GOLD Magazine by Kevi Chishios

ISSUE 27 JUNE 14 - JULY 13, 2013 PRICE €4.95

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THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Accounting, Audit & Tax Advisory FIRMS IN CYPRUS

+ CHRISTODOULOS ANGASTINIOTIS, NIKOLAOS GEORGIKOPOULOS, PERSELLA IOANNIDES

SHIPPING

SPECIAL SERVICES SUPPLEMENT

INTERVIEWS

LUIS CAMPOS E CUNHA THEO PARPERIS PETR ZEMCIK

BANKING

PLUS:

HELLENIC BANK MAKIS KERAVNOS: THE PRUDENT BANKER

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MONEY / BUSINESS ECONOMY TAX & LEGAL LIFESTYLE / OPINION

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Published by IMH ISSN 1986 - 3543

Managing Director:

George Michail General Manager:

Daphne Roditou Tang

Media Manager: Elena Leontiou Editor-In-Chief:

John Vickers senior Editor:

Kyproula Papachristodoulou Contributors to this issue:

Peter Economides, Evgenios Evgeniou, Gunnar Hokmark, Thomas Kazakos, Chloe Panayides Art DirectION:

Anna Theodosiou Senior designer:

Alexia Petrou Photography:

Jo Michaelides and Philippos Christou Marketing Executive:

Kevi Chishios SALES & BUSINESS DEVELOPMENT EXECUTIVE:

Phivos Karayiannis Advertising Executives:

Irene Georgiou, Christopher Constantinou Operations Manager:

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up front

Churchill tops “most admired” list

s part of its 16th Annual Global CEO Survey, PwC recently asked 1,400 CEOs from around the world which leaders they most admired, and what they most admired about their actions. Winston Churchill was the most popular choice of all CEOs with Steve Jobs (an innovator) admired in the most number of countries (37). Churchill has wide appeal and

leaders, in that order. Smaller categories include writers, artists, philosophers, sports people, religious leaders and fictional characters. 1% chose a colleague. Fifteen women were named, of whom Margaret Thatcher was the only one to make the top ten. The next most-named women were Angela Merkel, Ayn Rand, Mother Teresa and Queen Elizabeth I. Women were four times more likely to choose a female leader than men.

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popularity across Western Europe, coming top in France ahead of Charles de Gaulle and beating Niccolo Machiavelli to the top spot in Italy. Twice-serving as British prime minister (1940-45 and 195155) he even tied with Gandhi in Turkey, behind Mustafa Kemal Ataturk. Some 60% of CEOs chose a post-war politician or military leader. The other most popular categories were business leaders, historical leaders and contemporary

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igital Ship Cyprus, an international conference that deals with information and communication technologies related to ships and shipping companies, took place in Limassol in April, attracting distinguished speakers and maritime information technology managers from around the world. The Conference dealt with the latest technologies for maritime satellite communications, software and electronics and how they can assist ship operators to communicate effectively and efficiently with their fleets and meet the challenges in a market which is becoming more and more competitive. The Conference, which has further enhanced the image of Cyprus as an important international shipping centre, was organised and managed by the Cyprus Shipping Chamber.

8 Gold the international investment, finance & professional services magazine of cyprus

asyJet founder Sir Stelios Haji-Ioannou has taken action to help alleviate the hardship arising from the current economic crisis in Cyprus. His Food from the heart (FFTH) programme gives a helping hand to people in need – the poor, the hungry and the elderly as well as the disabled, the unemployed and those struggling on reduced incomes. The programme is operated on a strictly non-discriminatory basis and the only obligation of beneficiaries is to give their name and date of birth as well as a telephone number or e-mail address (to eliminate fraud and ensure efficient stock ordering). Since its launch on May 8 at the Stelios Philanthropic Foundation’s Limassol headquarters, FFTH has been offering a free halloumi cheese and tomato/cucumber sandwich to those registered with the FFTH (already several hundred people) between 12 noon and 2.00pm Monday to Friday. By registering with the Stelios Foundation, claimants receive a swipe card, which can then be presented for one snack per day. FFTH aims to complement existing charitable programmes run by the voluntary sector and churches. Sir Stelios Haji-Ioannou, who has pledged a 12-month commitment to the pilot programme, explained the rationale behind FFTH: “After the confiscation of bank deposits and the other measures taken two months ago, I realized that there must be more help for those facing the daily challenge of putting food on the table. With the Food from the heart programme, I wanted to lend a helping hand in a positive and efficient way. Anyone can come to our office in Limassol and register to receive a snack – Monday through Friday, no questions asked.” Sir Stelios wants to roll out the programme to other communities on the island with the help of volunteer franchisees in return for compensation from the Foundation to reward the time and effort involved. “Now is a good time for Cypriots to do their best to help each other,” he concluded. The FFTH is based at the Stelios Philanthropic Foundation at 8, Argyrou Drousioti St. 3041 Limassol. Tel: 25365118.

www.pwc.com.cy

Focus on tomorrow, starting today

We listen. We learn what you want to do and we help you create the value you are looking for. Value that is based on the knowledge that our almost 1.000 local professionals draw from 180.000 experts in 158 countries. We focus on the provision of Assurance, Advisory, Tax and Global Compliance Services.

UP FRONT

NICOSIA ECONOMIC CONGRESS The 3rd Nicosia Economic Congress organised by IMH took place last month at the Hilton Park Hotel in Nicosia.

Theodoros Parperis of PwC and George Appios of Piraeus Bank (Cyprus) Ltd.

Alpha Bank Team

Delegates to the Conference George Georgiou of Alpha Bank and Nicos Kyriakides of Deloitte

Pantelis Karonias and Odysseas Christodoulou of Global Training

Christos Papamarkides of Deloitte and Neophytos Neophytou of Ernst & Young Cyprus Ltd. Elias Gregoriou and Artemis Antoniadou of Voici La Mode

Thomas Kazakos of Cyprus Shipping Chamber and Nicos Nicolaou of Cyta

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Guillermo Nielsen, Former Secretary of Finance Argentina, President of Strategic Investments, Argentina and Luis Campos E Cunha, Former Minister of Finance, Professor of Economics at Universidade Nova de Lisbo, Portugal

UP FRONT

1ST ANNUAL GENERAL MEETING OF THE CYPRUS FIDUCIARY ASSOCIATION

The Marshall Islands The Marshall Islands TheCorporate Marshall Islands Registry Registry The Marshall Islands TheCorporate Marshall Islands Corporate Registry Corporate Corporate Registry Registry

The Cyprus Fiduciary Association held its 1st Annual General Meeting last month at the Mediterranean Beach Hotel in Limassol.

The Board of Directors of the Cyprus Fiduciary Association

Harris Georgiades – Minister of Finance

George Savvides – President of the Cyprus Fiduciary Association

Eva Ioannou – Head of the Legal Department of the Cyprus Securities & Exchange Commission

Constantinos Economides – Treasurer of the Cyprus Fiduciary Association

AS EXPOBANK OFFICIAL OPENING The Cyprus Branch of AS EXPOBANK, one of the oldest banks in the Republic of Latvia, was ofﬁcially inaugurated on June 4 in Limassol. It will act as a regional business centre, reaching out to Central and Eastern Europe and the Mediterranean. The bank implements a tailor-made approach to customer needs while e-banking has been developed as a convenient and safe tool for remote banking services. AS EXPOBANK is located at Interlink Hermes Plaza, 46, Agiou Athanasiou St., Limassol (25870740)

©Corbis

George Ioulianos – General Manager of the Cyprus Fiduciary Association

The The leading leading jurisdiction jurisdiction for for The leading jurisdiction for leading jurisdiction •The Management, The leading jurisdiction for for • Asset Asset Management, • Asset Management, Asset ••• Vessel Ownership Asset Management, VesselManagement, Ownership • Vessel Ownership Vessel Ownership ••• Real/Intellectual Vessel Ownership Real/Intellectual • Property Real/Intellectual Holdings Holdings •• Property Real/Intellectual Real/Intellectual Property Holdings Property Holdings •• Initial Public Offerings/ Property Holdings Initial Public Offerings/ • Publicly Initial Public Offerings/ Traded Companies Publicly Traded Companies •• Initial Public Offerings/ Initial Public Offerings/ Publicly Traded Companies Publicly Publicly Traded Traded Companies Companies

IRI Hellas Ltd. IRI Hellas Ltd. IRI Hellas Ltd. inin affiliation with the Marshall IRI Hellas affiliation with theLtd. Marshall Islands Islands IRI Hellas Ltd. in affiliation with the Marshall Islands Maritime & Corporate Administrators Maritime & with Corporate Administrators in affiliation the Marshall Islands

Maritime & Corporate Administrators affiliation the Marshall Islands tel: 4294 404 piraeus@register-iri.com tel: +30 +30 210 210in 4294 404&||with piraeus@register-iri.com Maritime Corporate Administrators tel: +30 210 4294 404 | piraeus@register-iri.com Maritime & Corporate Administrators www.register-iri.com www.register-iri.com tel: tel: +30 +30 210 210 4294 4294 404 404 | | piraeus@register-iri.com piraeus@register-iri.com www.register-iri.com www.register-iri.com www.register-iri.com

UP FRONT

THE WORLD’S MOST

POWERFUL WOMEN

Last month Forbes published its annual list of The World’s Most Powerful Women, made up of leaders in seven categories: billionaires, business, lifestyle (including entertainment and fashion), media, non-profits and NGOs, politics and technology This year’s list of 100 names features nine heads of state who run nations with a combined GDP of $11.8 trillion and 24 corporate CEOs who control $893 billion in annual revenues, not to mention 14 billionaires valued in excess of $82 billion. The following are the Top 10.

ANGELA MERKEL (58, MARRIED) Chancellor, Germany

She has served as Germany’s chancellor since 2005 but her biggest challenge may still lie ahead: she is running for a third term in September’s general elections. Her hard-line austerity prescription for easing the European debt crisis has been challenged by both hard-hit southern countries and the more affluent north, most particularly French President Francois Hollande. She has topped the Forbes list seven times in the past 10 years.

DILMA ROUSSEFF (65, DIVORCED)

MICHELLE OBAMA (49, MARRIED)

President, Brazil

First Lady, USA The Harvard graduate and former corporate attorney actively uses her platform as First Lady to fight childhood obesity and promote healthier eating and lifestyles. With 67% of Americans viewing Michelle Obama in a positive light, she’s more popular than her husband by far (47%), quite likely because she spends more time on TV than running the country. This year she announced the Best Picture for the Academy Awards.

Now at the midpoint of her first term, the former revolutionary is in charge of the world’s seventh-largest national economy (GDP $2.4 trillion). Despite Brazil’s size, Rousseff is tasked with pulling the country out of its slowest two years of growth in more than a decade. Her emphasis on entrepreneurship has inspired a new generation of start-ups but many criticize the leader for favouring pro-development policy over more humanitarian concerns.

MELINDA GATES (48, MARRIED)

HILLARY CLINTON (65, MARRIED) Personality, Philanthropist

Co-chair, Bill & Melinda Gates Foundation

The primary goals of the Bill and Melinda Gates Foundation this year are to eradicate polio worldwide by 2018 and get modern contraceptives to another 120 million women by 2020; the Foundation has committed $140 million annually to this cause. The Gates Foundation gave away $3.4 billion last year, the vast majority to global health programmes, and has made more than $26 billion in grant commitments since its establishment in 2000.

The former First Lady, US senator and Secretary of State is now a private citizen but she remains one of the most powerful women thanks to a strong belief in many quarters that she will be the 2016 Democratic presidential candidate and the next leader of the free world. 65% of Democrats say they’ll vote for her, while another poll has her beating the two Republican forerunners by 52%.

SHERYL SANDBERG (43, MARRIED)

CHRISTINE LAGARDE (57, SINGLE)

COO, Facebook

Managing Director, International Monetary Fund

One year after Facebook’s initial public offering, the company’s stock is still down roughly 30% but in 2012, after adding ads to its mobile news feed, Facebook earned more US mobile revenue than any other publisher, with an 18.4% share of the market. Sandberg’s book, Lean In: Women, Work and the Will to Lead sold nearly 150,000 copies in its first week and has topped the non-fiction bestseller lists since March.

French-born Lagarde was an attorney in the US before her six-year stint as French finance minister. The first woman to run the 188-country financial organisation has spent much of her first two years battling the debt crisis in Europe, facing resistance from Angela Merkel over her push for debt-sharing among the EU nations and an increase in bailout funds. There is speculation that she may run for the French presidency one day.

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JANET NAPOLITANO (55, SINGLE) Secretary, Department of Homeland Security, United States She took on the position as the first female head of Homeland Security after serving as the third female governor of Arizona from 2003 to 2009. She now heads the third largest department in US politics, overseeing a budget of $48 billion, a staff of 240,000 and 22 agencies, including the Secret Service. Napolitano describes her leadership style as “keeping your eye on long-term vision while dealing with the crisis du jour.”

SONIA GANDHI (66, WIDOW) President, Indian National Congress, India

As the longest-serving chief of India’s ruling political party, Gandhi holds the reins of the world’s second-most populous country and tenth-largest economy. Rumours persist over a rift between her and Prime Minister Manmohan Singh, with many expecting Singh to leave office before the 2014 general elections. In May it was announced that women commandos of the elite Special Protection Group may soon be guarding Gandhi, her daughter and the Prime Minister’s wife.

INDRA NOOYI (57, MARRIED) EO, PepsiCo

Nooyi has been busy pushing changes through PepsiCo this year. For starters, she boosted quarterly results – revenue jumped 1.2% to $13 billion – with higher prices and sales of the company’s snacks like Doritos and Cheetos. On her initiative, PepsiCo is researching a new sweetener that could result in trading places with rival Coca-Cola. Her total compensation fell by 17% after the company phased out option awards for top executives for long-term performance.

interview

five minutes with...

Yousif Saeed

Sales Director, Gulf Air

any people know Gulf Air as the official sponsor of the Formula One Gulf Air Bahrain Grand Prix. What else should we know about the airline? Gulf Air was founded in 1950 and is the national carrier of the Kingdom of Bahrain. As a pioneering airline in the Middle East region with over sixty years of experience and expertise in flying people across continents, Gulf Air is one of the most powerful brands and a name to be reckoned with in today’s global aviation industry. One of the prime objectives of Gulf Air is to connect Bahrain to the Middle East countries and the rest of the world. To this end, the airline currently operates the largest network of non-stop flights in the Middle East, while providing seamless onward connections to other international destinations. The airline’s current network stretches from Europe to Asia, connecting 38 cities in 30 countries, with a fleet of 40 aircraft. How important is the Larnaca-Bahrain route to Gulf Air? Cyprus is a significant market for Gulf Air which introduced flights to and from the island in 1976. It is evident that the Cypriot and the Bahrain markets interact very

well. Larnaca is seen as a point which connects the Cypriot market and the hub of Bahrain to the broader network being operated by Gulf Air. Cypriots are not strangers to Bahrain and they have contributed to the kingdom’s economy in various ways. They are very familiar with Bahrain’s culture and tourism. What are Gulf Air’s strategic goals for the future? In tune with “Vision 2030”, the Kingdom’s economic blueprint, Gulf Air’s strategy is to operate as an efficient, commercially sustainable and dynamic airline that effectively serves the people and the economy of Bahrain and represents the kingdom on the world stage. Reflecting the needs and aspirations of its customers, the strategy focuses on three core areas: a targeted, more focused international network; a superior, more consistent product; and a modern, more efficient fleet that will optimize value. Gulf Air’s goal reflects a commitment to the latest aviation technology, which is complemented by the hallmark Arabian hospitality for which the airline is well known The airline was recently honoured with a prestigious award. Yes. Gulf Air was named the winner in

the ‘Virtualisation’ category at the 2013 Network World Middle East Awards ceremony held in Dubai, in recognition of the airline’s ongoing and noteworthy technology innovation. The award recognizes Gulf Air’s high level of IT services that help it achieve a high level of customer satisfaction and deliver service excellence. Gulf Air recently appointed Orthodoxou Aviation as its exclusive General Sales Agent (GSA) in Cyprus. How did you make your choice? With several decades of travel trade experience and a strong team of marketing and sales professionals, supported by highly-trained and efficient reservation personnel, we felt that Orthodoxou Aviation was the right choice for Gulf Air. We are very pleased with its appointment as our GSA for Cyprus. As the largest network operator in the Middle East, and thanks to its codeshare agreement with Cyprus Airways, Gulf Air offers a great business potential to passengers. Through our new General Sales Agent, we are looking to strengthen the airline’s position in Cyprus and to promote our network to the Middle East and beyond.

the international investment, finance & professional services magazine of cyprus

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COVER STORY

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TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

umber Crunchers. Bean Counters. Ledger Lovers. Account Ants… These are just some of the more innocent nicknames used when referring to accountants and auditors while to those outside the profession, only one word comes to mind to describe their job: boring! Of course, it’s not really like that. Accountants analyse data, present reports and create strategies for success. To excel in professional accounting, you need decision-making, strategic planning and leadership skills, as well as a clear understanding of the inner workings of an organisation. It should not be a surprise to learn that many business leaders are accountants and many accountants are business leaders.

It is generally agreed that the reason why the accounting profession in Cyprus is today considered as equal to that of the UK, the US and other developed countries is all down to one man: Michael Zampelas. In 1965, when ICPAC was four years old, Zampelas became a Chartered Accountant and five years later, together with his associates, he established the accounting and consulting firm Coopers & Lybrand in Cyprus and Athens. A merger in 1998 would eventually lead to the creation of PricewaterhouseCoopers, more recently abbreviated to PwC, which is the world’s largest professional services firm and the largest of the so-called “Big Four” accountancy firms measured by 2012 revenues. In 2007, Zampelas was honoured by the Board of ICPAC for his visionary services to the accounting and auditing profession in Cyprus, while he was awarded First Prize by the same

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in a position to closely observe developments in the countries of the Eastern bloc and realised that there was an untapped market. By this time, the accounting profession had reached the stage where Cyprus was the only country outside the UK authorised to train UK Chartered Accountants and to hold the relevant examinations, and Zampelas proposed the idea of inviting 25 outstanding students from the former communist regimes to be trained in Cyprus. “I knew that on their return home, they were not only going to become top executives in their countries but they would become the best Ambassadors for Cyprus. That is precisely what happened and, in my view, these two events were key to the development of the profession which is now admired by the rest of the world. And it is thanks to a great extent to today’s accountants that Cyprus has gained its reputation as a major professional services centre.”

