A Financial Hub's Future: Can Cyprus Retain Its Banking Sector?

By Puri, Indira | Harvard International Review, Fall 2013 | Go to article overview

A Financial Hub's Future: Can Cyprus Retain Its Banking Sector?


Puri, Indira, Harvard International Review


Will the recent Cypriot crisis change the structure of the Cypriot economy? The country's economic strength has, in recent years, stemmed from its banking sector, with bank deposits amounting for over seven times the country's GDP in 2010. In the aftermath of the crisis, however, Cyprus has both imposed a bank levy and increased various taxes to pay back its debt, both moves that could potentially hurt Cyrpus' standing as a financial powerhouse. On the one hand, the bank levy imposed by the Cyprian government on deposits above 100,000 euros and the increase in tax rates may drive depositors to other countries. On the other hand, the Cypriot government claims that the bank levy is a one-time action and will not be repeated; Cyprus' tax rates, even after this increase, will remain one of the lowest in the Euro zone; and other countries are dealing with their own problems, so Cyprus, if not as wonderful a place to deposit funds as it was before the crisis, may remain the best place to deposit funds relative to other options. Assessing whether depositors are likely to flee the country in the long term means assessing whether the bank levy is likely to be a one-time occurrence and determining Cyprus' appeal as a tax haven relative to other potential tax havens. Unfortunately for Cyprus, it seems that the bank levy, even if one time, if likely to drive depositors away from the country, and that the relative appeal of Cyprus as a financial center is likely to diminish following policies implemented during the crisis. In the long term, then, Cyprus is unlikely to have as large a banking sector as it did before the onset of the Cyprian crisis.

Cyprus is the currently the only country in the Euro zone to levy tax on bank deposits, which means depositors can turn to any other country in that region to preserve their funds it depositors believe that Cyprus is likely to impose another bank levy. While the Cyprian government has stated that the levy is a one-time policy, and will not be repeated, foreign depositors have reason to doubt this assurance primarily because Cyprus has offered no reason why this levy is an extraordinary, exceptional policy whose repetition is unlikely. Rather, the country has merely stated that it is in need of funds, and that, because it is in need of funds, it is imposing a bank levy as a means of raising money. If Cyprus' only justification for the use of a bank levy is a dearth of funds, a dearth of funds may well occur in the future, and this same justification could be used to impose yet another levy.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

A Financial Hub's Future: Can Cyprus Retain Its Banking Sector?
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.