BEIRUT: A high-profile delegation visiting Cyprus is seeking to strengthen Lebanese banks’ operations and business involvement in the island country as it seeks the help of foreign lenders to finance trade with the European Union, bankers said Thursday.
Central Bank Governor Riad Salameh and a delegation from leading Lebanese banks will take part in a two-day conference in Limassol starting Friday to explore ways to cement ties with the banking and business community on the island.
Bankers said that the presence of Salameh at the conference demonstrated the importance of the visit.
The high-profile visit coincides with renewed efforts to unify the divided island and at a time when the Greek-Cypriot government struggles to bail the economy out of its financial and economic crisis.
“Most Cypriot banks have not yet managed to overcome their financial problems, and most of them are still reporting losses,” one banker told The Daily Star.
“Lebanese banks can issue letters of credit on behalf of Cypriot traders because Cypriot banks do not have the means or credibility to do such things.”
Local bankers seem more confident about the future of Cyprus despite the fact the financial crisis prompted many depositors to withdraw their deposits from the Lebanese banks operating there.
“Many Cypriots have withdrawn their money from the local banks following the financial crisis. Now these Cypriots want to use this cash which they stashed away and place it in banks that they can trust, and the Lebanese banks are one of them,” another banker said.
He said Cypriot merchants and traders would also seek letters of credit from Lebanese banks to finance trade operations with the European Union.
In March 2013, over $1.2 billion in deposits held by Lebanese banks in Cyprus were repatriated or transferred to other countries after the island’s Central Bank allowed foreigners to withdraw their money.
Bankers at that time told The Daily Star that at least 60 percent of the deposits held by Lebanese citizens in Cyprus had been withdrawn, predicting that Lebanese banks operating on the cash-strapped island would either close down or reduce the size of their operations.
But Lebanese banks did not entirely withdraw from the Cypriot market despite the withdrawal of deposits. Unlike most Cypriot banks, Lebanese lenders in the island enjoyed high capital-adequacy ratios and sufficient provisions for nonperforming loans, according to bankers.
“All of the seven banks that established a foothold in Cyprus decades ago decided to stay in the island, even if some of them reduced their presence to representative offices,” the banker said.
One of the participants in the conference declined to elaborate on the visit but assured The Daily Star that the prospects of doing business in Cyprus were great.
“We are looking at expanding the opportunities in Cyprus and that’s why the Lebanese banks are taking part in this conference tomorrow,” the banker explained.
Joe Sarrouh, the adviser to the chairman of Fransabank, stressed that Lebanese banks had great experience in trade financing and other business transactions, in addition to their familiarity with the island due to a long presence there and its large Lebanese community.
“Historically, Lebanese-Cypriot ties go back to a long time ago. We shouldn’t forget that Cyprus provided shelter and support to the Lebanese who fled the country during the Civil War,” Sarrouh said.
He said Lebanese banks had strengths that could be used to help the Cypriot merchants and economy.
“We should also remember that Lebanese banks are very liquid and have an abundance of credit and an abundance of resources,” he said.
But Sarrouh insisted that Lebanese deposits would not return to the island until banks saw real improvement in the economy and financial sectors.
Sarrouh and other bankers are also betting that when the unification of Cyprus takes place, Lebanese banks will benefit.
“Lebanese banks can also play a big role in financing certain projects once the island’s oil and gas exploration kicks off. The future of Cyprus is promising in the medium and long term, and that’s why we are cementing our presence,” another banker said.