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Bank of Cyprus Receives Notable Ratings Upgrade By Fitch

In a remarkable financial development, Fitch Ratings has elevated the ratings of the Bank of Cyprus Public Company Limited (BoC) from ‘BB+’ to ‘BBB-‘, indicating a strong positive outlook. This upgrade underscores the bank’s enhanced asset quality and robust capitalization.

The rating improvement is largely attributed to the bank’s strategic reduction in problematic legacy assets, such as non-performing exposures (NPEs) and net foreclosed properties. This has enabled a healthier capital structure with reduced encumbrance by unresolved problem assets.

Fitch notes that despite lowering interest rates, BoC’s profitability remains solid thanks to its competence as the largest domestic bank in Cyprus. With consistent deleveraging, it is poised for ongoing financial stability.

Prospective Economic Growth For Cypriot Banks

The favorable outlook anticipates better business and financial prospects amidst Cyprus’s economic growth, with decreasing unemployment and lower private sector debt. BoC’s plans to expand into wealth management and insurance activities stand to gain from these economic trends.

Expectations are that the ratio of BoC’s problem assets will drop below 5% within two years, thanks to diminishing NPE portfolios and active disposals of foreclosed assets. Last year, the bank’s operating profit/risk-weighted assets (RWA) ratio was a robust 5.4%, indicating a sustainable path forward.

Financial Strength And Stability

By the end of 2024, BoC boasted a common equity Tier 1 (CET1) ratio of 19.2%, with a notable buffer over regulatory demands. The bank’s CET1 encumbrance by problem assets fell significantly owing to further disposals.

Supported by a strong Cypriot deposit base, BoC maintains excellent liquidity. Looking ahead, while a downgrade is improbable, Fitch warns that any economic downturn in Cyprus could impact ratings. However, further elevation of the operating environment for Cypriot banks could enhance BoC’s business profile.

If you’re curious about technological advancements in Cyprus, read AI At Work: Cyprus Among Europe’s Most AI-Skeptical Nations.

How Venture Capital Can Help Create Startup Fraud

Fraud Is Often A System Problem, Not Just A Founder Problem

A new report from Imperial College London and Emlyon Business School examines how venture capital-backed founders commit fraud and how investors can unintentionally create the conditions for it.

Published in June, the study draws on cases pursued by the U.S. Securities and Exchange Commission and the Department of Justice between 2000 and 2023. Its central conclusion is that fraud is not solely a founder problem, but can also stem from the incentives, expectations and governance structures surrounding startups.

High Expectations, Higher Risks

Several high-profile cases, including Charlie Javice of Frank, Gökçe Güven of Kalder, Do Kwon of Terraform Labs, and Alexander and Valerie Lau Beckman of GameOn, have intensified debate over where ambitious fundraising ends and fraud begins.

“Fraud is much more common and normalized in the startup world than we are ready to admit and accept,” Tim Weiss, one of the report’s authors, told TechCrunch.

Weiss also cited a University of Toronto study covering 654 fraud cases involving U.S. venture-backed startups between 2000 and 2023. Although fraud remained relatively rare, venture-backed companies were more likely to face fraud charges than non-VC-backed firms, while startups launched during overheated investment markets were 19% more likely to commit fraud later.

According to Weiss, pressure from investors and boards to deliver rapid growth can encourage misconduct, particularly in fast-moving sectors such as artificial intelligence.

The Three Stages Of “Façading”

The report, co-authored by Weiss and Nevena Radoynovska, identifies a three-stage process the authors call “façading.”

Surface façading begins with exaggerated claims about a company’s progress or traction. Reinforced façading involves creating evidence to support those claims, including fabricated contracts, invoices or revenue records. Deep façading extends the deception to the product itself through fake demonstrations and staged proof points.

Rather than beginning with a single act of fraud, the report argues that misconduct often develops gradually as founders attempt to sustain increasingly unrealistic expectations.

Investors Also Shape The Conditions For Fraud

One of the report’s central arguments is that investors are not always passive victims of founder misconduct. In some cases, they help create the conditions in which fraud becomes more likely.

According to the researchers, venture capital can “co-create fraud” by continuing to back founders who have previously been accused of misconduct, signaling that such behavior carries few long-term consequences. A separate University of Toronto study found little evidence that founders accused of fraud struggle to raise funding for new ventures, even when earlier cases attracted significant media attention.

“New investors and the broader VC market do not penalize past misconduct,” the report said, linking that pattern to Silicon Valley’s long-standing tolerance for failure.

Governance Plays A Critical Role

The University of Toronto study also identified governance as a key factor. Startups with founder-controlled boards were twice as likely to commit fraud as companies with investor-controlled or shared-control boards.

It also found that venture-backed companies going public were more likely to face securities class-action lawsuits within two years than private equity-backed firms. As startups remain private for longer while raising larger funding rounds, Weiss argues that governance has not kept pace with their growing scale.

“Founders do not have a professional body or association that could govern or enforce rules of entrepreneurial and investor conduct on how to be a good founder and what reasonable growth expectations are,” he said.

Calls For Stronger Oversight

Weiss argues that regulators should take a more proactive approach by introducing routine investigations and formal audits once startups reach significant funding thresholds, rather than waiting for whistleblower complaints or investor lawsuits.

The report also calls on investors to accept greater responsibility when aggressive growth targets contribute to governance failures. According to the authors, stronger oversight by both regulators and investors would help reduce the conditions in which fraud can develop.

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