The rise and rule of zombie banking in Cyprus

Abstract

The Government has facilitated and protected the banks on a stand and motto that “without banks there is no economy”. However, eight years after the financial crisis that culminated to the infamous Bail-In in Cyprus the country remains heavily indebted with private debt exceeding by at least three times the GDP. In such conditions banks, rather than supporting the real economy in unfavourable conditions, engage in a predatory role by which to extract as much as possible from the collateral and guarantees they hold their balance sheet. The Government is at the very least myopic in its approach to trust the banks to bring about economic recovery. In the author's opinion this policy is sinking the economy into a long and deep balance sheet recession.