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Cyprus Considers Extending Basic Payment Account Rules To Small Businesses

Legislative Proposals Set For Review

Cypriot lawmakers are preparing to examine proposals that would extend the framework of basic payment accounts to very small businesses. The initiative is expected to be brought before the parliamentary plenary in the coming period. However, the proposals have drawn strong opposition from several institutions, including the finance ministry, the Central Bank of Cyprus (CBC) and commercial banks. The discussion in the House Commerce Committee follows nearly three years of review and consultations.

In-Depth Overview Of The Proposals

The first legislative proposal seeks to redefine the term “consumer” so that very small businesses would fall within the scope of basic payment account regulations. It also aims to improve transparency and comparability of bank charges linked to these accounts.

The second proposal would prevent banks from rejecting an application for a basic payment account simply because the applicant already holds an account with another credit institution. Supporters argue that this change would ensure broader and more equal access to essential banking services.

Historical Context And Regulatory Debates

During the committee session, MP Costas explained that the proposal to expand the definition of “consumer” dates back to amendments discussed in 2020 following the adoption of a relevant European directive. At the time, the proposal was postponed due to concerns that Cyprus could face legal complications at the European level if the directive was not fully transposed into national law. According to Costas and fellow MPs Giannakis Gavriel and Andreas Pasiourtidis, the issue has not been incorporated into a government bill.

Mixed Reactions From Key Stakeholders

Several public authorities have raised concerns about the proposed changes. Avgi Chrysostomou-Lapathiotis, representing the finance ministry, argued that the new provisions could impose additional obligations on banks that are already regulated under EU harmonisation legislation. The consumer protection service also noted that a broader legislative review of the framework remains pending.

A representative of the Central Bank of Cyprus, Artemis Nicolaou, questioned whether the changes are necessary. According to the CBC, the current volume of complaints does not justify expanding supervisory responsibilities without prior consultation with the European Central Bank.

Industry Concerns Over Business Risk Management

The banking sector has also expressed reservations about the proposals. Michalis Kronides, Senior Director of the Cyprus Banks Association, warned that the changes could limit banks’ ability to assess and manage client risk. He argued that financial institutions could be required to serve higher-risk businesses, including companies operating in sectors such as cryptocurrency.

Under the current framework, basic payment accounts are intended to cover routine banking services such as deposits, withdrawals, direct debits, card payments, online transactions and credit transfers. The proposed reforms, therefore, raise broader questions about how to balance financial access with risk management in the banking system.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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