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KPMG LIMITED

KPMG is a global network of professional firms providing audit, tax and advisory services through 152,000 outstanding professionals working together to deliver value in 156 countries worldwide. KPMG in Cyprus traces its origins back to 1948 and is one of the largest audit and advisory organisations in the country. From 6 offices throughout the island, more than 750 professionals work closely with clients of all sizes active in all industries.

The firm takes pride in the quality of the services it delivers, which improve the transparency, trust and consistency of business processes. Number of Employees: 840 Managing Director: Evgenios Evgeniou Number of Partners: 42

Number of Employees: 767 Managing Director: Andreas Christofides Number of Partners: 37 Head Office: 14, Esperidon St., 1087 Nicosia Tel: (+357) 22209000 Fax: (+357) 22678200 Website: www.kpmg.com/cy e-mail: nicosia@kpmg.com.cy

DELOITTE

With more than 500 professionals in its Nicosia, Limassol and Larnaca offices, Deloitte is one of the largest professional services organisations in Cyprus and part of the Deloitte global network, employing more than 200,000 people in over 150 countries. It provides a full range of audit, tax, consulting, financial advisory and wealth advisory services

services Group operating in South East Europe and the Eastern Mediterranean in fully-fledged offices in Nicosia, Athens, Thessaloniki, Sofia, Bucharest, Belgrade, Podgorica, Tirana, Skopje, Zagreb, Pristina, Banja Luca, Sarajevo, Cairo, Alexandria, Tbilisi and Cy tax desks in Moscow and Kiev. Its professional services include accounting and payroll, transaction advisory, Mergers & Acquisitions, compliance reporting and cross-border structuring. It employs over 250 people in total. Number of Employees: 250 (South East Europe & East Mediterranean) Managing Director: Zoe Kokoni Number of Partners: 3 Head Office: 5, Chytron St., 4th floor, 1302 Nicosia Tel: (+357) 22699222 Fax: (+357) 22699004 Website: www.eurofast.eu e-mail: info@eurofast.eu

Fax: (+357) 22360400 Website: www.deloitte.com/cy e-mail: infonicosia@deloitte.com Other offices in Limassol and Larnaca

to a diverse client portfolio and an integrated services offering addressed primarily to the international business community. Number of Employees: 500+ CEO & Managing Partner: Christis M. Christoforou Number of Partners: 28 Head Office: 24, Spyrou Kyprianou Ave., 1075 Nicosia Tel: (+357) 22360300

BAKER TILLY KLITOU

EUROFAST GLOBAL 4 Eurofast is an international boutique professional

Head Office: Julia House, 3, Themistocles Dervis St., 1066 Nicosia Tel: (+357) 22555000 Fax: (+357) 22555001 Website: www.pwc.com.cy e-mail: via the website

Baker Tilly Klitou is an independent member of Baker Tilly International, the world’s 8th largest accountancy and business advisory network by combined fee income of its members. Employing more than 26,000 people worldwide, it is represented by 156 firms in 131 countries with a combined fee income of US$3.3 billion. Baker Tilly Klitou operates through six offices: Nicosia, Limassol and Larnaca (Cyprus), Bucharest (Romania),

TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

Sofia (Bulgaria) and Chisinau (Moldova). Number of Employees: 200+ Chief Executive Officer: Marios Klitou Number of Partners: 14 Head Office: Corner of C. Hatzopoulou St. & 30, Grivas Dighenis Ave.,1066 Nicosia Tel: (+357) 22458500 Fax: (+357) 22751648 Website: www.bakertillyklitou.com e-mail: info@bakertillyklitou.com

PwC No.1

Evgenios C. Evgeniou: The accounting profession in Cyprus has a distinguished history. Cyprus was the first country outside the UK where the ICAEW gave authority to firms to train Chartered Accountants. As a result of the investment in training by international networks like PwC, the profession employs highly qualified, experienced, multilingual people who have achieved international recognition. Indicatively, in 2012, three of our trainees won four international awards in the ICAEW professional examinations and PwC was awarded the Investors in People Gold certificate. The quality of our professionals, the business-friendly tax environment, a treaty network covering 47 countries, a legal system easily understood by international businesses and the location as the EU gateway to the East have been the pillars of development in Cyprus. These have remained fundamentally unchanged. Cyprus is committed to the European Union and the euro and, operating within its frameworks, will further evolve as a quality international business hub.

Evgenios C Evgeniou is CEO, PwC Cyprus

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ERNST & YOUNG Ernst & Young is a global leader in assurance, tax, transaction and advisory services, employing 152,000 people worldwide. The firm combines leading practices, methodologies and tools, together with fresh thinking, tailoring its services to its clients’ business needs. In Cyprus, where the firm’s origins date back to the 1930s, it has an excellent reputation amongst the local business community as a high quality provider of professional services from offices in

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Nicosia and Limassol. Number of Employees: 176 Managing Directors: Andreas Demetriou Number of Partners: 12 Head Office: Nicosia Tower Centre 36, Byron Ave., 1096 Nicosia Tel: (+357) 22209999 Fax: (+357) 22209997 Website: www.ey.com e-mail: ey.cyprus @cy.ey.com

GRANT THORNTON CYPRUS

Grant Thornton is one of the world’s leading organisations of independent assurance, tax and advisory firms, employing over 35,000 people in 120 countries. For over 70 years, the people of Grant Thornton Cyprus have been providing a full range of assurance, tax, specialist advisory and outsourcing services to clients ranging from public companies and multi-nationals, to government agencies and private businesses across a broad spectrum of industries. Number of Employees: 95 Managing Director: Stavros Ioannou Number of Partners: 7 Head Office: 41-49 Agiou Nicolaou St., Nimeli Court, Block C, Engomi, Nicosia Tel: (+357) 22600000 Fax: (+357) 22600001 Website: www.gtcyprus.com e-mail: main@cy.gt.com

KPMG No.2

Andreas Christoﬁdes is Managing Director, KPMG Ltd

0 56 K TREPPIDES & CO LTD

A pioneer in providing audit, tax, accounting, legal, consulting and financial advisory services to international companies in Cyprus, the firm was established in 1985 and has continued to grow as the sector has expanded. Constantly reinventing itself to ensure that it remains at the forefront of the market, it is currently one of the leading regulatory compliance advisory firms on the island with a significant share of CySEC licensed investment firms.

Number of Employees: 170 Managing Director: Kikis Treppides Number of Partners: 2 Head Ofﬁce: Treppides Tower, 9 Kafkasou St., Aglandjia, 2112, Nicosia Tel: (+357) 22678944 Fax: (+357) 22681887 Website: www.treppides.com e-mail: info@ treppides.com

10 = MGI GREGORIOU & CO

Established in 1973, the firm is recognised as one of the leading accounting, auditing, tax and business advisors in Cyprus with offices in all cities. It services clients listed on international stock exchanges, High Net Worth Individuals from all over the world, and reputable and prestigious companies active in all industries in Cyprus. The combination of experience, professional expertise, efficiency and the personal approach of management is the cornerstone of the firm’s success.

Number of Employees: 85 Managing Director: Andreas Gregoriou Number of Partners: 5 Head Office: Greg Tower, 7, Florinis St., 1304 Nicosia Tel: (+357) 22451555 Fax: (+357) 22451556 Website: www.gregoriou.com e-mail: nicosia@gregoriou.com

TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

Andreas Christofides: Cyprus is well known for its highlyeducated workforce and its world-class quality services that are provided to investors. At the moment there are more than 3.000 professionals, all members of reputable international professional bodies. It is admitted, even by competitive centrEs, that Cypriot professionals respond quickly and efficiently to the needs of both local and foreign investors. Despite the recent changes in corporation tax, Cyprus still has one of the most friendly tax systems in Europe with no taxation imposed on the sale of shares, full participation exemption on dividend income, no withholding tax on dividends, interest and royalties, no thin cap rules, no exit charges, effective tax on royalty income of 2.5%, interest income being taxed only on a thin margin and so many other benefits including the very beneficial shipping regime. It is also an ideal place for establishing investment funds and financial services companies.

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BDO LTD 8

BDO Ltd is the Cyprus member firm of BDO International, the 5th largest accountancy network in the world, which employs almost 48,800 people in 1,118 offices in 135 countries. More than 100 professionals in Cyprus offer a wide range of audit, tax, accounting and advisory services to companies of all sizes. BDO combines the personal characteristics of a local firm with the expertise, worldwide network and strength of a large-scale global player. Number of Employees: 100 Managing Directors: Karlos Zangoulos, Rois Potamitis Number of Partners: 7 Head Office: Antonis Zenios Tower, 1, Erechthiou St., Engomi, Nicosia Tel: (+357) 22495707 Fax: (+357) 22495717 Website: www.bdo.com.cy e-mail: info@bdo.com.cy

HORWATH =10 DSP Horwath DSP Ltd offers audit, tax, risk and advisory solutions to a diverse clientele in Cyprus, the region and the world. As a member of Crowe Horwath International, it can draw on the know-how of a worldwide network of 160 independent accounting and advisory services firms in over 100 countries. The combination of local and regional talent, coupled with the network’s global reach, provides clients with all the expertise and capabilities they need. Number of Employees: 85 Managing Director: Yiannis Demetriades Number of Partners: 5 Head Office: 8, Stassinos Ave., 1st Floor, Photiades Business Centre, 1060 Nicosia Tel: (+357) 22755656 Fax: (+357) 22452055 Website: www.crowehorwath.com.cy e-mail: mailbox@crowehorwath.com.cy

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DELOITTE No.3

Christis M. Christoforou: Recent events in Cyprus and their effect on the economy – and on the banking sector in particular – have dented efforts to attract new international business to Cyprus. However, the country still enjoys a number of key competitive advantages. Its unique geostrategic position as the literal and metaphorical gateway to three continents, low taxes and an extensive double taxation treaty network, combined with its world class infrastructure, highly skilled workforce and the benefits of European Union membership, have made Cyprus the international hub it is today. It is now time for the government to implement measures to make the process of conducting business in Cyprus friendlier and less bureaucratic. Cyprus is recognised as an international centre of excellence for the provision of professional services by world-class accounting firms and its accounting professionals are ready to work hard, utilising their experience and expertise, so that Cyprus turns the present crisis into an opportunity.

HLB AFXENTIOU 12 HLB Afxentiou Ltd. is one of the largest accounting and advisory organisations in Cyprus. It is a member firm of HLB International, which employs 13,400 people in over 100 countries. More than 70 staff work from the Nicosia, Limassol and Larnaca offices, providing premium quality professional services to a wide range of businesses

NEXIA POYIADJIS

ranging from the small owner-managed business to large multinational groups and listed companies in the Stock Exchange. Number of Employees: 76 Managing Director: Costas Afxentiou Number of Partners: 5 Head Office: Palaceview House, Prodromos St. & 2, Zenonos Kitieos

Christis M. Christoforou is CEO & Managing Partner, Deloitte Ltd

St., 2064 Nicosia Tel: (+357) 22002700 Fax: (+357) 22002800 Website: www.hlb.com.cy e-mail: nicosia@hlb.com.cy

=13 P.G. ECONOMIDES & CO LTD =13

This prominent Nicosia partnership of Chartered Accountants and business consultants was established in 1969. Since 1980, the firm has been the exclusive member in Cyprus of Nexia International, one of the largest international networks of independent accounting and consulting firms with 570 offices in over 105 countries. It is a leading provider of audit and assurance, business advisory and consulting, business restructuring and insolvency, taxation and wealth management services. Number of Employees: 70 Managing Director: Yiannakis Poyiadjis Number of Partners: 3 (+ 1 director) Head Office: 2 Sophouli St., Chanteclair House, 8th Floor, 1096 Nicosia Tel: (+357) 22456111 Fax: (+357) 22666276 Website: www.nexia.com.cy e-mail: np@nexia.com.cy

LOGO

This Limassol-based firm specializes in providing auditing and accounting services and international tax planning advice. It also offers business consultancy services and deals with liquidations and investigations. The company, which began its operations in London in 1972, has grown exponentially in terms of both size and reputation over the past 40 years. A member of various international networks of accountants and auditors, it

also maintains its own fully-fledged office in Bucharest. Number of Employees: 70 Managing Director: Petros Economides Number of Partners: 6 Head Office: 30, Gr. Xenopoulou St., 3106 Limassol Tel: (+357) 25559000 Fax: (+357) 25559001 Website: www.pgeconomides.eu e-mail: audit@pgeconomides.eu

More than 3,000 accountants are members of the Institute of Certiﬁed Public Accountants of Cyprus (ICPAC).

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Marios Klitou: The accounting profession in Cyprus is world class because it is dominated by holders of the internationally recognized qualifications of Chartered and Certified Accountants of the UK who have significant experience in the highest standards of accounting and auditing, in view of the fact that Cyprus has followed International Financial Reporting Standards and the International Standards on Auditing since the year 1981. Cyprus will remain an important International Business Centre because of its unique advantages: its skilful people, its legal system which is founded on English law aligned with EU Directives, being a member of the EU, and its geographical location. In addition, Cyprus has a business-friendly tax system with a corporate tax rate of 12.5%, one of the lowest in the EU, and an extensive network of double tax agreements. The recent discovery of natural gas in the country’s Exclusive Economic Zone will certainly contribute to greater investment activity.

Marios Klitou is CEO, Baker Tilly Klitou

TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

U No.5 O IT L K Y L IL T BAKER PKF Savvides & Co Ltd 16

JOANNIDES + CO Established in 1979, it is a member of AGN International Ltd., a worldwide association of independent accounting and consulting firms. One of the largest accounting firms in Cyprus, it is a leading provider of distinctive, high-quality professional audit, taxation, accounting, management consultancy, corporate finance and IT services to clients from its offices in Nicosia, Limassol and Larnaca. The firm’s stated objective is to add

significant value to its clients’ business performance. Number of Employees: 60 Managing Director: Lefkios Joannides Number of Partners: 3 Head Office: 13, Agiou Prokopiou St., 2406 Engomi. Nicosia Tel: (+357) 22556556 Fax: (+357) 22556300 Website: www.joannides.com.cy e-mail: cy@joannides.com.cy

INTERTAX AUDIT

InterTaxAudit is a Nicosia-based firm of professional qualified Auditors, Tax Consultants and Business Advisors. Founded in 2002, it has since undergone substantial expansion and now offers a range of services including statutory audit, international tax planning and management consultancy services. Its clients are mostly international business companies of varying size, origin and activity. Its stated objective is to add significant value to their business performance and to provide quality client care. Number of Employees: 50 CEO: Aris Theophanous Number of Partners: 4 Head Office: Navarino Business Centre, 18, Navarinou St., Agios Andreas, 1100 Nicosia Tel: (+357) 22400400 Fax: (+357) 22400401 Website: www.intertaxaudit.com e-mail: Info@intertaxaudit.net

LOGO

PKF International is an international network of independent firms of accountants and business advisors, currently represented in Cyprus by two member firms, PKF Savvides & Co Ltd in Limassol (established in 1979) and PKF ATCO Ltd in Nicosia (established in 1998). Both firms provide audit, tax and consultancy services to clients ranging from small businesses, start-ups and sole entrepreneurs to public companies and multinationals, many of which are engaged in international operations.

