Constantinos Herodotou: A resilient banking sector in an everchanging economic environment Speech by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, at the Deloitte Annual Conference, Nicosia, 28 September 2022. ***  Introduction Distinguished co-speakers and guests, ladies and gentlemen. Thank you for inviting me to this conference. It is a pleasure to have this opportunity to speak to you today. I will start with a brief overview of recent euro area and Cyprus economic developments and the monetary policy decisions taken in response to the new challenges of persistently high inflation and elevated economic uncertainty. I will continue with the developments in the Cyprus banking sector which needs to address a number of challenges in this fast evolving economic environment. Euro area Euro area economic developments In the euro area in general, GDP is growing at a slower pace this year than previously expected due to the negative geopolitical developments, mainly caused by the war in Ukraine. Growth is hampered by soaring energy and commodity costs, low confidence and supply chain disruptions. At the same time, inflation is approaching double digits, and a winter with possible energy shortages and high energy prices is on the horizon. Nevertheless, a recovering tourism industry, decreasing unemployment, and EU funding payments help to boost activity and limit, to some extent, output loss. More specifically, the Euro area quarterly economic growth reached 0.8 percent in the second quarter, following a 0.7 percent rise in the first quarter.
To this point, the recently introduced alternative procedure for the simplification of the auditing of the financial statements of very small businesses should support these efforts and facilitate the timely transmission of the financial statements to the credit institutions. It is of utmost importance that a timely flow of up-to-date customers' financials is maintained by banks at all times. Unquestionably, this will be beneficial for both parties, banks and clients, as any events signalling a deterioration of the client's financial standing will be captured early on. Consequently the most suitable restructuring solution may be sought, which could ensure the continuation of a healthy and economically viable business relationship. Conclusion To sum up, the world's economies have been through a lot in recent years, from the challenge of the pandemic, to the impact of the war in Ukraine. It is up to us to come through these challenges unscathed or even stronger, wiser and better prepared for a brighter future. We have done it before, we can do it again. After all, to quote Gever Tulley (an American writer, speaker, educator, and entrepreneur) - persistence and resilience only come from having been given the chance to work through difficult problems. Thank you for your attention. 4/4  BIS - Central bankers' speeches