Cyprus Table of Contents
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 Cú44.5 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