D.I. ROSS & CO LTD (DI Ross)

This Limassol-based independent firm of Chartered Certified Accountants and registered Chartered Tax Advisers was founded by Demetris Ioannides, who also founded Deloitte, Cyprus in 1988, serving as Managing Partner and subsequently as Executive Chairman until 2005. The firm employs a team of around 51 qualified

accountants, economists, mathematicians and university graduates. DI Ross places great emphasis on delivering a seamless service and on training younger personnel through a structured program for further development and qualifications. Number of Employees: 51 Managing Partner: Demetris Ioannides

Number of Partners / Directors: 4 Head Office: Eftapaton Court, 256, Archbishop Makarios III Ave., 3105 Limassol Tel: (+357) 25857700 Fax: (+357) 25340734 Website: www.di-ross.com e-mail: info@di-ross.com

MOORE STEPHENS STYLIANOU 19 Moore Stephens International is one of the world’s major accounting and consulting networks with 299 independent firms in 101 countries. Member firms share the common values of integrity, personal service, quality, knowledge and a global view. For over 30 years, Moore Stephens Stylianou & Co has been providing cus-

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Number of Employees: 58 Managing Director: Christos Antoniou Number of Partners: 6 Head Ofﬁce: Meliza Court, 4th, 5th and 6th ﬂoor 229, Archbishop Makarios III Ave., 3105 Limassol Tel: (+357) 25868000 Fax: (+357) 25590229 Website: www.pkf.com.cy e-mail: info@pkf.com.cy

tomers with innovative, high quality services from traditional assurance services to large consultancy projects, international tax planning, information technology and business strategy. Number of Employees: 40 Managing Partner: George Stylianou Number of Partners: 4 Head Office: Iris Tower,

Office 602 58, Archbishop Makarios III Ave., 1076 Nicosia Tel: (+357) 22717777 Fax: (+357) 22717766 Website: www.mscyprus.com e-mail: info@mscyprus.com

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PEK LTD

The firm was established in 1997 by a group of qualified professionals whose complementary skills and long experience have enabled them to deliver quality auditing, accounting, taxation, consultancy, corporate, trust administration, offshore, shipping, insolvency and recovery services. Over the past 16 years, PEK has expanded its portfolio of international and local companies as a result of the quality of service on offer and the trust its clients place in the firm. Number of Employees: 36 Managing Director: Andreas Efthyvoulou, Kyriacos Koutsoftas Number of Partners: 2 Head Office: Central Court, 3rd Floor, 17, Demosthenes Severis Ave., 1080 Nicosia Tel: (+357) 22865000 Fax: (+357) 22865001 Website: www.pek-cy.com e-mail: info@pek-cy.com

IOANNOU & THEODOULOU LTD Founded in the early 1990s, the firm has established an excellent reputation in the local and international markets for its high professional standards. Its long experience in dealing with a broad range of businesses and industries is enhanced by its membership of the International Association of Independent Accountants, K.S International, currently represented by more than 165 offices around the world. The firm offers professional

guidance and advice to clients on all business and financial matters. Number of Employees: 35 Managing Directors: Michael Ioannou, Christos Theodoulou Number of Partners: 2 Head Office: 4, Pindou St., 2409 Engomi, Nicosia Tel: (+357) 22318734 Fax: (+357) 22493123 Website: www.ith.com.cy e-mail: info@ith.com.cy

KYPRIANIDES, NICOLAOU & ASSOCIATES =21 Founded in 1955, it is one of the oldest auditing and accounting firms in Cyprus and its client list contains some of the biggest and best-known names in the country’s industrial and services sectors. In 2004 a partnership with George Economides established Kyprianides, Nicolaou & Economides in Limassol. Both

firms pride themselves on the strong personal bonds and trust that characterise their relationships with clients to whom they offer quality solutions. Number of Employees: 35 Managing Director: Pola Kyprianidou Number of Partners: 3 Head Office: 48, Themistocles

Dervis Ave., Office 401, 1066 Nicosia Tel: (+357) 22756585 Fax: (+357) 22756595 Website: www.kyprianides.com e-mail: info@kyprianides.com

UHY ANTONIS =21 D. MARINOU & CO KASSAPIS LTD AUDITORS-ACCOUNTANTS Established in 1991 and based in Nicosia, it is the Cyprus member firm of UHY International, the worldwide association of independent accounting and consulting firms. It provides services that include auditing, accounting and bookkeeping, taxation, international tax planning, management consultancy, investment advice, VAT preparation & submission, preparation of budgets, cash flow forecasts and other specialist services, including international and offshore business consultancy and a full range of corporate and fiduciary services. Number of Employees: 35 Managing Director: Antonis Kassapis Number of Partners: 3 LOGO Head Office: Frigogel Building, 89, Kennedy Ave., Office 201, 1077 Nicosia Tel: (+357) 22379210 Fax: (+357) 22379212 Website: www.uhy.com.cy e-mail: info@uhy.com.cy

=21

The Larnaca-based ﬁrm offers a comprehensive range of professional services including audit, tax and consultancy. Its clients are public and private businesses operating across a wide range of markets both locally and internationally. Number of Employees: 35

=21

Managing Directors: Demetris Marinou Number of Partners: 4 Head Ofﬁce: Griva Dhigeni Av. 81, 1st & 2nd ﬂoor, 6043 Larnaca Tel: (+357) 24663400 Fax: (+357) 24663409 e-mail: marinoud@cytanet.com.cy

ALLIOTT PARTELLAS KILIARIS

The firm, which was founded in 1994, is the Cyprus member firm of the Alliott Group, a worldwide alliance of accountants, auditors, tax consultants and lawyers, represented in more than 70 countries by 160 member firms. Its range of services includes company registrations and administration, bookkeeping, tax advice and international tax planning, and auditing. Based in Nicosia, it caters to the needs of clients around the world through its Alliott Group membership. Number of Employees: 30

Managing Director: Antonis Partellas Number of Partners: 2 Head Office: 77, Strovolos Ave., Strovolos Center, Office 201, 2018 Strovolos, Nicosia Tel: (+357) 22875111 Fax: (357) 22765611 Website: www.pkcy.com e-mail: info@pkcy.com

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KRESTON PROIOS 26

PKF ATCO Ltd

This firm of consultants and corporate service providers has been offering highquality services to local and international clients since 1965. It is a member of Kreston International Ltd., currently the 13th largest network of independent accounting firms in the world, with offices in 95 countries manned by over 19, 500 professional and support staff. Kreston Proios offers auditing, accounting, taxation and consultancy services to a range of local and international clients.

Number of Employees: 28 Managing Director: Nicos Drymiotis Number of Partners: 1 Head Office: Corner of Nikis Ave. & Kastoros St., 2080 Nicosia Tel: (+357) 22490094, Fax: (+357) 22490494 Website: www.krestonproios.com e-mail: info@krestonproios.com

Number of Employees: 25 Managing Director: George Koukoumas Number of Partners: 3 Head Ofﬁce: Aluminium Tower, 2nd,3rd and 4th ﬂoor 2, Limassol Ave., 2003 Nicosia Tel: (+357) 22462767 Fax: (+357) 22339866 Website: www.pkf.com.cy e-mail: info.nicosia@pkf.com.cy

=27

DINOS ANTONIOU & CO LTD This Limassol-based firm offers a comprehensive range of professional services including audit, tax, investment appraisal and consultancy services to a significant number of local and international businesses. Established in 1994, it has expanded locally and in EU and Eastern European countries. The firm’s high calibre team of auditors and experienced personnel offers high-quality professional services and tailor-made

solutions that meet the most complicated of clients’ needs. It is a member of TCS Global. Number of Employees: 25 Managing Director: Marios Efthymiou Number of Directors: 3 Assurance Director: Tasos Anastasiou Tax Director: Maria Spyrou Head Office: 9, Vassilis Michaelides St., Limassol Tel: (+357) 25824545

Fax: (+357) 25824060 Website: www.dinoscpa.com e-mail: marios@dinoscpa.com

=27

YIALLOURIDES & PARTNERS LTD, CHARTERED =29 ACCOUNTANTS Since its establishment in 1999, the firm has experienced solid growth, thanks to the comprehensive and practical solutions it offers. Working in association with a broad network of international accounting, legal and consultancy firms, it is thus able to provide professional assistance and consultation to companies and organisations in all key

business locations worldwide. Its clients range from small businesses to large public companies in various economic sectors, both local and international. Number of employees: 23 Managing Director: George Yiallourides Number of Partners: 2 Head Office: 16, Spyros Kyprianou

St., Divine Clock Tower, Office 101, 3070 Limassol Tel: (+357) 25443132 Fax: (+357) 25878948 Website: www.ayca.com.cy e-mail: info@ayca.com.cy

Andreas Demetriou: Ernst & Young is committed to playing its part in building a better working world: As accountants and auditors we contribute to the functioning of capital markets, providing transparent financial information to investors and other stakeholders. Through our business advisory services we help our clients to improve and grow and to create jobs, leading to higher living standards. We develop people who have successful careers at EY and go on to other roles in industry, government and academia. Finally, we help the communities where we live and work develop and prosper. Over the past year Cyprus has faced exceptional challenges to restore the viability of the financial sector and sound public finances. Despite the issues with the local economy, the favourable environment for international business companies remains: The tax regime is very competitive, the professional services are world class and Cyprus is a great place to live and work in.

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COSTAS =29 TSIELEPIS & CO

The Limassol-based firm offers a comprehensive range of professional services including audit, tax, consultancy and the setting up and administration of trusts. Its clients are public and private businesses operating across a wide range of markets both locally and internationally. Drawing from over thirty years of experience and knowledge, the firm prides itself on offering clients a personal, confidential and professional service based on trust. Number of Employees: 23 Managing Director: George Tsielepis Number of Partners: 2 Head Office: 205, 28th October Ave., Louloupis Court 1st floor, 3036 Limassol Tel: (+357) 25871000 Fax: (+357) 25373737 Website: www.tsielepis.com.cy e-mail: info@tsielepis.com.cy

TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

ERNST & YOUNG No.6

Yiannis Demetriades Andreas Demetriou isisManaging Ernst & Young ManagingDirector Director,ofHorwath DSP

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Yiannis Demetriades: A first-class education, commitment to the job, continuous training, client orientation,

professionalism and striving for success are key qualities that make some people stand out from the crowd. Blend them together and you get world class professionals. The Cypriots are no strangers to misfortune but this has never kept them down. There are more than 4,000 highly educated, registered accountants, most with ACA and ACCA qualifications, here. The fact that the Institute of Chartered Accountants in England and Wales (ICAEW) chose Cyprus as the first country in the world to train Chartered Accountants outside the UK proves the world class of accounting services here. With over 30 years of cumulative knowledge and experience in international business, and professionals with an appetite for continuous success committed to giving added value, Cyprus is flexible enough to adjust to the current adverse economic climate and retain a leading position as an International Business Centre.

DFK DEMETRIOU =31 TRAPEZARIS LTD DFK Demetriou Trapezaris Ltd is a medium-sized accounting firm offering high-quality services to local and international clients. The firm was established in 1992 and consists of highly qualified partners and staff offering a wide range of expertise. In addition to its Nicosia office, it also has a presence in Bucharest, Romania. The firm is a member of DFK International, a top Worldwide Association of Independent

Accounting Firms and Business Advisers. Number of Employees: 18 Managing Director: Demetris Demetriou Number of Partners: 2 Head Office: 59-61 Acropolis Ave., Office 202, 2012 Nicosia Tel: (+357) 22879300 Fax: (+357) 22491375 Website: www.dfkcy.com e-mail: office@dfkcy.com

PAPAKYRIACOU & PARTNERS

=31

Founded in 1993, this Nicosia-based firm of Chartered Certified Accountants with offices in Athens offers quality professional services to the business community. Its stated mission is to offer a real alternative to the large traditional accounting firms by providing a dynamic, progressive, partner-led approach to accounting practices and business services, so as to assist clients in meeting the challenges posed by domestic and cross-border ventures while serving both individual and corporate needs. Number of Employees: 18 LOGO Managing Director: Sozos Papakyriacou Number of Partners: 2 Head Office: 28, Sofoulli St., Chanteclair Building, Office 406, 1096 Nicosia Tel: (+357) 22676660 Fax: (+357) 22664311 Website: www.papaky.com.cy e-mail: info@papaky.com.cy

TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

o.10 N P S D H T A W HOR

Yiannis Demetriades is Managing Director, Horwath DSP

The Institute of Certiﬁed Public Accountants of Cyprus (ICPAC) was founded in 1961.

KPSA

KPSA Chartered Accountants is a professional and independent firm that prides itself on its integrity, providing innovative services in an ever-changing and growing global environment. It is committed to delivering an expert and professional service by blending technical, practical and business expertise to each engagement. The ethos of the firm is to maintain strong relationships with clients, treating them as unique, and to provide them with technically strong advice within a timely

timeframe. Number of Employees: 18 Managing Director: Nicos Kastellanis Number of Partners: 3 Head Office: 15, Themistocles Dervis St., 1st floor, 1066 Nicosia Tel: (+357) 22445500 Fax: (+357) 22672000 Website: www.kpsa.com.cy e-mail: info@kpsa.com.cy

RSM STYLIANOU LTD It is a member of RSM International, ranked the 5th-7th largest network of independent accounting and consulting firms worldwide with more than 700 offices in 100 countries. The Nicosia-based firm provides audit, tax and consultancy services to private and public enterprises with local and international orientation requiring the complete spectrum of services provided by Certified Public Accountants and Business Consultants. RSM Stylianou also has offices in Greece (Athens, Thessaloniki) and Albania (Tirana). Number of Employees: 18 Managing Director: Athos Stylianou Number of Partners: 1

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Head Office: Kennedy Business Center 12-14 Kennedy Ave (Office 505) 1087 Nicosia Tel: (+357) 22751140 Fax: (+357) 22751145 Website: www.rsmi.com.cy e-mail: stylianou@rsmi.com.cy

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SHIAKALLIS & CO AUDIT SERVICES LTD

This growing, reputable firm of accountants, established in 2000, has developed the appropriate infrastructure to be able to offer professional audit, accounting, tax, business consultancy and international business management services to a broad range of companies registered in Cyprus, of local and

foreign interests. The firm’s stated aim is to offer such advice as to enhance the performance of each client and its financial operations by applying the necessary procedures and controls. Number of Employees: 18 Managing Director: Nicholas Shiakallis Number of Partners: 1

PAPADAKIS & CO 37 M. This firm of Certified Public Accountants, established in

1985, provides audit, accounting and tax advisory services to a large number of local and international clients, including CSE-listed and private companies taking advantage of Cyprus’ favourable tax regime in order to maximize their worldwide profits. The firm’s internal controls and procedures ensure a high quality of service while a strict confidentiality policy secures the protection of its clients’ assets and records. Number of Employees: 15 Managing Director: Michalis Papadakis Number of Partners: 3 Head Office: Maria House, 1, Avlonos St., 1075 Nicosia Tel: (+357) 22761362 Fax: (+357) 22767543 Website: www.offshore.com.cy e-mail: info@papadakis.com.cy

HTT AUDIT

HTT Audit Ltd is the Cyprus member firm of Reanda International, a leading international network of independent accounting and consulting firms based in Asia. The firm’s services include statutory audit, tax, corporate & financial advisory, internal audit, business valuations and restructurings and other related services. Its stated mission is to continuously add value to its clients’ businesses through the provision of the highest quality professional services on a timely and cost-effective basis.

0 56 =31

Number of Employees: 13 Managing Directors: N/A Number of Partners: 3 (Adonis Theocharides, Charilaos Hadjiioannou, Phivos Theocharides) Head Office: Eirini Tower, 27, Evagorou St., 6th Floor, Office 61, 1066 Nicosia Tel: (+357) 22670680 Fax: (+357) 22670681 Website: www.httaudit.com.cy e-mail: info@httaudit.com.cy

Head Office: 44-46 Acropolis Ave., 1st floor, Strovolos 2012 Nicosia Tel: (+357) 22319990 Fax: (+357) 228138269 Website: www.shiakallis.com e-mail: info@shiakallis.com

Established in 1996, this public practice firm of accountants and business consultants, specialises in the provision of audit, tax, receiverships/liquidations and business dispute resolution services to a wide range of businesses, including government, non-profit organisations and ownermanaged clients (public and private companies, sole traders, partnerships) in the local and international markets. Clients operate across a range of industries including financial services,

general and retail trade, services companies, shipping and transport, tourism and manufacturing. Number of Employees: 17 Managing Director: Michalis Avraam Number of Partners: 1 Head Office: 8, Digenis Akritas Ave., Office 403, 1045 Nicosia Tel: (+357) 22346080 Fax: (+357) 22346020 Website: www.amicha.com e-mail: info@amicha.com

KYRIAKIDES, SAVVIDES & ASSOCIATES LTD

This fast growing, reputable ﬁrm of accountants provides professional audit, accounting, tax, business consultancy and international business management services to a broad range of local and international clients. Driven by the professionalism, competence and commitment of the directors and its staff, the ﬁrm has experienced one of the highest growth rates in the sector thanks to the extensive range of high-quality, tailor-made professional services it offers to its clients. Number of Employees: 14

Managing Director: Elias Kyriakides Number of Partners: 2 Head Ofﬁce: 5, Spatharikou St., 4004 Mesa Geitonia, Limassol Tel: (+357) 25343477 Fax: (+357) 25343484 Website: www.ksapre.com e-mail: ksa.pre@ksa.com.cy

P. KALOPETRIDES & CO This well-established firm of accountants, auditors and business advisers celebrated its 50th anniversary in 2012. From its offices in Nicosia, Limassol and Paphos it offers services in auditing & assurance, taxation & international tax planning, corporate & trust formation, financial and business con-

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MICHALIS AVRAAM & PARTNERS

sulting, management and human resource consulting, management information systems, property investment and advice. Its stated aim is to help its clients succeed in the markets in which they operate. Number of Employees: 12 Managing Director: Petros Kalopetrides

Number of Partners: 4 Head Office: 2, Chr. Sozos St., Eiffel Tower, 1096 Nicosia Tel: (+357) 22669017 Fax: (+357) 22665297 Website: www.pkalopetrides.com.cy e-mail: info@pkalopetrides.com.cy

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A CHRYSANTHOU & CO. LTD

An awarded independent ﬁrm of Cyprus accountants and auditors, it was set up in 1980 and has an impressive track record of servicing both family-owned businesses and large corporations with cross-border operations and investments. The company’s aim is to provide clients with a personalised service of the highest quality level and, at the same time, maintain its professional and business ethics in order to add value and safeguard its clients’ interests. Number of Employees: 11 Managing Director: Anastasios Chrysanthou Number of Partners: 2 Head Ofﬁce: 20, Vasilissis Friederikis St., El Greco House, 3rd Floor,1066 Nicosia Tel: (+357) 22675900 Fax: (+357) 22670498 Website: www.acco.com.cy e-mail: info@acco.com.cy

CPV AUDIT

The company’s initials say it all: Clarity, Professionalism, Value. CPV is a dynamic, fast-growing firm of chartered certified accountants, dedicated to providing a wide range of services, such as accounting, auditing, tax planning, company incorporations and business consulting. Its team of experienced local and international professionals delivers fast, trustworthy, professional services of the highest standard to clients ranging from small to medium size enterprises to large scale companies across various

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finance – Euroaudit will find it. Number of Employees: 10 Managing Director: George Christou Number of Partners: 2 Head Office: Frosia House, 2nd Floor, Office 202, Corner of Evagorou & 1, Menandrou St., 1066 Nicosia, Tel: (+357) 22667734 Fax: (+357) 22667175 Website: www.euroaudit.com.cy e-mail: info@euroaudit.com.cy

This accounting, auditing, tax and consulting firm provides professional, technical, consulting and business services to clients in a wide range of industries. Passionately committed to delivering a service that is innovative, flexible and holistic, it recognises that every client’s needs are different. It promises that, wherever there is a commercial advantage to be gained for its clients – whether in audit, tax consultancy or corporate

A.G. GEORGHIOU LTD This Nicosia-based firm of qualified accountants and auditors was founded in 1993. It specializes in setting up both offshore and onshore enterprises in Cyprus as well as in providing all the necessary services for their smooth operation. It also provides international tax planning,

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G. C. EUROAUDIT

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Managing Director: George Georgiou Number of Partners: 1 Head Office: 16, Annis Komninis St., 1060 Nicosia Tel: (+357) 22769100 Fax: (+357) 22769101 Website: www.aggeorghiou.com.cy e-mail: a.g.georghiou. co@cytanet.com.cy

secretarial services, ship and shipping management, computerization and management consultancy services. The firm’s stated goal is to provide the best professional and personal service to all its clients, irrespective of size. Number of Employees: 10

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industry sectors. Number of Employees: 6 Managing Director: Antonis Chrysanthou Number of Partners: 1 Head Office: 21, 28th October St., 1st Floor, Office 104, 2414 Engomi, Nicosia Tel: (+357) 22028470 Fax: (+357) 22028474 Website: www.cpvaudit.com e-mail: info@cpvaudit.com

A member of the Tax Representation Alliance (TRA), an alliance of independent VAT specialists firms, it is an independent provider of quality compliance, audit, tax and advisory services to a wide range of businesses, ranging from sole entrepreneurs to large multinational groups. Its stated mission is to continuously add value to its clients’ businesses through the provision of the highest quality professional services on a timely, efficient and cost-effective basis.

