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Cyprus Finance, Insurance, Real Estate, and Business Services
Economic activity by this subsector expanded
substantially
after 1976. Some of the forces contributing to this
expansion were
the housing boom, which stemmed from the need to
accommodate
refugees from the Turkish-occupied north; the offshore
business and
banking activities, which began in the late 1970s; and
other
business services, such as accounting, computer
programming, and
consultancy services. Many of these services proved to be
a dynamic
component of the economy. This subsector was not a large
employer,
but many of those it employed were among the best trained
in the
country.
Banking services in Cyprus were relatively well
developed. In
1989 Cyprus had a central bank, eight commercial banks,
nineteen
offshore banks, and four specialized financial
institutions. About
320 branches of the commercial banks were located
throughout the
republic.
The Central Bank of Cyprus had the exclusive right to
issue
notes and coins, regulate the supply of money and credit,
and act
as banker, financial agent, and economic adviser to the
government.
It supervised all banks and designated financial
institutions,
managed the international reserves of the country,
administered the
exchange control legislation, and determined the exchange
rate of
the Cyprus pound.
Commercial banks were the main source of funds for
working
capital and capital investment. They provided about 80
percent of
the loan funds flowing into the private sector, and also
provided
housing, professional, and personal loans. In addition to
providing
these conventional banking services, the banks had entered
the
fields of installment-plan financing, general insurance,
data
processing, and trustee services. Commercial banks had
strong
networks of correspondent relationships with many foreign
banks,
and some Cypriot banks were connected to the Society of
Worldwide
Interbank Financial Telecommunications (SWIFT), an
international
system of telecommunications for the computerized
transmission of
commercial and financial messages among 1,500 banks
worldwide.
Offshore banks had become an important subsector since
the
first offshore banking license was granted in 1982. The
guidelines
governing the establishment and operation of these units
were
clearly laid out by the Central Bank of Cyprus. Offshore
banks
could transact business abroad only with nonresidents of
Cyprus.
In addition to offshore banks, offshore businesses as a
whole
were a dynamic element in Cyprus's growth. Between 1975
and the end
of the 1980s, more than 5,000 permits were issued by the
Central
Bank of Cyprus for the establishment of these enterprises.
The
island's central geographic location, English legal
system, low
cost of living, and generous tax incentives made it a
major center
for offshore businesses. Many kinds of activities were
conducted,
including marketing of consumer goods, transit and storage
trade,
holding of property and securities, business consulting
and
services, distribution and repair of equipment,
architecture and
town planning, road and airport construction, maintenance
of
computer hardware, ship management, and insurance.
Foreign exchange earnings from offshore enterprises
were C£44.5
million in 1988. In that year, 555 new permits were
issued. At the
end of the 1980s, about 700 offshore enterprises
maintained fully
staffed administrative offices in the Republic of Cyprus,
employing
about 3,000 persons, 1,800 of them foreigners.
More than fifty insurance companies operated in Cyprus.
Many
were incorporated abroad and represented well-known
multinational
insurance companies. The industry was regulated by the
government
to safeguard the interests of the insured and to prevent
the
uncontrolled flow of capital from the island.
Data as of January 1991
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