BEIRUT: Lebanon and Cyprus will form a joint banking committee to strengthen financial ties between the two countries, according to a statement released Sunday by Lebanon’s Central Bank. A high-profile Lebanese banking delegation visited Cyprus Friday in a bid to expand the operations of its financial institutions on the island as the latter seeks to support its trade.
The discussions focused on “establishing a framework for cooperation between the Lebanese and Cypriot banking sector and international banks operating in Cyprus in a bid to support the Cypriot economy,” the statement said.
Cyprus had a liquidity crunch after an international bailout in March 2013 shut down a major bank and imposed losses on large depositors in a second lender there. The heavy losses imposed on depositors were followed by domestic capital controls restricting withdrawals and money transfer abroad to prevent a run on the banks.
“The Cypriot central bank will inform its Lebanese counterpart of developments relating to the road map to lift restrictions of transfers among other restrictions imposed on the banking sector,” the statement said of the agreement reached between banking authorities.
Lebanese banks make up the largest national grouping on the eastern Mediterranean island, with nine lenders operating branches in Cyprus and two Cypriot banks owned by Lebanese banks.
Central Bank Governor Riad Salameh headed the Lebanese delegation to Cyprus, accompanied by the heads of the Association of Banks in Lebanon and the Banking Control Commission.
The second clause of the agreement detailed “the establishment of a follow-up committee representing the Association of Banks in Lebanon, the Association of Cypriot Banks and the Association of International Banks operating in Cyprus” to build on the ongoing cooperation between the concerned parties.
Local bankers told The Daily Star earlier that they expected Cypriot merchants and traders to seek letters of credit from Lebanese banks in order to finance trade operations with the European Union.