Number of Employees: 6 Managing Directors: Christos Ierodiakonou, Constantinos Ekkeshis Number of Partners: 2 Head Office: 39, Themistocles Dervis St., Office 102, 1066 Nicosia Tel: (+357) 22466470 Fax: (+357) 22766470 Website: www.eicyprus.com e-mail: info@eicyprus.com

JOANNIDES + CO No .15 TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

LOGO Kypros Protopapas: Cyprus is recognized as an international centre of excellence in providing profes-

sional services. This recognition is, to a great extent, attributed to the high standard of the services offered by the accounting profession which is held in high regard among the international business community. The high level of professionalism of Cyprus’ accounting firms is reflected in the endorsement and recognition, by the Institute of Chartered Accountants in England and Wales and the Association of Chartered Certified Accountants, of the training offered in Cyprus to candidates seeking membership of those Institutes. As the economic adjustment programme is implemented, a number of short- and medium-term financial, fiscal and structural challenges for the Cyprus economy will gradually be met, restoring the soundness of the banking sector and bringing confidence and economic stability. This will further enhance the international business sector which maintains its competitive advantages, such as the high quality service offered by the accounting profession.

Kypros Protopapas is a Partner, Joannides + Co

The Best-Run Businesses Run SAPTM

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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83 COVER STORY

G. JOSEPHAKIS AUDIT LTD Founded in 1996, this firm of accountants, tax consultants and business advisors carries out statutory financial audits, internal audits and investigations and offers computerised accounting services, tax services for individuals and companies, financial and management consulting and other corporate services. Its stated vision is to provide the highest standard and quality of professional services and to

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continue to grow, without losing the close and personal relationship it has with its clients. Number of Employees: 6 Managing Director: George Josephakis Number of Partners: 1 Head Office: 2, Dinokratous St., Office 302, Amaral 25, 1070 Nicosia Tel: (+357) 22759990 Fax: (+357) 22759993 Website: www.gjosephakis.com e-mail: info@gjosephakis.com

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IOANNOU & DAMIANOU LTD

add value and safeguard its clients’ interests. In November 2010, the firm was awarded the prestigious ACCA Quality Checked Award, confirming the firm’s commitment to quality. Number of Employees: 5 Managing Directors: Maria

element in a successful business relationship. Number of Employees: 5 Managing Director: Yiannakis Ioannou Number of Partners: 2 Head Ofﬁce: Suite 4A, 4, Georgios Seferis St., Ayii Omologites, 1076, Nicosia Tel: (+357) 22760220 Fax: (+357) 22759595 Website: www.advantax.com.cy e-mail: info@advantax.com.cy

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Pastellopoulou Number of Partners: 2 Head Office: 39, Themistocles Dervis St., Office 504, 1066 Nicosia Tel: (+357) 22761670 Fax: (+357) 22768030 e-mail: info@pkcca.com.cy

A.A. XENOPHONTOS & ASSOCIATES LTD

Located in Latsia, Nicosia, the firm was named Full Service Accountancy Firm of the Year in Cyprus by Global Accountancy Experts in 2013, and by business magazine Corporate INTL in 2012. The firm offers a wide range of services, including accounting, auditing, tax planning and compliance, financial studies (feasibility/ viability studies, business plans), payroll services, VAT, trusteeship/nominee services and company formation, trust formation, company liquidation and strike off services. Number of Employees: 3

Managing Director: Andreas Xenophontos Number of Partners: 1 Head office: 79, G. Kranidioti Ave., 2nd Floor, Office 204, 2231 Latsia, Nicosia Tel: (+357) 70000066 Fax: (+357) 22483211 Website: www.xenophontos-associates.com e-mail: info@xenophontos-associates.com

Adonis Theocharides: The accounting profession in Cyprus will continue to be considered as world class due to its high-calibre qualified workforce, excellent infrastructure and developed professional/legal system. While the corporation tax rate has increased from 10% to 12.5%, it is still among the lowest in EU. The Cyprus tax regime continues to provide for full exemption on dividends (incoming and outgoing) while the new IP regime, which provides for 80% exemption on profits from the exploitation of intellectual property rights, remains intact. Zero withholding taxes on payments to non-residents still apply, as do the exemptions on capital gains on the disposal of shares, other securities and immovable property situated outside Cyprus.The introduction of a financial transactions tax has been avoided. It is widely anticipated that changes now being put in place will have a positive effect on Cyprus’ competitiveness and it will thus continue to be an attractive jurisdiction for international tax planning.

The Best-Run Businesses Run SAPTM

26 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

The main services provided by the firm, established in 1990, include audit, taxation, business consulting and financial advisory. It also offers a host of specialised services to a wide range of corporations, partnerships, non-profit organisations and individuals, and is well-known for its expertise in the business issues and tax laws that impact its clients and for its constructive and insightful feedback on the financial performance, position and specific circumstances of each company. Number of Employees: 5 Managing Directors: Costas Yiassemides FCCA Number of Partners: 2 Head Office: 14 Costi Palama Street, 2121 Aglandjia, Nicosia Tel: (+357) 99627851 Fax: (+357) 22260966 Website: www.yiassemides.com e-mail: info@yiassemides.com

This leading firm of Chartered Certified Accountants, Auditors and Business Advisors offers a wide range of services to local and international clients. Services include accounting and audit, business advisory, taxation and IT services. Through innovation and forward thinking, the firm responds to the individual needs of its clients, bringing an open mind as well as unparalleled experience to each job ensuring client satisfaction, an essential

PASTELLOPOULOU, KARLETTIDES LTD A firm committed to quality and customer care, specialises in the provision of accounting, auditing, tax and consultancy services. The firm’s aim is to provide clients with the highest quality level and, at the same time, maintain its professional and business ethics in order to

YIASSEMIDES & CO

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TOP 50 ACCOUNTING, AUDIT, TAX & ADVISORY FIRMS IN CYPRUS

.39 HTT AUDIT No

Adonis Theocharides is a Partner, HTT Audit Ltd

HELLENIC BANK

THE PRUDENT BANK

Makis Keravnos Chief Executive Officer

Dr. Marios Clerides Group Senior General Manager Risk Management & Strategy

Photography: Jo Michaelides

Marios Clerides has a long history in the Group of Hellenic Bank. Today he is Group Senior General Manager, Risk Management & Strategy but he started his career in the bank in 1982, in charge of Planning and Economic Research. He is considered a major asset of the organisation and one of the CEO’s most valued associates. On 1 January 2012 he was appointed as a Member of the Board of Directors of Hellenic Bank. From 2001-2006, he served as Chairman of the Cyprus Securities and Exchange Commission (CySEC). He holds a Ph.D. in Labour Economics from the London School of Economics and Political Science.

28 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Makis Keravnos assumed the position of Chief Executive Officer (CEO) of Hellenic Bank Group on 1 September 2005. While he entered the banking industry in an era full of challenges, he instilled a sense of confidence and professionalism in all bank activities. He quickly became an influential banker, noted for his visionary skills and his ability to effectively assess trends in the sector. The recent adverse conditions in the banking industry confirmed the soundness of his decisions on a number of strategic issues. Makis Keravnos is masterful at appropriately assessing all sides of a complex issue and then making prudent decisions. Before joining Hellenic Bank, he served as Minister of Labour and Social Insurance and Minister of Finance in the government of Tassos Papadopoulos.

Nicos Hadjimarkou Manager of the CEO’s Office

Eliodoros Eliodorou Group General Manager Insurance Services & Human Resources

Antonis Rouvas Group Chief Financial Officer

Nicos Hadjimarkou started his career with Hellenic Bank in June 1988 as a Credit Analyst. In 1994 he was appointed as Manager of Credit Appraisal at Hellenic Bank (Finance). In 1998 he assumed the position of Manager, Credit Policy in the Credit Administration Department. In 2002 he was appointed Manager of Group Market & Liquidity Risk, a post he held until July 2011. In August 2011, he became Manager of the CEO’s Ofﬁce.

Antonis Rouvas started his career with Hellenic Bank in March 2008 as Group Chief Financial Ofﬁcer after a long and successful career abroad with various international audit ﬁrms and the multinational bank Credit Suisse. Prior to his appointment at Hellenic Bank he was a partner at KPMG in Nicosia. He has a B.Sc. in Business and Mathematics and holds the professional titles FCA (Institute of Chartered Accountants in England and Wales) and AMCT (Association of Corporate Treasurers, UK). Today he is also the General Manager of the Debt Recovery Department of Hellenic Bank in Cyprus.

Eliodoros Eliodorou started his career with Hellenic Bank Group in 1984 in the Cash and Remittance Department before becoming Deputy Manager of the Trade and Finance Department and subsequently Operations Manager in Hellenic Bank in Greece. Since 1 August 2011 he has held the position of Group General Manager, Insurance Services & Human Resources and is responsible for the Group Insurance Division, Group Human Resources, Legal Services, Group Marketing Services, Public Relations & Cultural Activities, Shares & Bonds Registry and Health, Safety & Security.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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HELLENIC BANK

For Cyprus Popular Bank and Bank of Cyprus, which ended up in resolution and a painful restructuring respectively in March, the downfall started on 26 October 2011: the date when EU leaders decided to implement a ‘haircut’ on Greek Government Bonds (GGBs) which, in turn, led to huge losses to private investors and banks which had them on their balance sheets as part of their valuable Core Tier-1 Capital. For Hellenic Bank, the then third biggest lender on the island, the events of 26 October were harsh but, as has since been proven, not disastrous. Today, the date might justifiably be seen as the one on which Hellenic confirmed the prudence of its management style over the previous few years.

t the end of 2011, a few months after the EU leaders’ decision to impose PSI (Private Sector Involvement), Hellenic Bank had in its possession GGBs with nominal value of €110 million, classified on its balance sheet as “held to maturity”. Following the finalisation of the terms of agreement on 21 February 2012, the Group recognized a total amount of impairment of €77 million which represented 70% of the nominal value of the bonds. Today the Bank has zero exposure to GGBs, having sold them in October 2012. In a fragile banking environment characterised by multiple credit rating downgrades of the Cypriot Government and its banks, as well as the continuing crisis in Greece and the notorious incident at the Evangelos Florakis Naval Base which plunged the economy into a deep recession, Hellenic Bank remained adequately capitalised and

HELLENIC BANK TIMELINE

avoided receiving capital state aid of any kind, or worse, being nationalised. The infamous PIMCO due diligence exercise demanded by the Troika, which diagnosed a capital shortfall for Bank of Cyprus and Cyprus Popular Bank of €5,616 million (base scenario) and €7,795 million (adverse scenario), was not devastating for Hellenic. According to PIMCO, Hellenic Bank had excess capital of €23 million under the base scenario and a shortfall of €333 million under the extreme scenario (without taking into account capital savings from the sale of the branch network in Greece). The harsh Eurogroup decisions of 25 March 2013 affected the whole spectrum of the Cypriot banking sector and the economy. Consequently, Hellenic Bank does face a number of challenges, given the unstable economic environment and capital control measures imposed as a reaction to the recent developments, but it remains independent and is not involved in any resolution or restructuring measures. Moreover, the bank

is not controlled by the Resolution Authority (i.e. Central Bank of Cyprus), hence the “privilege” to negotiate the sale of its branch network in Greece to Piraeus Bank, as requested by the Troika, on its own. In the first quarter of 2013, the bank booked a €10.3 million loss as a consequence of its discontinued Greek operations. The total cost to Piraeus Bank for the acquisition of the Greek operations of Hellenic Bank, Cyprus Popular Bank and Bank of Cyprus was €524 million. For Hellenic Bank, what is still pending is the fulfilment of the Troika’s demand to satisfy the PIMCO-diagnosed capital shortfall of €330 million. Under the terms of the Memorandum of Understanding (MoU) with the Troika, this must be satisfied by the end of September 2013. Hellenic Bank says that it is evaluating its options in order to draw up the most appropriate plan under the circumstances and in the given timeframe to ensure compliance with the required capital requirements. It says some-

1976 The Bank begins operations 1990 • The Insurance Services with a branch in Nicosia and 33 Department is founded, repreemployees. senting a number of insurance companies offering a wide choice 1985 The subsidiary company, of insurance products. • The first Hellenic Bank (Finance) Ltd, is International Business Centre of founded, providing asset finance. its kind is founded in Limassol. 1986 The subsidiary company, 1991 The network of Automatic Hellenic Bank (Investments) Ltd, Teller Machines (ATMs) estabis founded, providing investment lished, providing a 24-hour service. services.

30 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

1994 Following the success of the Limassol International Business Centre, a new centre in Nicosia begins operations. 1996 The Group acquires the onshore facilities of Barclays Bank PLC in Cyprus. Recognising the ongoing evolution of the Internet, the Group launches its own website.

Marinos Athanassiades Group Global Markets & International Banking thing else too: that it does not necessarily accept that PIMCO’s evaluation is correct and therefore will question it. In any case, if Hellenic fails to raise the necessary capital independently, it will not have a problem since the MoU removes any uncertainty by stipulating that, if necessary, public programme funds will be used to recapitalise Hellenic Bank and any other credit institutions that might need it. On 31 March 2013, the Bank’s main shareholders were the Archbishopric of Cyprus and its related parties with a total stake of 19.6%, the investor Fatkhullin Renat with 6.5%, the multinational financial services company Credit Suisse AG with 5.9% and the Bank of Cyprus Group with 5.2%. In total, international investors hold around 36% of Hellenic Bank.

Petros Ioannides Overseas Operations

He was employed by Hellenic Bank on July 2007 to head its Group Credit Risk department and implement the BASEL II agreement. Prior to joining Hellenic Bank he was part of the HSBC team in Cyprus and abroad. From 2009-2011 he was Head of Group Corporate Banking before being promoted to General Manager, Overseas Operations, to manage the operations of the Group in Greece and Russia. He is a member of various committees within the Bank.

The bank maintains a strong franchise within Cyprus with a market share of 12.2% in total deposits in Cyprus and 7.9% in total loans at the end of March 2013, according to its most recent financial results presentation to international investors. Customer deposits recorded a decrease of 12% to €6.9 billion compared to €7,8 billion in December 2012 (including the portfolio of the branch network in Greece). Customer deposits in Cyprus amounted to €6.9 billion, a fall of 4% from December 2012. Hellenic Bank posted a €31.7 million loss in the first quarter of 2013, taking a hit from higher provisioning for bad loans and from lower Net Income. Group provisions for non-performing loans more than doubled to €56.4 million from €24.1 million a year earlier, reflecting a deteriorating economic environment. The Hellenic Bank Group claims to maintain comfortable liquidity, benefiting from its high stable deposit base. Specifically, in March 2013 the ratio of gross loans to deposits remained at 66.6% while the ratio of net loans to deposits was 58.6%. Zero funding from the European Central Bank, zero raised liquidity from the Emergency Liquidity Assistance (ELA) and non-dependence on the interbank market all indicate the comfortable liquidity of the Group. Under Pillar 1 of Basel II, the Group’s Capital Adequacy Ratio at 31 March 2013 was at 14.7% (December 2012: 13.6%), the Tier 1 Ratio was 11.3% (December 2012: 10.9%) and the Core Tier 1 Ratio was 8.3% (December 2012: 8.2%). Correspondingly, the minimum required supervisory ratios for Hellenic Bank, taking into account the increment, which is calculated based on the percentage of the bank’s assets over the Gross Domestic Product of the Republic of Cyprus, enforced from 31 December 2012, are 11.7% (Capital Adequacy ratio), 9.7% (Tier 1 ratio) and 8.2% (Core Tier 1 ratio).

1997 The Limassol International Business Centre acquires ISO 9002 service quality certification – the only centre of its kind in Cyprus to do so. • The Card Services Department launches the first credit card in association with Mastercard, targeting the travel and entertainment sector.

opens in the Kolonaki area of central Athens. Representative Offices are opened in Sandton (South Africa) and Moscow.

1998 The first branch of Hellenic Bank

2000 Hellenic Alico Life Insurance

1999 Hellenic Bank Group.acquires the Ledra and Pancyprian insurance companies. The Hellenic Bank (Factors) Ltd subsidiary is established.

Marinos Athanassiades started his career with Hellenic Bank in 1993 as an F/X Dealer and subsequently served in various positions. He currently holds the position of General Manager, Group Global Markets & International Banking and he is responsible for the Treasury, Dealing room, Financial Institutions Department, Private Banking Department, Hellenic Bank (Investments) Limited, Trust & Custodian Services Department, International Banking Division and the Representative Ofﬁces in Moscow, St. Petersburg and Kiev.

