Ladies and gentlemen,
It is with great pleasure that I am here with you today, to talk at this conference about the financial services sector in Cyprus, its capabilities and prospects. The sector is indeed a strategic one for the Cyprus economy. I would like to thank the organisers of the conference, the European Institute of Management and Finance, K. Treppides & Co and MAP S. Platis for organizing this event.
Indeed the financial services sector, has proved resilient in the past challenging years and has an important contribution to growth and employment. We believe this contribution to the economy will continue and most likely increase, provided the business model of the sector is built on sound foundations, with a medium and long term vision in mind. We are observing a plethora of European Directives and Regulations, coming into force after the financial crisis, that considerably increase the administrative burden on the industry, presenting it with new challenges. At the same time, these new requirements limit the risks to consumers and standardise financial products with a strong policy direction towards financial stability, consumer protection and transparency. We are of the view that though challenging, this added product standardisation and consumer protection, provides credibility and prospects for the industry. Such an example is that of the funds industry and the financial services industry in general.
Subsequent to the aftermath of the financial crisis, the Alternative Investment Fund Managers Directive was introduced in 2011 which set a framework on the work of the fund managers of alternative investment funds of systemic importance. Though challenging at first to introduce and develop such a framework for Cyprus, this work together with the legislation on UCITS provided a good starting point for the development of a funds industry. This was completed with the introduction of the Alternative Investment Funds Law in 2014, currently been amended. Important elements of the current reform is the introduction of successful practices and products, such as the introduction of registered funds, limited partnership with legal personality vehicles, licensed and regulated fund managers below the thresholds (mini-managers) etc. Within the same general framework of timely harmonisation with the acquis, but also of giving the necessary tools to the industry to work with, the amendment to the Markets in Financial Instruments Directive also known as MiFID II is taking effect with the timely introduction of a bill that is currently been discussed in Parliament for enactment. This new legislation will invariably create new challenges for the industry but it will also create opportunities, as it has the potential to offer appropriate products to a broader base of investors through enhanced transparency, credibility and investor protection.
This protection has to be real and be implemented with due care. That is why the Ministry of Finance has strongly supported over time the Regulator, the Cyprus Securities and Exchange Commission, in building up capacity and expertise, so that it can effectively monitor the market. We see the presence of a strong regulator as a prerequisite for a sustainable development of the market. Without a strong regulator which effectively performs its duties, investor confidence and trust quickly dissipates.
Consultancy firms for the industry such as K. Treppides & Co and MAP S. Platis have a critical role to play, not only in attracting investors but also in setting a high standard of practice in the industry, which influences the whole environment. The work of the regulator becomes much easier when the practitioners set a high standard of the industry on their own. Educators such as the European Institute of Management and Finance also have an important role to play, in educating practitioners and helping them achieve professional qualifications and high standards for the benefit of themselves and the consumers.
Ladies and Gentlemen,
We believe, that Cyprus has every potential to retain and enhance its standing in the financial services industry in the European Union. The specialisation of the legal framework but also of the industry is of primary importance. But, there other factors present in Cyprus conducive to this course. The high level of auxiliary services such as accounting and legal services and the comparatively lower costs and good standard of living have been attracting professionals, who see Cyprus as an excellent location to set up business in this field.
Thus, the financial services industry cannot develop and operate in a void. It has to be supported by the general environment and framework of the country. This is indeed present in the case of Cyprus. Our exit from the support programme was coupled with a strong recovery for the economy. In 2016 we have achieved one of the highest growth rates in the EU approaching three per cent and we see this trend maintained in 2017, not through excessive deficit spending, but through the strong performance of the key productive sectors of the economy, namely tourism, shipping and business services. Challenges still remain but efforts on the reform agenda remain strong for the advancement of the country, its citizens and the business environment. To draw a general picture, a reform of the public sector is underway. Most recently the privatisation of the Port of Limassol via a concession agreement has been completed. Efforts are maintained for the reform of the local administration, the health system and for the establishment of a Sovereign Wealth Fund which will manage future Natural Gas revenues on the basis of international best practice. We are also working towards the reformation of the occupational and private pension retirement funds framework, with a view to bring it to a best practice standard in the near future. Additional reforms are envisaged regarding the judicial system in Cyprus, which are expected to facilitate the business environment.
Unlocking the country’s investment potential and improving the business environment is indeed vital and for its achievement an Action Plan for Growth set by the Council of Ministers which includes around 70 targeted actions with specific timeframes for enhancing the competitiveness of our economy. One of these actions is the creation of a Department for Growth and Competitiveness, headed by a Deputy Minister.
Ladies and gentlemen
We see that the pieces are put into place to make Cyprus a leading jurisdiction for the provision of financial services in the EU. For this to be achieved government and private sector efforts have to be maintained and enhanced, with the development of quality products and services, having a medium and longer term perspective. This has to be coupled with compliance to the rules of the conduct of business with strong but fair enforcement by the supervisor.
Thank you very much for your attention.