The Central Bank of Cyprus published its 2025 Financial Stability Report, concluding that the domestic financial system remains resilient but faces elevated risks from geopolitical and economic tensions, global uncertainty and Cyprus’ exposure to external shocks. Banks are supported by strong profitability, improved asset quality and adequate capital and liquidity buffers, while nonbank financial institutions have so far remained resilient to market volatility. A further deterioration in geopolitical conditions could increase inflation, weaken household incomes and corporate margins, and impair debt-servicing capacity. The report also highlights rising cyber risks and warns that recent changes to the foreclosure framework could weaken payment discipline and recovery expectations, potentially resulting in tighter lending standards and higher borrowing costs. Macroprudential measures include a countercyclical capital buffer raised to 1.5% from January 2026, revised capital requirements for domestic systemically important institutions, continued lending limits and reinforcement of the Deposit Guarantee Fund.
Central Bank of Cyprus2026-07-28
Central Bank of Cyprus finds financial stability risks remain elevated despite financial sector resilience
The Central Bank of Cyprus found that the financial system remains resilient, although financial stability risks are elevated by geopolitical tensions, external shocks and cyber threats. It also warned that changes to the foreclosure framework could weaken payment discipline and increase borrowing costs. Macroprudential measures include a 1.5% countercyclical capital buffer from January 2026.