As noted during the presentation of the financial results to the Bank’s investors at the end of March 2013, the Directors and Management of the Group are closely monitoring developments in relation to the implementation of the recent decisions of the Eurogroup and the final MoU for Financial Assistance to Cyprus and taking all necessary measures to manage the negative impact on its operations caused by the newly formed business and economic environment. The strategic targets of the Group continue to focus on the effective management of credit risk, the safeguarding and enhancement of capital adequacy ratios, ensuring sound liquidity, and cautious and rational development with a view to permanent profitability.

Company Ltd is launched for the provision of bancassurance products, following an agreement between the Hellenic Bank and the American Life Insurance Company (Alico AIG Life). • Expansion of the Hellenic Bank branch network in Greece continues with the opening of six new branches, including the first in Thessaloniki.

Ltd launches the electronic brokerage service, HBI eTrade. • Hellenic Alico Life provides bancassurance products through the Bank’s branch network across Cyprus. • Opening of the Larnaca International Business Centre.

2001 Hellenic Bank (Investments)

2003 Hellenic Bank Investments Ltd

2002 Launch of Hellenic Net Banking.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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THE PRUDENT BANKER

Gold: In what way has the new financial environment, created in Cyprus after the Eurogroup decision and loan agreement, affected Hellenic Bank and the measures it has taken? Makis Keravnos: The changes to the financial sector and the economy, particularly those emanating from the decisions taken by the Eurogroup, as reflected in the Memorandum of Understanding (MoU) that Cyprus has signed, have created a new environment for Cyprus and changed the banking sector significantly. Hellenic Bank, despite taking precautions and, as always, managing the effects of the crisis in the best interest of its shareholders, customers and investors, has unfortunately also had to suffer the consequences of these decisions.

obtains a license from the Securities and Exchange Commission to operate as a Cyprus Financial Services Company. 2004 Opening of the new Head Office building in Nicosia. • Adoption of EFQM (European Foundation for Quality Management). 2005 Hellenic Bank is recognised for the second consecutive year by

Hellenic Bank Group CEO Makis Keravnos acknowledges that the decisions taken by the Eurogroup and the repercussions of the Memorandum of Understanding between Cyprus and the Troika have changed the banking sector significantly, caused a loss of confi-

Although the Group is not subject to any reorganisation/resolution measures, and its customers “escaped” a levy on their deposits, it will be affected by the changes to the supervisory/regulatory framework that are included in the MoU. In addition, the restrictions imposed on the transfer of capital and, generally, the present negative economic environment and the drastic changes to the other two banks have all had a direct negative impact on the Group. We believe that the Eurogroup’s decision was unfair to Hellenic Bank’s customers and investors, who are feeling the consequences even though they chose a Bank which took timely decisions and preventive measures in order to minimise the effects of the crisis, which was not in any way caused by the actions of our Group. However, despite the decisions that have negatively affected the financial system, Hellenic Bank continues to provide a smooth service, to take preventive actions and to maintain its strong balance sheet. At the same time, it is making constant efforts to strengthen its capital base and to maintain a healthy liquidity position. Since the Eurogroup decision on Cyprus of 25 March 2013, the Board of Directors, the Executive and General Management of the Group have focused on taking measures to handle all potential and anticipated negative impacts on its operations due to the new circumstances. In particular, the loss of business confidence in Cyprus is a major hurdle and one that need to be overcome through a joint effort by the Government, the Central Bank, local businesses and individuals, as quickly as possible.

JP Morgan for its fully automated transfers of almost all SWIFT payments sent from Hellenic Bank to JP Morgan. 2006 The leading quarterly magazine The Global Custodian, specializing in the international security services business, names Hellenic Bank’s Custodian Service as first among custodians in Cyprus.

32 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

What are the main challenges that Hellenic Bank is currently facing and how is it called to manage them? The biggest challenge that Hellenic Bank is facing at this moment is to ensure its recapitalisation, by achieving the goal of maintaining its private ownership and avoiding the need for state support. According to the PIMCO report – about which Hellenic has expressed its reservations, citing among other concerns its non-transparent nature – on the recapitalization needs of the banking sector, Hellenic Bank has a capital surplus of €23 million according to the baseline scenario and a capital gap of €333 million according to the extreme scenario. Following the sale of the Bank’s branch network in Greece to Piraeus Bank on 26 March, in addition to the savings resulting from the sale, the capital gap of the Bank was reduced to an estimated €300 million (according to the extreme scenario). The Central Bank of Cyprus has given the Bank until the end of September to find the funds required on the basis of this scenario and we are examining various financial and legal options in relation to this. The situation is quite complex and difficult, involving painful measures such as the sale of our Greek operations, but we are hopeful that we can maintain the private status of the Bank and that we will not need any state support, despite the difficult conditions and the negative environment in which we operate. How have the restrictions applied by the Central Bank of Cyprus (CBC) affected the banking system as a whole? Hellenic Bank is obliged to comply with the

2007 The Ukrainian Central Bank grants approval for the opening of a Representative Office in Kiev. • For the second consecutive year, The Global Custodian ranks the Custodian Services of Hellenic Bank first among custodians in Cyprus. • Hellenic Bank becomes the first Cypriot bank to offer trilingual Electronic Banking services, after the intro-

duction of the Greek and Russian versions of Hellenic Net Banking. 2008 ISO 9002 international service quality certification is reconfirmed for the Limassol International Business Centre. • The Global Custodian recognises the Bank’s custodian services unit as the ‘Top Rated’ Custodian for the third consecutive year.

HELLENIC BANK

dence in the system and had a very negative impact on Hellenic Bank. Nevertheless, in this exclusive interview with Gold, he insists that the Bank remains strong and hopes to maintain its independence as it moves towards satisfying its capital adequacy requirements by the end of September. CBC’s decisions and the relevant decrees issued by the Minister of Finance regarding restrictions on banking transactions. We believe that the present restrictive measures regarding the internal market are still excessive and are one of the reasons that led to the recent downgrading of Hellenic Bank by Fitch Ratings – one that is not related to the Bank itself. Our inability to fully serve our customers’ needs, due to the restrictive measures that have been imposed on us, has had an impact on our relationship with some of customers. Unfortunately, what has happened has shaken the public’s trust in banks in general and in the reputation of Cyprus as a financial centre, even though we – as Hellenic Bank – differentiate ourselves from the rest of the banking sector and have, so far, successfully managed these changes. In general, I would say that the Group is coping quite well. It has a comfortable liquidity (ratio of net loans to deposits 61%) and has not needed any assistance in the form of cash from the Emergency Liquidity Assistance (ELA) of the European Central Bank.

WE BELIEVE THAT THE PRESENT RESTRICTIVE MEASURES REGARDING THE INTERNAL MARKET ARE STILL EXCESSIVE • Hellenic Bank wins Deutsche Bank’s 2008 EUR STP Excellence Award for the Exceptional Quality of Payment Messages. 2009 An agreement is signed between Hellenic Bank and the European Investment Bank for the granting of loans on favourable terms to small and medium-sized enterprises in Cyprus and Greece.

What measures do you consider necessary for Cyprus to come out of the recession? We believe that, following the recent Eurogroup decisions and agreement on the MoU, Cyprus should intensify its efforts to change its financial model in order to support economic growth so that the island soon emerges from the recession. We expect to see the implementation of effective measures to reduce unemployment and improve business conditions. Generally speaking, every effort must be geared towards restarting the economy in order to create investment projects and to open up job opportunities. On the other hand, we also need to intensify our efforts to rebuild credibility and trust in both the economy and the country’s financial system. Attracting foreign investment by offering a favourable business environment and the right incentives will also be key, as will encouraging new investments in sectors such as energy, green economy and tourism. What will Hellenic Bank focus on and what messages do you want to give your customers and those foreign investors who have placed their trust in you? We are in constant communication with our customers in order to preserve to the maximum our cooperation and the excellent relationships that we have developed with them. The limitations imposed on the transfer of capital have definitely had a negative impact on many of our business relationships but we expect that lifting them will immediately benefit both the Bank and its customers. Our main message is that we are a Bank with a strong balance sheet, prudent management

2010 Hellenic Bank passes the European Union Banking Stress Test Exercise. This exercise, carried out at the Bank’s own initiative, recognises its healthy financial position and strong capital adequacy even in the worst-case scenario. • Hellenic Bank wins the Citi Performance Award of Citi Bank for its fully automated swift transactions towards Citi Bank.

and comfortable liquidity, and we are making constant efforts to reinforce our capital adequacy. People who bank with us know that we have always been a reliable partner and that we will support them. Unfortunately, many of the decisions that are deeply affecting us were taken without any prior consultation with us. What measures has Hellenic Bank taken to contribute to the overall effort to restart the economy? Hellenic Bank is contributing in a proactive and decisive way. Since 17 April, we have lowered the basic lending interest rates, thereby helping tackle the financial crisis and contributing to efforts to reduce the burden on businesses and households in debt. The Group applies a rational pricing policy, taking into account the main parameters of the banking system in Cyprus and the international environment. We remain close to our customers and we are prudently supporting them as much as possible. What kind of role do you expect the Hellenic Bank Shipping Business Centre to play in this effort? As one of the leading financial institutions in Cyprus, we provide the shipping business community with a complete range of products and services. Hellenic Bank has successfully served the shipping sector for a long time now and, during this period, a sizeable portfolio of reputable customers from the shipping industry has been developed. This customer portfolio consists of some of the best known ship management, chartering, bunkering and marine insurance companies. Dedicated to exclusively serving the island’s shipping business community and capitalising on the long standing tradition of the Bank’s affiliation with the shipping industry, the Hellenic Bank Shipping Business Centre is the first of its kind in Cyprus. All the know-how and expertise accumulated throughout the years is now concentrated under one roof. Through a mixture of core and tailor- made services, combined with a highly-experienced team of professionals, the Hellenic Bank Shipping Business Centre aims to provide a new level of experience to this selected group of clients.

2011 The Hellenic Bank Group achieves another of its strategic targets and reinforces its presence abroad. Hellenic Bank operates its first branch in the Russian capital, offering full banking operations from 11 January 2011. The company-owned branch is located in the centre of Moscow. 2012 Creation of the first Eco-

Friendly, Energy Efficient Branch in Limassol 2013 Launch of the Shipping Business Centre in Limassol, the first of its kind in Cyprus • At the request of the Troika Hellenic Bank sells its branch network in Greece to Piraeus Bank, following a transnational agreement between Greece and Cyprus.

THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

Gold 33

OPINION

The Safest Way to Let Banks Fail Imposing losses on creditors won’t be enough in a systemic crisis

he European crisis – and especially this spring’s events in Cyprus – has put the spotlight on a once-taboo question: Can a major bank be allowed to fail? Looking back at recent financial history, it is quite difficult to find examples of fully-fledged bank failures in which losses have been forced upon creditors. Instead there are manifold examples of banks being rescued, either with or without public support. Such rescues have led to the perception that certain institutions are “too big to fail” or “too interconnected to fail.” These propositions alter the incentives of bank owners and lenders. Moral hazard has become entrenched in the system. Why have banks not been allowed to fail? One factor is path-dependence: By not letting banks fail in the past, policymakers face strong pressure not to let banks fail in the future. Time-inconsistency also plays a role: The rewards from letting banks fail – reduced moral hazard chief among them – lie in the future, whereas the costs – financial destabilization and voter outrage – are imminent. But the biggest obstacle is simply that, for now, the markets do not expect big banks to be allowed to fail. There is no concept more fundamental in economics and finance than expectations. When unexpected events occur, disorder can set in instantly. This is why the initial agreement to haircut Cypriot depositors caused such unrest. It was jarring enough that deposits – perceived as the safest of all forms of credit – would be hit under the plan. But to hit deposits below the insured level of €100,000 was seen as crossing a red line. Cyprus was – unfortunately, to my mind – interpreted as the beginning of an unexpected regime change in how bank failures are dealt with in Europe. Hence the importance of the European Commission’s Bank Recovery and Resolution Directive, which seeks to establish a pan-European framework to allow for orderly bank resolution. As the European Parliament’s lead negotiator on the directive, I have been studying the Cypriot case and other examples of bank failures quite intensively. A few points seem fundamental to me: First, bank failures must be managed as predictably as possible. One cannot alter the rules of the game without adequate prior notice. Even the most well-considered line of action will have adverse con-

Bank failures must be managed as predictably as possible

By Gunnar Hökmark

sequences on market and depositor confidence if it is not carried out according to clear ex-ante principles. Formally secured investments such as insured deposits and covered bonds must be fully protected and exempt from the scope of any bail-in. Second, the bail-in tool is complex to implement. It has many benefits, not least that bank creditors will be more certain of the riskiness of their investments. If the markets have been prepared for it, bailing in creditors will help resolve banks without the use of taxpayers’ money. But bailing in creditors in large volumes carries risks of contagion, especially when applied to banks whose creditors are, to a large extent, depositors. Third and last, a bail-in alone will probably not be sufficient in systemic crises. When the payment system – the most basic infrastructure of our modern economies – is in peril, government has a responsibility to act. Not because it is desirable, but because the alternative is far worse. If our new bank-resolution rules do not allow for government intervention as a last resort, then future resolutions will be more or less solely dependent on a bail-in. In the heat of a systemic crisis, this might cause more problems than it solves, thereby reducing the probability that bail-in is used at all. Hence the best framework for dealing with a bank in severe stress should allow for both kinds of tools. When a bank is taken into temporary public ownership, for instance, moral hazard should simultaneously be addressed by wiping out previous shareholders and bailing in holders of unsecured debt to the largest feasible extent, with uninsured deposits being preferred in the hierarchy. If markets know that government can intervene to contain chaos while also imposing losses on shareholders and creditors, then the application of bail-in will be more credible compared to a scenario in which bail-in alone is the only option. Against this background, I am very satisfied that the European Parliament’s Economic and Monetary Affairs Committee backed my main proposals when we voted on the text of the directive. Once European finance ministers have reached a common agreement, we can initiate final negotiations on a joint legislative text that will enter into force on January 1, 2015. Done as outlined above, the forthcoming framework for bank resolution can both reduce moral hazard and enhance systemic stability.

info: Gunnar Hökmark is a Swedish member of the European Parliament, vice president of the European People’s Party Group and rapporteur for the Bank Recovery and Resolution Directive.

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OPINION

Cyprus will survive as an international financial centre The country has faced crises before, emerged stronger from them, and will do so again.

he eurozone crisis interrupted more than three decades of growth for Cyprus as an international business hub. The consequences have been harsh for the country, with the banking sector bearing the brunt of a financial assistance package which will see one bank wound down and another recapitalised through a depositors’ bail-in. The signed Memorandum of Understanding (MoU) sets out measures for restoring the soundness of the banking sector, controlling public finances and ensuring sustainable growth. Cyprus has secured the funds needed and has agreed to implement reforms that, despite the pain, will ultimately strengthen the economy. Following its restructuring, the key Cypriot bank will find itself on a stronger capital footing, enabling it to focus on serving the needs of businesses and individuals in Cyprus, while unaffected local and international banks may identify new opportunities. Lifting of capital controls and diligent implementation of the MoU will be necessary to restore the country’s credibility and to regain the trust of the markets. The main pillars of the development of Cyprus as a business centre, which have been the tax, legal and regulatory frameworks and the quality of professional services, have remained fundamentally unchanged. Furthermore, the strategic geographic location as a European gateway to the East and the excellent living conditions were beyond reach in the context of the MoU agreement. The country retains one of the most competitive tax environments in the EU, fully compliant with the EU Code of Conduct and OECD Harmful Tax Practices, working under double taxation treaties with 47 countries. It has a robust common law linked legal system (based on English law), easily understood by international businesses. Cyprus continues to have an excellent EUcompliant regulatory environment and recognised central administration, companies providing operational support and reporting solutions to a

Cyprus will not relinquish its unique advantages as an international business hub

By Evgenios C. Evgeniou

wide variety of holding and financing companies, funds and investment management firms. According to the final round evaluation report by Moneyval, Cyprus ranks higher in FATF compliance than most other EU countries and is on the OECD ‘white list’. Per the MoU, Cyprus has agreed to further improve anti-money laundering implementation, on the basis of an audit by Moneyval and an independent auditor, to make Cyprus “best of class” in the EU. In shipping, the island is the only EU-approved ‘Open Register’ with one of the most competitive and wide ranging taxation systems covering ship owning, ship management and chartering, offering a secure, legally transparent and attractive basis of operation. The World Economic Forum identified Cyprus as one of 35 innovation-driven economies in 2011-12. The country enjoys a highly-qualified and multilingual workforce and the professional services sector is dominated by UK-qualified accountants and lawyers with deep expertise and collective experience. Cyprus will not relinquish its unique advantages as an international business hub. The underlying strength in professional services and non-financial sectors of the economy will be important to Cyprus’ long-term economic recovery. The active maritime, technology, education and tourism industries continue to require a stable financial services sector to support their activities. On the horizon, the commercialisation of natural gas reserves will augment this requirement and necessitate the provision of new and specialist services. An EU member for nine years, Cyprus is committed to both the Union and the common currency. Operating within its legal and regulatory frameworks, the country will focus on developing key, vibrant industries with an emphasis on innovation to further evolve as a competitive and reliable international business hub. Cyprus has faced crises before, emerged stronger from them, and will do so again.

info: Evgenios C. Evgeniou is CEO of PwC Cyprus. This article first appeared on the Professional Wealth Management website.

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XXXX INTERVIEW

ANTICIPATING

G1.

r e t t e b a Future

old: In practical terms, how does CIPA go about attracting investors to Cyprus? Christodoulos E. Angastiniotis: Our main initiatives revolve around three areas: The promotion of Cyprus in key target markets – Russia, China, India, the Middle East and Europe – through advertising, participation in trade shows and business events, the organisation of CIPA-led events and targeted face-to-face meetings. For example, we were one of the key exhibitors at the Annual Investment Meeting that took place in Dubai in April and we were able to present a variety of opportunities to potential investors from the region. The facilitation and investment support for new or existing foreign investors interested in investing in or through Cyprus. In order to attract foreign investment in development projects, we have compiled a list of major development projects in the public and private sector that are available for foreign investment and these are promoted to targeted contacts made by the Agency abroad. The list is also available on the CIPA website. At the same time, potential investors proactively contact CIPA with requests for information on the country’s business climate, incentives and other information pertinent to their industry. Advocacy for the necessary reforms to improve the business environment and the ease of doing business in and through Cyprus. We actively collaborate with other organisations/agencies to identify key areas of improvement and develop suggestions/ proposals on how to address problems and enhance the environment so that we provide the best service possible to foreign investors.

