean Business Summit this week.

Addressing the event, Herodotou also referred to the banking turmoil in the US, and said the key characteristic is that it involved regional banks, which were not considered systemic.

The crisis revealed that global contagion can be caused even with regional banks, and also the significant role of the credit default swaps in signalling to the markets that there might be an issue with a specific institution, he said. As CDS prices increase, the spike can create bank runs, Herodotou added.

However, he noted that there are key differences between the US and Europe, as European banks, balance sheets are a lot more diversified.

He expressed the view that monetary policy tightening is the only way to combat inflation in Europe and the increase in interest rates is temporary.

Herodotou: Bank sector is liquid and resilient

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