By Angelos Anastasiou
THE beginning of a dialogue aimed at strengthening relations and including the expansion of activities by Lebanese banks in the Cyprus market was announced yesterday by Central Bank Governor Panicos Demetriades, and his Lebanese counterpart Riad Salameh.
In a joint press conference held after a closed session, the two central bankers affirmed the intention for banking cooperation, in the form of expanding banking operations by Lebanese banks in the Cyprus market to include funding of business activity, investments, cooperation with Cypriot banks in issuing credit notes and letters of guarantee, and project financing.
“Lebanese banks can help restart the Cyprus economy and catalyse the country’s recovery,” Demetriades said.
The two governors also discussed measures to further fight money laundering and the restrictions on capital flow imposed by the Cypriot authorities.
The institution of a working committee of all three federations (the Cyprus Bank Federation, the Cyprus International Banks Federation and the Lebanese Bank Federation) of commercial banks from the two countries was also announced, tasked with devising a roadmap and measures to be taken in order to effectively foster cooperation.
Demetriades expressed the belief that the present crisis offered an opportunity to strengthen the bond between the two banking systems. Lebanon’s banking sector is strong enough to assist Cypriot banks in funding business activity, he said.
Salameh said there was room for Lebanese banks to expand their operations in Cyprus, suggesting that the Lebanese authorities would support such a prospect. However, he pointed out that any delays in materialising such expansion related to the restrictions still in place in the Cyprus banking system.
He said Lebanese banks had high liquidity and capital adequacy ratios, and thus were able to expand across national borders. Deposits in Lebanese banks add up to more than three times the country’s GDP.
“That is why we have encouraged our banks, when presented with the opportunity, to expand their activities beyond Lebanon”, Salameh said. The Lebanese Central Bank caps banks’ foreign investments at 50 per cent of its capital.
Salameh said that Lebanon’s geographical proximity to Cyprus was an important factor, but warned that the responsibility for their investment decisions ultimately rested with the banks themselves.
The President of the Lebanese Banks’ Federation Francois Bassil said that nine Lebanese bank branches, as well as four affiliated banks, already operate in the Cyprus market.
“We feel we owe a lot to Cyprus. We are obliged to help Cyprus with funding and investment,” he said.