The CIPA team is working very hard and is focused on the task at hand.

Gold: How would you describe the Agency’s achievements to date? C.E.A.: We have realised various achievements but I feel that there is much more work to be done. Our role now is more crucial than ever due to the present economic climate and the fact that foreign investments are a catalyst for our economy’s growth. Gold: How much more difficult is it going to be for CIPA to attract and encourage foreign investment in the present post-bailout climate? C.E.A.: The current situation has certainly not made our job easier, rather the opposite. We are facing various challenges including the country’s negative image and the perception that the banking system and the economy are risky for foreign investors. In addition, our competitors are increasing their efforts to take advantage of the situation and tempt our clients – the foreign investors – away. In the midst of all this, we remain optimistic and we are working on improving today’s not-so-positive image of Cyprus. One positive sign is the fact that we have not seen a mass exodus of foreign investors from Cyprus after the bailout. This shows that they truly believe in the advantages enjoyed in Cyprus today such as top quality human capital, a transparent regulatory framework, a competitive tax system, the network of double tax treaties, the island’s key geographical position and the quality of life. Cyprus has always welcomed foreign investors and provided a strong platform for doing business, combined with low operating costs and excellent professional services. We expect that our competitive advantage will be further enhanced in the near future, especially

THE CYPRUS INVESTMENT PROMOTION AGENCY (CIPA) IS THE ORGANISATION WITH THE CRUCIAL MANDATE OF PROMOTING CYPRUS AS AN ATTRACTIV INVESTMENT DESTINA- E TION AND AN INTERNATIONAL BUSINESS CENTRE, AS WELL AS BEING THE SOLE AGENCY THAT ADDRESSES THE NEEDS OF FOREIGN INVESTORS IN CYPRUS. ITS BOARD OF DIRECTORS, INCLUDING THREE NEW MEMBERS, RECENTLY CONVENED UNDER ITS PRESIDENT, CHRISTODOULOS E. ANGASTINIOTIS, WHO SPOKE TO GOLD ABOUT CIPA’S AIMS, HOW IT IS DEALING WITH THE ISSUE OF INVESTMENT IN THE CURRENT CLIMATE AND THE SECTORS HE FORESEES AS BEING KEY TO THE COUNTRY’S ECONOMIC FUTURE. By Joh

n Vickers, Photograph by Jo Micha

elides

36 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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WE NOW HAVE A CHANCE TO DEVELOP A LEANER, FASTER AND FRIENDLIER ECONOMY THAT WILL BE MORE ATTRACTIVE TO FDI with a reduction in operating and human capital costs. We now have a chance to develop a leaner, faster and friendlier economy that will be more attractive to FDI. Gold: Have you had any indications so far of any decrease in interest or, on the other hand, of investors looking at Cyprus as a place where they will find business opportunities, precisely because of the crisis? �� are currently seeing increased inC.E.A.: We terest from new investors looking for business opportunities in emerging growth areas such as renewable energy and oil and gas. A crisis always brings about new opportunities which visionary investors are able to identify and take advantage of. The new geopolitical landscape in the area, as well as the developments in oil and gas, will bring about new partnerships and areas of collaboration such as the one we are currently forging with Israel. Gold: Even before the agreement with the Eurogroup, CIPA had made a number of proposals to the previous government on simplifying certain processes and cutting bureaucracy. What kind of response were they given? C.E.A.: We have so far seen minimal imple-

mentation. We welcome any changes that will improve the ease of doing business and result in prosperity and growth. I think that we are all in agreement that our governmental processes and bureaucracy require re-engineering and extreme streamlining in order to speed up results and be more customer-oriented. Outdated procedures, introverted attitudes and general bureaucracy should be combated directly and this can only be achieved with the help of all stakeholders. In most cases, an investment decision depends on whether an investor feels welcome and the public service must take steps to eliminate the negative predisposition that characterizes it and go the extra mile to help and welcome investors. The new Government has received our proposals positively and is committed to reforming the public sector by taking them into account. CIPA works closely with the Government in this area and has put forward various proposals. It is also important to note that CIPA has taken the lead in establishing a Ministerial Committee for the creation of a rapid Strategic Investments Licensing & Implementation process (“Fast Track”) and which is now in force. This is the first major step towards eradicating bureaucracy in the area of licensing for large investment projects that aim to benefit the local economy. Gold: One of the main stated aims of CIPA is “to promote Cyprus as an attractive international investment centre in key priority growth sectors”. What are these “key priority growth sectors” today and have they changed over the past five years? C.E.A.: The Cyprus economy is mainly based on the services sector which is about 80% of the Gross Domestic Product (GDP). This sector is expected to remain the main driver of growth in the country with a greater focus on tourism. International business activities will continue to contribute significantly to GDP but we expect to see a decline in the near future. There is ample opportunity to cultivate attractive new and existing sectors that offer a wide range of investment opportunities. The first main sector is energy. The significant reserves of natural gas in Cyprus’ Exclusive Economic Zone has brought the country to the forefront of the global energy market as a potential key player in the EMEA region. Many foreign investors have already expressed interest in undertaking energy projects in Cyprus, focusing on the development of the necessary infrastructure for the exploitation of natural gas. We have all seen the recent developments with Noble Energy, ENI/KOGAS and Total and we expect new partnerships to be announced soon. This sector is going to bring an inflow of auxiliary services companies that will set up shop in Cyprus to cater for the new demand. It is also expected to drive the creation of a variety of new jobs in the sectors of construction and services. Energy is

at the forefront of our future prosperity and will undoubtedly bring revenue and other benefits to Cyprus. In addition, the recent revision of the legal framework presents significant opportunities for domestic and foreign investors in the area of Renewable Energy Sources (RES) and Technologies. Gold: Presumably the second key sector is shipping? C.E.A.: Yes. Shipping is already a strong sector in Cyprus which is an internationally renowned centre that provides extremely attractive investment options. The new Tonnage Tax System, enacted in April 2010, remains to date the only EU approved tonnage tax regime which covers all three key shipping activities offered today with benefits for ship-owning, ship-management and crew members. Gold: What about the much-talked-about Fund Industry? C.E.A.: The Cyprus fund industry has experienced growth in recent years due to a number of regulatory developments, as well as the streamlining of procedures and increased promotion, especially for International Collective Investment Schemes. The recent transposition of the Undertakings for Collective Investment in Transferable Securities (UCITS) IV Directive, where Cyprus offers a European passport to the Fund Management Industry, is expected to enhance the country’s status as an attractive jurisdiction for investment funds. Cyprus is also implementing measures for the transposition and the Alternative Investment Fund Managers Directive (AIFMD) so that it will be able to offer outstanding possibilities for cross-border and global fund distribution, benefiting from an efficient and reliable fund infrastructure. Furthermore, Cyprus has built a strong position as an internationally recognized hub for FX and other investment establishments. The investment services sector, made of up of Cyprus Investment Firms, has grown considerably over the last few years and is contributing to the country’s growth and providing employment opportunities to sector professionals. Gold: There has been talk of other areas such as Education, Health and Sports Tourism too. C.E.A.: Cyprus has been attracting investor interest in Education. The island is perfectly located for such investments which also fit in very well with the fact that this is the country with the highest percentage of tertiary education graduates in the European Union. Cyprus is committed to further strengthening education and is focusing on reforms to achieve sustainable growth. We provide great opportunities and encourage further growth in the establishment of

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INTERVIEW

new universities, colleges and research institutes. Regarding Health, Wellness & Sports Tourism, these sectors have received significant attention in recent years and we are working hard on preparing the platform for such interest. The potential is immense and this has been identified by a number of industry experts with vision. Finally, a number of large development and infrastructure projects, such as marinas, golf courses, as well as more integrated development projects including residential, commercial and high-quality educational and health services, are currently available for foreign investment. Gold: How close a watch does CIPA keep on what competing jurisdictions are doing? C.E.A.: CIPA is continuously monitoring competitor activities and especially jurisdictions like Malta, Ireland and Luxembourg. It is only natural that competitive jurisdictions will attempt to take advantage of our weak position but the majority of our investors will remain loyal to Cyprus and its hospitality and even find ways to increase their presence due to the new processes and enhanced business environment that will emerge. We are ensuring that we quickly address the needs/problems faced by investors today and make them feel that we are by their side with support and encouragement for the achievement of their goals. Additionally, we continue to promote Cyprus in key markets and ensure that it remains a viable investment destination option for new investors. I personally escorted the President of the Republic during his trip to Israel in May and had various business meetings that focused on future investments among the two countries. Gold: Have you met with President Anastasiades to discuss CIPA’s role in the new government’s strategy? The President of the Republic is placC.E.A.: �� ing great emphasis on attracting investment into Cyprus and boosting the economy. We have already had a few meetings to discuss CIPA’s role and how it fits into the new strategy which is currently evolving. We fully support the efforts of his government to create a modern, competition-driven business environment that is fully aligned with the demands of international business. It is encouraging to see that the President fully understands the importance of foreign direct investments as drivers of growth and the subsequent creation of new jobs which are needed today more than ever. Gold: How significant do you believe the Government’s policy of offering Cypriot citizenship to those investing a minimum amount in the island will be? Are there any indications of its success? Combining investments and citizenC.E.A.: �� ship is a concept that has been adopted by

other successful countries such as Canada and Australia. Cyprus has the opportunity to tap into the niche market of investors looking both for a new place to live and do business in. Our EU membership makes Cyprus an attractive destination for Asian-based investors wishing to do business in the EU. We have already seen great interest from Chinese investors who are keen to do just that. Foreigners can take advantage of the recently announced Citizenship Scheme which states that, if they have deposits of a minimum of €3 million for five years in a Cyprus bank, they will be eligible for citizen-

CYPRUS HAS THE TRUE POTENTIAL TO BECOME ONE OF THE RICHEST PER CAPITA COUNTRIES IN EUROPE ship. Foreign investors who decide to invest a minimum of €5 million in Cyprus with a variety of activities including the purchase of offices, stocks, companies, etc., will also be eligible for citizenship. There is also a Permanent Residency Permit (PRP) Scheme, which offers permanent residency status to investors acquiring property to the value of at least €300,000. Investors can apply for these schemes provided they meet the specific criteria for obtaining Cypriot citizenship. Gold: There have been a number of highprofile investment projects that have been publicized and then abandoned. I’m thinking specifically about the old Larnaca airport and the land opposite the Hilton Cyprus. Should we learn to keep quiet until deals have been struck? C.E.A.: Keeping quiet until deals have been struck is, of course, considered a Best Practice and this is what experience has taught us. We also believe in communication and transparency throughout the process when there is a possibility of implementing a large project in the country. It is crucial for everyone to understand the importance of such investments and how they will contribute to our economy. We ask that everyone embrace these possibilities with an open mind as opposed to displaying a negative attitude towards them. It is clear that large investments will lead the economic development of the country. Gold: What was your first message to your newly-appointed Board Members and those who will continue to serve?

C.E.A.: My message first and foremost was for everyone to roll their sleeves up and get to work on the right things with the right mindset so that we can bring investment growth and success to the island. Our Board has a crucial role in defining the strategy for investments and we must create a vision that will drive the right actions for the creation of a cutting-edge business environment that is attractive to investors. Gold: To an outside observer of Cyprus 12 months ago, the request for a financial assistance package would have come as a great surprise. How would you explain to that observer what happened to the economy and the banking sector? C.E.A.: Cyprus was driven out of the international markets in 2011 so someone who was following such developments would not have been surprised by the request for financial assistance. A variety of factors led to our demise, including the effects of the global financial crisis, our exposure to the Greek bonds and their ‘haircut’, the overexposure of Cypriot banks in foreign markets, uncontrolled public spending and more. We were, unfortunately, reluctant to take the necessary measures and radical action sooner. If we had done so, we could potentially have avoided the severity of the Eurogroup’s deal and bailout that has crippled our economy and banking system. We are going through a rough patch and it is no secret that anydecisions taken will be painful with long-term repercussions. However, we have an opportunity to change the way we do things and how we operate. Let’s not miss the opportunity to analyze our mistakes and take corrective action that will have a longstanding impact on the country’s growth. Gold: How optimistic/pessimistic are you about the Country’s short-term and longterm prospects? have always been an optimistic perC.E.A.: I�� son. We are definitely going to go through a difficult transition period over the next few years and we will suffer but we will prevail for sure. We need to focus on measures that will improve our business environment now and in the future. The government is focusing on measures to boost the economy, create new jobs and attract foreign investment. At the same time, the government will become more efficient with less bureaucracy and cultivate the necessary customer-friendly approach to attract and retain investors. We finally have an opportunity to restructure and implement reforms that are long overdue. With hard work we will get back on our feet and become even stronger. And once we start to profit from our hydrocarbons discovery, Cyprus has the true potential to become one of the richest per capita countries in Europe.

38 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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BANKING BANKING

he decision to substantially restructure Cyprus’ banking sector came as no surprise, given that it was deemed by the other countries of the eurozone and the IMF to be a major cause – if not the main one – of the island’s financial difficulties. The detailed reform

plan prepared by the Troika, which is part of the Memorandum of Understanding agreed with Cyprus, essentially turns the sector upside down. It involves considerable downsizing and restructuring in order to restore the banks’ solvency and viability, reinforce the sector’s resilience and regain public confidence. The domestic banking sector (including the cooperative credit institutions), which until recently represented 550% of GDP, has been already downsized

significantly to 350% of GDP. Further downsizing will be achieved through the restructuring of the cooperative credit institutions. Gold presents a detailed roadmap of what has to be done over the next 30 months to the end of 2015 in order to put the banking sector in order. The Troika has placed great emphasis on the second half of this year, when the most important aspects of the restructuring plan must be implemented.

Steps to be followed by Cyprus under the guidance of the Troika for the restructuring of the banking sector By Kyproula Papachristodoulou

40 Gold the international investment, finance & professional services magazine of cyprus

Overall Banking Sector

May 2013

In order to safeguard the banks’ capital buffers, the classification of loans will be amended by the Central Bank of Cyprus (CBC) and applied by the end of May. The CBC‘s guidance on the classification of loans as non-performing will be amended to include all loans in arrears by more than 90 days.

June 2013

Domestic banks relying on Central Bank funding or receiving state aid are required to establish and submit to the CBC, quarterly, medium-term funding and capital plans at the end of each quarter starting from 30 June 2013. The report will be transmitted to the ECB, the EC, the European Stability Mechanism (ESM) and the IMF. The plans should realistically reflect the anticipated deleveraging in the banking sector and reduce dependency on borrowing from the CBC, while avoiding asset fire sales and a credit crunch. The CBC will implement a unified data reporting system for the banks and the cooperative credit institutions by the end of June 2013. The publication of statistical data will be extended to the cooperative credit institutions. The authorities should step up the monitoring of the indebtedness of the corporate and household sectors and prepare quarterly reports, including information on the distribution of assets and liabilities across households, and an assessment of debtservicing capacity and refinancing activities by the end of June 2013. The Financial Stability Report will be published on a yearly basis from December 2013. The authorities should develop a framework and issue legislation as needed to address legal, administrative or other impediments affecting the restructuring of viable borrowers, while preserving credit discipline by the end of June 2013. The approach will be based on market-based voluntary workouts, underpinned by measures to strengthen the legal framework to support debt restructuring. Amendments will be introduced to ensure the reduction of built-in costs (fees, requisites) for credit institutions and clients during restructuring.

December 2013

A mediation service between banks and their clients to achieve fair debt restructuring will be established by the end of June 2013.

The CBC will increase the minimum Core Tier 1 capital ratio from the present level of 8% to 9% by December 2013.

July 2013

March 2014

The supervision of cooperative credit institutions will be integrated into the CBC by the end of July 2013. The authorities will align the regulation and supervision of cooperative credit institutions to that of the commercial banks. The accounts of cooperative credit institutions, above a size to be decided by the CBC after consultation with the EC, the ECB and the IMF, will be subject to an independent annual audit by an external, recognized and independent auditing firm.

September 2013

The CBC should create a central credit register listing all borrowers and beneficial owners from commercial banks and cooperative credit institutions in order to enable these institutions to check new loan applications against the register. The credit register will identify the borrowers who are or were in arrears and will help monitor credit risk and large exposures. A legal framework for the Credit Register should be set up by 30 September 2013. It should become operational by 30 September 2014. The CBC should review its current regulatory framework with respect to loan origination processes, asset impairment and provisioning, and the treatment of collateral in provisioning by the end of September 2013. The new prudential regulations will enter into force by the end of March 2014. Legislation to strengthen the banks’ governance should be passed and implemented by the end of September 2013. This will prohibit commercial banks and cooperative credit institutions from lending to independent board members. It will also remove any board members in arrears on existing debts to their banks. Lending to other board members will be prohibited above a certain threshold. Loans and other credit facilities to each board member will be disclosed to the public. A majority of directors on the banks’ boards will be independent.

The new prudential regulations on loan origination processes, asset impairment and provisioning, and the treatment of collateral in provisioning, will enter into force by the end of March 2004. The CBC will introduce mandatory supervisory action based on capitalization levels by the end of March 2014.

June 2014

The first stress-test exercise of the banks should be completed by the CBC before the end of June 2014. Stress-testing will be integrated into regular off-site bank supervision and will serve as an input into Pillar 2 assessments. Supervisory stress-tests will be carried out annually. The necessary legislative changes to overcome the administrative hurdles and the legislative framework currently constraining the seizure and sale of loan collateral must be submitted to the House of Representatives by mid-2014. The legal framework will be amended such that property pledged as collateral can be seized within a maximum time-span of 18 months from the initiation of legal or administrative proceedings. In the case of primary residences, this time-span could be extended to 30 months.

September 2014

The Credit Register should become operational by 30 September 2014.

December 2014

Subject to the macroeconomic conditions at the time, the MoU requests the implementation of the new legal framework which will make the seizure of property pledged as collateral for housing loans possible within 18 months and 30 months (see above) by the end of 2014. By the end of December 2014, the CBC will update the liquidity regulations of euro-denominated assets to avoid the concentrated exposure of Cypriot banks to risky assets.

the international investment, finance & professional services magazine of cyprus

Gold 41

BANKING

Bank of Cyprus Given the systemic importance of Bank of Cyprus, the Troika recognizes the importance of the speedy integration of the operations of Cyprus Popular Bank (Laiki Bank), improvements to operational efficiency, optimisation of the recovery of non-performing loans and the progressive normalisation of funding conditions. In order to achieve these goals and to ensure that Bank of Cyprus can operate with the maximum safeguards to preserve its stability and continued viability during the transition period, the CBC, upon consultations with the Ministry of Finance, will appoint a new Board of Directors and an acting Chief Executive Officer until Bank of Cyprus’ new shareholders hold a general meeting. The terms of reference of the independent valuation exercise should be agreed in consultation with the EC, the ECB, and the IMF no later than mid April 2013. To ensure that the capitalisation targets are met, a more detailed and updated independent valuation of the assets of Bank of Cyprus and Cyprus Popular Bank will be completed by the end of June 2013. Following the valuation, if required an additional conversion of uninsured deposits into class A shares will be undertaken by the end of June 2013 to ensure that the core tier one capital target of 9% under stress by end-programme can be met. Should Bank of Cyprus be found to be overcapitalised relative to the target, a share-reversal process will be undertaken to refund depositors by the amount of over-capitalisation. The CBC will require the Board of Directors to prepare a restructuring plan defining the bank’s business objectives and credit policies by the end of September 2013.

board members, and to a restructuring process in line with EU competition and state-aid requirements, which will be scrutinised by an external monitoring trustee. If recapitalisation takes the form of state aid, funds for the recapitalisation of these banks will be made available in the context of the programme. The banks will be instructed by the CBC to take the necessary steps to ensure that they meet regulatory requirements in a stress scenario, i.e. to raise private capital, by the end of September 2013. The Cypriot authorities should submit restructuring plans for these banks to the EC by 30 November 2013.

Cooperative Credit Institutions As regards the cooperative credit institutions, the CBC, assisted by the current supervisor and in consultation with the EC, the ECB and the IMF, will ascertain the viability of individual cooperative credit institutions and design a strategy for restructuring and recapitalising the sector. Legislation will be introduced to authorise the CBC to instruct the current cooperative credit sector supervisor to intervene at the level of individual cooperative credit institutions by the end of May 2013.

Other Commercial Banks Commercial banks with a capital shortfall, which are deemed viable, can, if other measures do not suffice, ask for recapitalisation aid from the State. Capital should, to the largest extent possible, be raised from private sources including internal measures, asset disposals and liability management exercises. Banks in need of aid from the State will not be recapitalised before their restructuring plans have been formally approved under state-aid rules. The credit institutions benefiting from capital injections will be subject to specific management rules and restrictions on the pay levels of executive and supervisory

42 Gold the international investment, finance & professional services magazine of cyprus

Legislation for the detachment of the supervision of cooperative credit institutions from the Ministry of Commerce, Trade and Tourism will be passed by the end of June 2013. The assessment of the capital needs and viability of the cooperative credit institutions should be finalised by June 2013. Cooperative credit institutions will be instructed to meet capital regulatory requirements by July 2013. If necessary, public programme funds will be used to recapitalise these institutions in accordance with EU state-aid rules. Cooperative credit institutions requiring recapitalisation should seek private sector participation no later than 31 July 2013. The CBC should submit to the EC – while also informing the ECB and the IMF – the strategy including the possibility of the application of mergers and restructuring based on an assessment of capital needs and viability by the end of July 2013. The restructuring plans for the cooperatives will be submitted to the EC by September 2013. A strategy for restructuring and recapitalising the cooperative institutions sector should be implemented by 30 June 2015. As in the case of the commercial banks, cooperative credit institutions in need of aid from the State will not be recapitalised before their restructuring plans have been formally approved under state-aid rules. The cooperative credit institutions benefiting from capital injections will be subject to specific management rules and restrictions, and to a restructuring process in line with EU competition and state-aid requirements, which will be scrutinised by an external monitoring trustee. Sufficient funds for the recapitalisation of the cooperative credit institutions will be made available from the programme following the first programme review and will be deposited in a dedicated account with the CBC to boost confidence in the system. The amounts will be injected following the identification of the capital needs and in accordance with the agreed strategy, after approval of the restructuring plans. A new governance structure will be established, which allocates clear levels of continued accountability and provides for proper incentives to avoid moral hazard, having regard to the two-tier supervisory system applied in other EU Member States.

Cyprus Tax Firm of the Year for 2013 Winning is a state of mind Deloitte Cyprus received the â&#x20AC;&#x153;Tax Firm of the Year in Cyprusâ&#x20AC;? award for 2013, at the 9th Annual International Tax Review (ITR) European Tax Awards. This international distinction strengthens our commitment in providing exceptional quality services and encourages us to set even higher targets.

www.deloitte.com/cy

Into the Light

Cyprus will emerge from its economic crisis much faster than Greece By John Vickers Photograph by Philippos Christou

economy

“P

rovided that the Government implements everything agreed with the Troika, Cyprus will recover quickly from its present problems.” This is the optimistic view of financial economist Dr. Nikolaos Georgikopoulos, Head of Information Technology at the Centre of Planning and Economic Research (KEPE) in Athens and currently a Visiting Research Professor at the Leonard N. Stern School of Business, New York University. Georgikopoulos was in Cyprus last month where he addressed the 3rd Nicosia Economic Congress, organised by IMH, on “The Greek and Cypriot Financial Crises” before granting Gold an exclusive interview. In his latest presentation, he draws comparisons between what happened in Greece and Cyprus but we begin by talking about something that was not applied in both cases: the controversial haircut of deposits in the Bank of Cyprus. “I was shocked and very upset when I found out that they were originally discussing the idea of applying a haircut to deposits under €100,000,” he says, “because there is a written commitment in the European banking system that clearly states that depositors’ money up to €100,000 cannot be touched under any circumstances. So I was totally against this idea. On the contracts we all sign when opening a bank account there is no small print saying that if we are offered a particular rate of interest, there is a possibility that our money will be taken!” In the end, the House of Representatives rejected the idea too and the haircut was applied to uninsured deposits in the Bank of Cyprus but Georgikopoulos was not impressed. “I don’t agree with what the Troika did,” he says, asking “Why didn’t they use the European Stability Mechanism (ESM)? It was created precisely for something like this. If there is a problem with a European bank, the ESM is there to provide a Financial Assistance Facility Agreement (FAFA) programme to resolve it. But they didn’t use it. Was it because they wanted to ‘punish’ the Cypriot banking system?”

He is a little coy about answering his own question, suggesting that if a decision is being taken by “a single powerful country”, it can do whatever it likes for its own benefit. ”Of course,” he adds, “if I was placed in the position of accepting this or facing bankruptcy, I would do what the Cypriot government did and accept it but I don’t agree with it as a way of resolving the problem.” Reminded that the decision was approved by Cyprus’ 16 eurozone partners and not by a single state, Georgikopoulos acknowledges that this was indeed the case but he is adamant that under different circumstances, the haircut option would not have been used: “They would never have considered it in the case of Luxembourg,” he explains,” and if Cyprus had been a bit more clever it would have been thinking like Luxembourg and doing everything to persuade banks from all over Europe and elsewhere to operate here instead of being contented to attract those from Greece and Russia. The Government should have realised that international banks are so interconnected that any turbulence would quickly spread beyond Europe to the US and other major financial centres. You can be sure that the Eurogroup would have understood this and they would never have agreed to such a solution.” Georgikopoulos has seen first-hand that there is a great deal of negative sentiment towards the Troika in both Greece and Cyprus but he recognises that politicians in both countries were unwilling to take the harsh measures that were required to correct the problems of the economy. He recalls what happened when he returned to Greece in 2007 and went to work for the Centre Of Planning and Economic Research (KEPE) in Athens. ”My colleagues and I were providing research reports to a series of Finance Ministers, offering assistance, advice and suggestions. They did not listen! If they had bothered to take notice

of what we and other think tanks were saying, writing and proposing in 2009, for example, they could have prevented at least some of what happened later. Unfortunately the politicians placed greater value on the political cost of taking action than on the possibility of bankrupting the country. I fear that the same thing happened here.” He also describes as a “shocking” the admission by more than one Greek politician who voted in favour of country’s Memorandum of Understanding (MoU) with the Troika even though they had not read it. “Another high-ranking official did read it,” he adds, “but he couldn’t understand it because he didn’t have the knowledge. He still signed it without asking anyone to explain it to him.” It would appear, though, that leaving the

They would never have considered the ‘haircut’ option in the case of

Luxembourg

decisions to the Troika rather than to the politicians has finally begun to bear fruit and there are some positive indications in Greece that the agreement has started to work as it was supposed to. This is, indeed, the case, says Georgikopoulos who is quick to clarify that he is not, and has never been, a supporter of any political party in his homeland. “The reason why we are now seeing results is simply because the coalition government decided to take the situation very seriously and ignore the political cost of taking measures that will keep Greece on the right track,” he says, noting that the positive macroeconomic figures still have to reflect the real economy. “We see, for example, that bank deposits are rising but they need to be turned into loans to generate growth,” he explains, adding that, “Hopefully, by the middle of the next year the country will be able to go to the financial markets and borrow money which

the international investment, finance & professional services magazine of cyprus

Gold 45

economy

Nikolaos Georgikopoulos

have an ‘economic shock’ for one year and to start from the bottom than to take half-measures in an attempt to soften the blow. People need to understand that there is no way out of this crisis if Cyprus does not ‘suffer’ for its past mistakes. And the Government needs to understand that the last thing it should be doing is imposing further taxes. It should be looking to cut unnecessary expenses but not to increase the burden on people who can’t take any more taxes.” In support of this argument, he notes that in Greece, the increase in VAT to 23% has all but killed the market. “It has to be reduced at some point. The Government needs to decide if it wants a high rate of VAT which it won’t be able collect because consumers are not paying it and traders are not charging or declaring it so tax evasion is on the rise. If it wants to encourage people to spend, it needs to lower VAT as soon as possible.” Despite high unemployment and a depressed market, Georgikopulos remains optimistic about the Greek economy, while acknowledging that “it has a long way to go”. In contrast, he feels much more positive about the future of Cyprus and believes that the MoU will work: “I am more optimistic about Cyprus and a quick exit from the Memorandum than I am about Greece,” he tells Gold. “The Cypriot situation resembles the case of Ireland in that the Irish government decided to reform its banking sector quickly and make it work for the economy. Cyprus is more like Ireland than Greece in this respect. Moreover, it is more flexible than Ireland and it has many more educated and experienced professionals.” He declares himself “100% sure” that Cyprus will emerge from the crisis much more quickly than Greece will. This presupposes that the Government will quickly implement all the necessary structural reforms and make

I am 100% sure that Cyprus will emerge from this crisis much more quickly than Greece will will then enter the real economy to produce more. The credit rating agencies have begun upgrading us again, which is a sign that things are improving.” Figures and statistics are all very well but so far they seem to have had little effect on the major problem of unemployment, especially among young people, in Greece and – increasingly – in Cyprus too. Georgikopoulos describes it as a “crucial” aspect of the crisis which the two governments and their politicians have to deal with seriously and rapidly because, he says, the unemployed younger generation “cannot wait much longer.” “I can manage for another year on a low salary – mine has gone down by 30% – because I am at least receiving something, even if it has been reduced. There are young people in Greece who have no income of their own and their families are in dire straits so they will either be forced to leave the country and look for a job abroad or they will become a real problem.” So far, Georgikopoulos notes, there has not been significant social unrest in Greece and Cyprus and he believes there is a simple reason for this: people are expecting things to change soon. “They are beginning to see the light at the end of the tunnel but that is not enough,” he says. “They want to get close enough to be able to touch it and get out of the tunnel once and for all.” If there is one lesson that Cyprus can learn from Greece, Georgikopoulos believes, it is the need to implement the MoU with the Troika to the letter in order to avoid another one. “Since Cyprus has decided to sign the agreement and to go ahead and keep Cyprus in the eurozone – a very good thing in my opinion – it has no reason to delay implementation,” he says. “It’s better to

46 Gold the international investment, finance & professional services magazine of cyprus

r Nikolaos I. Georgikopoulos is a research fellow in financial economics and the Head of Information Technology at the Centre of Planning and Economic Research (KEPE) in Athens. For the current academic year he is a visiting research Professor at the Leonard N. Stern School of Business, New York University, where the Society for Financial Econometrics (SoFiE), of which he is a founder member, is based. He is also a part-time lecturer at London Metropolitan University, affiliated with the STORM research centre (Statistics, Operational Research and Mathematics). In addition, he is an external senior associate research fellow of Professor Nicos Christofides, Imperial College London. He was recently the main coordinator of three research projects assigned to KEPE by the Greek state: a) Investment Opportunities in Greece: The path to Recovery and Sustainable Growth (February 2013), which was submitted to the Prime Minister’s Office, b) The Impact of Electronic Transactions on Tax Revenues (November 2011), which was submitted to the Greek Parliament, and c) Investment Opportunities in Greece (September 2011) which was submitted to the Ministry of Development, Competitiveness and Shipping . sure that the banking system is stabilised and put to work for the economy. “The country’s financial system won’t be as big as it was before but the key will be to keep whatever works and to attract foreign direct investment into the sectors that Cyprus knows – tourism, energy and real estate, especially the latter and the market for holiday and retirement homes. This existed before the crisis but not enough attention was paid to it so the state failed to maximise the benefits, having decided that there were other ways of making more money and faster. In the end those ways proved to be unsustainable. This will be a key challenge in the future but I am convinced that Cyprus has everything required for a good recovery and a bright future.”

There is no way out of this crisis if Cyprus does not ‘suffer’ for its past mistakes

After The Tsunami

Cyprus will survive but it needs to play by the

How has the professional services sector reacted to the latest economic developments in Cyprus and what will its future be? Theo Parperis, the outgoing President of the Institute of Certified Public Accountants of Cyprus (ICPAC) talks to Gold about this and more. By Kyproula Papachristodoulou

Gold: Two months after the Eurogroup’s decision on Cyprus, what is your assessment of the situation? How have firms providing professional services and their clients adapted? Theo Parperis: I would say that, two months after the tsunami, we are still above water. The first shock has passed and it is now clear that the Cyprus package – which has always been competitive, despite some reputation problems – remains attractive to international businesses. This is something that makes us hopeful for the future. The vast majority of foreign companies that use Cyprus as a base for their corporate structures have kept their business on the island and, as far as we know, are not planning to change their minds. It is all about trust now, as it has always been. We need to restore and rebuild trust in Cyprus. Gold: Do you think that companies and investors who lost money as a result of the resolution of Cyprus Popular Bank and the restructuring of Bank of Cyprus will maintain their business on the island? T.P.: Yes, a considerable number of them. On the other hand, some of these companies have told us that, while Cyprus remains the most appropriate jurisdiction for their business, they

have taken the decision to leave as a matter of principle. They are not willing to accept the way Cyprus – because of its eurozone partners – has treated them. Their decision is not only to leave Cyprus but also the euro area. I’m not only referring to Russians or Ukrainians but also to High Net Worth Individuals from the US and Canada, for example, who now have a total lack of trust not just in Cyprus but in the eurozone as a whole. Gold: How does the professional services sector intend to deal with the flow of business away from Cyprus? T.P.: In a nutshell, what we are doing now is adjusting our models in order to accommodate structures in Cyprus with more substance. We expect that from now on they will have to have real substance in the country, in other words offices and operations in Cyprus – which will be a very positive development. They might continue carrying out their transaction banking from Cyprus but, as they see it, there is no need to keep huge deposits or indeed any deposits of significance in Cyprus until the situation is clarified. Gold: How will we convince international companies to create more business sub-

48 Gold the international investment, finance & professional services magazine of cyprus

stance on the island now if they haven’t been doing so in the past? T.P.: Up to now we were concentrating on volume. Companies did not carry out activities in Cyprus and we did not insist that they should. It was cheaper and easier for a company to operate without any real business activities. We should gradually change our approach. There are places like Singapore where you cannot have a company without substance. It is now time to adopt such models. This will not only improve Cyprus’ reputation but, in the context of the new international and European environment, it will work for the benefit of businesses. It is going to be easier for companies to explain to their home regulators and their home countries the reason why they have decided to establish and maintain a Cyprus company. Gold: You referred earlier to the ‘Cyprus Package’. What does it contain? T.P.: Basically a mixture of elements that are convenient and suitable for international business: a tax-friendly environment, a legalfriendly environment based on the AngloSaxon system, high standard professional services (accountants and lawyers, all UK educated). Our package is very good quality

accounting xxxxxxx

rules from now on.

Theo Parperis

Theo Parperis has been President of the Institute of Certified Public Accountants of Cyprus (ICPAC) since 2011. His term expires on 20 June 2013. He is a Partner at PwC Cyprus, in charge of the Global Compliance Services and Private Wealth Services sections of the Tax and Legal Services division, providing primarily compliance, administration and private wealth services to international clients.

the international investment, finance & professional services magazine of cyprus

Gold 49

accounting

Do it! It Costs Nothing

CPAC has been adamant about the need for Cyprus to improve its competitiveness as a business centre by adopting pieces of legislation which will add a lot to what the country has to offer without incurring any cost. These include: • Amending legislation to attract QROPS and Islamic Finance Structures.

• Amending Company Law to allow for mergers with non-EU companies. • Finalising and introducing Cell companies legislation. • Finalising and introducing Leasing legislation. • Allowing for a change of use of assets e.g. hotels may be converted into flats, the relevant taxes are paid and the change is allowed.

and extremely competitive compared to that of other jurisdictions such as Luxembourg, Ireland, Malta, etc. Furthermore, the cost of our services is lower, especially if you compare it to countries like Singapore, the Netherlands and Luxembourg. On top of that we are a good destination to come and do business in because of the sun, the sea and the weather, while another part of the package is the friendliness of our people. Friendliness counts, even in business. Traditional Cypriot hospitality has a business value. Gold: Are you saying that the Eurogroup’s decisions have not damaged Cyprus’ business model too much? T.P.: I think that the Europeans focused on the big problems that Cyprus was facing and not so much on our business model. We do not have German, French or English companies here that have relocated from their home countries. We do not pose a threat to other European countries; they are not losing money because of Cyprus. Most of the investment that comes into Cyprus is generated from non-EU countries so, effectively, we are adding business to the EU instead of absorbing business from them. If Cyprus can be a business hub for non-EU countries that want to use the island as a base, I don’t think that this is bad for Europe. Luxembourg, for example, poses a more serious threat to some European countries such as the UK. There is already a lot of fuss being made in England on why certain companies are not paying their taxes in the UK. Cyprus is more focused on international business, not necessarily European. We are focused on investments from the US and Canada, for example, which are redirected to Russia, India or China. Effectively we are facilitating international business. Gold: But there are certain things that have to change… T.P.: Of course! From now on we need to play by the new rules. The Europeans believed that we had a problem with our banking model and they have tackled it by their decisions. Other than that, the Memorandum of

Understanding contains some very good recommendations for Cyprus. The increase in the corporate tax rate is not a huge issue for international business. The same goes for the increase in interest on deposits which can be viewed as a controlling measure for the size of the banking sector. The main problem, as they saw it, was the huge amount of de-

The MoU contains some

very good points which

will increase Cyprus’ competitiveness and the efficiency and effectiveness of the

banking sector

posits coming to Cyprus and the management of those deposits. We have to admit that our management of the deposits was not the best. A large part was directed to Greece and when Greece defaulted we suffered from the concentration of risk in one country. All in all, the MoU contains some very good points which will increase Cyprus’ competitiveness and the efficiency and effectiveness of the banking sector. What was unfair about the MoU was the bail-in tool they used for the first time in Cyprus. Gold: A large part of Bank of Cyprus will now be owned by foreign investors who used to be the bank’s depositors. What will this mean for Cyprus? T.P.: The largest part of the banking sector in other business centres is owned by international banks. This is common practice. They have the expertise and the muscle. For serving huge international clients and their huge deposits, it is clear that foreign banks are better equipped. The new big shareholders in Bank of Cyprus are people who have experience and success in business. If they have a significant part of the Bank, the expectation is that they will take care of this investment. They will direct business to the Bank or they will look for a new investor. From now on I believe we should be more open to foreign investment. There is nothing negative in this as long as the supervisory

50 Gold the international investment, finance & professional services magazine of cyprus

authorities play their role in monitoring things properly. Gold: What are the lessons for the professional services sector to be learnt from the latest developments in Cyprus? T.P.: The main lesson is that we need to be more space aware. What do I mean? We had a tendency in Cyprus to think that we could do everything, that there were no limits. We wanted to obtain as much international business as possible without necessarily being fully compliant. This does not work. We are part of the EU, if we want to be a credible international business centre, we have to play by the rules. We have to respect our partners and EU laws. We need to be more compliant on all fronts, this is the gist of it. For example, accountants and lawyers should ensure that they file all returns and accounts with the registrar of companies. On the other hand, the Government and the competent departments should be tough. If companies do not adhere to their commitments, they should impose penalties and restrict the use of the business as they do in other jurisdictions. Gold: So adherence to the rules and regulations should not be considered as working to the detriment of the business? T.P.: Not at all! It should strengthen the business. Right now, some of the businesses which are going to leave Cyprus are doing so because of the bad reputation that Cyprus was given by the international media and its European partners regarding money laundering. This is really a pity. We have a good product but right now our investment environment is not clear. That is why it is very important to change our mindset. We need to understand that greater compliance creates more international business. We should also try and create more substance for companies. All professionals should be pushing in this direction because this is the way to create more credibility. And once we clarify the pending issues, we need to go out and improve our image. We have some very good examples that Cyprus should be proud of, such as the shipping industry which has not been affected by the recent “tsunami” and remains an excellent advertisement for Cyprus. We also have excellent prospects in the energy sector and this needs to be given more prominence in the international media. We need to get out and advertise better. I also want to stress that it is time to stop advertising Cyprus as a good offshore location. We are not an offshore location. We are an EU country so we cannot be an offshore location. What we have is a tax efficient international business sector and therefore there are strict rules. In a nutshell, we have to be more sophisticated in the promotion of Cyprus.

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CYPRUS SHIPPING DIRECTORY

CURRENT FINANCIAL DEVELOPMENTS &

THE CYPRUS SHIPPING INDUSTRY By Thomas Kazakos, Director-General, Cyprus Shipping Chamber

he recent Cyprus-Troika loan agreement has, admittedly, brought an end to the financial uncertainty surrounding the country’s banking system but the strict austerity measures imposed on Cyprus and the temporary banking restrictions have, to a certain extent,

affected the smooth operation of shipping companies based here. However, despite a limited number of cases where local shipping companies have been directly affected by the banking system’s problems, shipping’s overall operational and taxation infrastructure remains intact. Indeed, the strength of the shipping taxation system is one of the main reasons why these companies remain fully committed to Cyprus, as the base for their opera-

52 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

tions. The shipping industry stands united and remains loyal to Cyprus and its flag. Similarly, the country’s Maritime Administration, through the Department of Merchant Shipping, continues to work normally with no interruptions and restrictions. The temporary banking restrictions are being eased day by day and the Government is in the process of introducing new measures so that all the restrictions can be lifted as soon as possible. While implementing the appropriate urgent financial measures, it is taking into account the needs of the Cyprus economy, including those of the shipping industry. Moreover, the Cyprus Shipping Chamber (CSC), through a coordinated plan of action and close contact with various state agencies, has intensified its efforts to alleviate any operational problems that might occur, thereby enabling shipping companies in Cyprus to continue trading as normal and to meet their obligations towards seafarers and business associates alike. There has been a gradual return to normal business for Cyprus-based shipping companies, in terms of local banking transactions, and this is contributing to the reinstatement of trust between the banks and their clients. The Government has also publicly acknowledged its appreciation to the shipping industry for its continuous loyalty, its substantial financial support and high standards of professionalism, and has pledged its commitment to work with the CSC – now, more than ever – on promoting the advantages of Cyprus as a reliable and competitive maritime centre. In the wake of the first Eurogroup decision, the CSC launched a positive PR campaign under the banner “Shipping remains in Cyprus and continues to support the Economy”. The aim of this initiative is to promote in Cyprus and abroad the fact that, despite the global depression in shipping freight rates and the recent Cyprus banking problems, Cyprus’ overall shipping infrastructure remains solid and fully operational. Between the two Eurogroup meetings, when the country’s banks

remained closed, the local shipping industry managed to maintain its high standards and to continue its reliable operations. Chamber representatives also initiated an objective media crusade, aimed mostly at foreign TV, print and online media as well as various EU governments and parliaments and although Cyprus initially had to deal with a huge negative media response (due mainly to a lack of correct information) provided, in the end, an overall negative perception had changed to a rather more positive one. The release of the first tranche of the loan to Cyprus by the European Stability Mechanism marked the beginning of the re-financing of the country’s banking system and, by extension, the full stabilisation and subsequent recovery of the economy. We are optimistic that, with the implementation and enforcement of efficient corrective measures, the road to recovery will not be a long one and Cyprus will regain its leading edge as a competitive and internationally credible business centre. It is therefore, of the utmost importance, that the re-structuring of the Bank of Cyprus and the complete lifting of the remaining banking restrictions are effected as quickly as possible. With the assistance and cooperation of the Cyprus Maritime Administration and in close cooperation with the Cyprus Investment Promotion Agency (CIPA) and other professional bodies, we shall be able to continue promoting Cyprus as one of the most advanced shipping centres internationally for the benefit of the Cyprus economy. In addition, the commitment of the new Government to upgrade the infrastructure of the Cyprus Maritime Administration with the appointment of an UnderSecretary to the President on Shipping will further boost efforts aimed at expanding and promoting the Cyprus shipping industry. The Cyprus Shipping Chamber remains confident that Cyprus shipping will maintain a steady course through the present stormy waters and will continue to contribute to the country’s economy. Its continuing presence after more than 40 years is a clear Vote of Confidence.

The Government has pledged its commitment to work with the CSC on promoting the advantages of Cyprus as a reliable and competitive maritime centre

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CYPRUS SHIPPING DIRECTORY

GLOBAL MANAGEMENT LIMITED Ariel Corner, 196, Makarios III Avenue, Office 401, 3030 Limassol Tel: 25898000 Fax: 25898295 e-mail: info@globalmanagement.com.cy Website: www.globalmanagement.com.cy/

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SEATANKERS MANAGEMENT CO. LTD. Deana Beach Apts., Block 1, Flat 411, Promachon Eleftherias St., Ayios Athanasios, 4103 Limassol Tel: 25326111 Fax: 25323770 e-mail: seatank@cytanet.com.cy

INTERGAZ LTD. Larnaca-Dhekelia Rd. 6303 Larnaca Tel: 24821666 Fax: 24635789 e-mail: info@intergaz.com.cy

LOUIS CRUISES 20, Anthipoleos, Nicosia Tel: 25574001 Fax: 25566809 e-mail: contact@louiscruises.com, Website: www.louiscruiselines.org

ÖSTERREICHISCHER LLOYD SEEREEDEREI P.O. Box 57280, 3314 Limassol Tel: 25662555 Fax: 25662666 e-mail: capt.ekoch@cy.oelsm.com Website: www.oelsm.com/

SMT SHIPMANAGEMENT AND TRANSPORT LTD. 702, A Nicolaou Pentadromos Centre, Limassol Tel: 25820000 Fax: 25749080 e-mail: operations@smt.com.cy Website: www.smt.com.cy

PETRONAV SHIP MANAGEMENT LTD. 145-149, Chr. Hadjipavlou St., Christiel Building, 4th Floor, 3036 Limassol Tel: 25889100 Fax: 25346289 e-mail: petronav@petronav.com.cy, Website: www.petronav.com.cy/

STENA HOLDING CYPRUS LTD. Lophitis Business Centre II, 4th floor, Office 401, 28th October St., 3035 Limassol Tel: 25871207 Fax: 25760220 e-mail: Ole.Lindoe@stena.com Website: www.stena.com

INTERNAUT SHIPPING LTD. Posidonos No. 2, Ayios Tychonas, 4532 Tel: 25818755 Fax: 25818707 e-mail: internaut@internaut.com.cy Website: www.internaut-shipping.de/ INTERORIENT NAVIGATION CO. LTD. 3, Thalia Street, Limassol Tel: 25840300 Fax: 25575895 e-mail: management@interorient.com.cy, Website: www.interorient.com INTERSHIP NAVIGATION CO. LTD. Intership House, 123, Grivas Dighenis Ave., 4002 Limassol Tel: 25584000 Fax: 25585756, e-mail: mail@intership-cyprus.com Website: www.intership-cyprus.com IONA SHIPMANAGEMENT LTD 41, Spyrou Kyprianou Ave. Steratzias Buildg., Office 101 Mesa Yitiona, Limassol Tel: 25750310 Fax: 25750370 e-mail: crewing@iona.com.cy Website: www.iona.com.cy JPC SHIPMANAGEMENT (CYPRUS) LTD. 35, Riga Fereou St. Fereos House, Apt. 303, 3609 Limassol Tel: 25871004 Fax: 25344428 e-mail: claus.Horn@jpc-shipmanagementcyprus.com Website: www.jpc-shipmanagement.de LEFKARITIS BROS MARINE LTD. 1, Kilkis Street, Larnaca Tel: 24652142 Fax: 24657173 e-mail: mariosl@lefkaritisgroup.com.cy

LOWLAND INTERNATIONAL SHIPPING (CYPRUS) LIMITED 5A, 28th October St., 7560 Pervolia, Larnaca Tel: 24427342 Fax: 24427343 e-mail: Cyprus@lowland.com Website: www.lowland.com/companies/ lowland-international-shipping-cyprus-ltd MARIN SHIPMANAGEMENT LTD. 139 A, Gladstone St., 3032 Limassol Tel: 25871355 Fax: 25871357 e-mail: crewing@marin-shipmanagement. com Website: www.managementfacilities.nl/ en/site/marin_ship_management MARLOW NAVIGATION CO. LTD. Marlow Building, 13, Alexandrias St., 3013 Limassol Tel: 25882588 Fax: 25882599 e-mail: marlow@marlow.com.cy, Website: www.marlownavigation.com.cy MASTERMIND SHIPMANAGEMENT LTD Centro Imperio building, Office no. 3, 11, Grigori Afxentiou St., 4003 Limassol Tel: 25256000 e-mail: eadami@interhsip-cyprus.com Website: www.mastermind-cyprus.com MEDSTAR SHIPMANAGEMENT LTD. 10-12, Emmanuel Rhoides St., Agia Zoni, 3031 Limassol Tel: 25877114, 25877115 Fax: 25877122, 25877121 e-mail: admin@medstar.com.cy NAIHI HOLDINGS LTD. Soboh House, 337, 28th October St., 3107 Limassol Tel: +441293556386 Fax: +441293556304 e-mail: smadani@slb.com

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PREMICON CRUISE LIMITED 19, Evangelistrias St., Ayia Zoni 3031, Limassol Tel: 25871877 Fax: 25371877 e-mail: Michael.knauer@permicon.de, Website: www.kd-cy.com PROJECTIVE TRANSMARINE FINANCE CO. LTD. City Chambers, 6, Rigas Fereos Street, Limassol Tel: 25820505 Fax: 25817601 e-mail: mail@ptfc.com.cy REEDEREI NORD LTD. Libra Tower, 23, Olympion St., Limassol Tel: 25841400 Fax: 25345077 e-mail: mail@rnkeo.com.cy, Website: www.rnkeo.com SALAMIS LINES LTD. P.O. Box 50531, 3607 Limassol Tel: 25860000 Fax: 25342600 e-mail: k.vassiliou@salamis-shipping.com Website: www.salamisorganisation.com SEA SHIPPING HOLDING LTD. 1, Katanis St., A.T. Stavrinides Tower, 3rd Floor, Limassol Tel: 25660820 Fax: 25660804 e-mail: fleet@seashippingholding.com Website: www.seashippingholding.com

SYNERGY MARINE LTD Address: 5th Fl, Lapithion Tower, 5 Deligiorgi St, 1066, Nicosia Tel: 22666147 Fax: 22666173 e-mail: sgeorghiades@synergy-marine. com.cy TERRA NAVIS SHIPPING LTD. 258, Leontiou A’ St., Suite B, 4th Floor, 3020 Limassol Tel: 25870352 Fax: 25735243 e-mail: info@terra-navis.com, Website: www.terra-navis.com TSAVLIRIS SALVAGE (INTERNATIONAL) LTD. 1, Kostakis Pantelides Ave., Nicosia Tel: (+30) 2104221000 Fax: (+30) 2104221008 e-mail: salvage@tsavliris.com, Website: www.tsavliris.com UNICOM MANAGEMENT SERVICES (CYPRUS) LTD. Unicom Tower, 18, Maximos Plaza, Maximos Michaelides St.,3106 Limassol Tel: 25890000 Fax: 25890089 e-mail: Unicom@scf-group.com Website: www.unicom-cy.com UNITEAM MARINE LTD. Fortuna Court, 284-286, Archbishop Makarios III Ave., Limassol Tel:25846100 Fax: 25581706 e-mail: info@uniteammarine.com Website: www.uniteammarine.com

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CYPRUS SHIPPING DIRECTORY

ABB Philippos Ioulianos Sales Manager

W hat kind of services do you provide to the shipping industry here?

Are you alone in what you offer or is your particular sector very competitive? If so, how do you manage to stand out from your competitiors? In the New Buildings projects, we have strong competition from other turbocharging makers and it is a long and hard process to convince the owners to place our turbocharger on their vessels. We provide good benefits to the client and, in addition, our Service network is in more than 100 locations globally. Therefore, whenever the vessel is trading we have nearby an ABB Turbocharging Service Station. Regarding after sales service, we have even more competition as small workshops can

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Photography: Jo Michaelides

ABB Turbocharging is the worldâ&#x20AC;&#x2122;s premier supplier of turbochargers for diesel and gas engines in the 500kW plus power range. Worldwide more than 190,000 ABB turbochargers are in operation, on ships, in power stations, on locomotives and in off-highway equipment. Our Limassol ABB Turbocharging Service Station offers customer proximity and rapid response to all the service needs of ABB turbocharger end users in Cyprus. ABB Turbocharging Service in Cyprus offers turbocharger maintenance, repair and overhaul, using knowledge and technology and expertise available only to the turbocharger manufacturer.

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do part of our job. We managed to stand out from those competitors with our global Service Station network, transparency in our Original Service job globally, the availability of 98% of all Original Parts for all ABB turbochargers and professional consulting services. Are ship owning/ship management companies in any way different from the other firms to which you provide equipment and maintenance? If so, how much of a challenge is it for you to give them what they need? All of the industries that we are working in are really demanding with a lot of challenges. Time is really crucial for our clientele and we try to meet their needs in the provided timeframe. Our global Service network (more than 100 Service Stations globally) is available for our clientele anytime to meet any of their requests. In addition, we have available 98% of all the Original Parts anytime and they can be delivered to any major international airport within 24 hours. Are there particular challenges that stem from dealing with companies operating in a global industry such as shipping rather than firms with a greater local focus? As a global firm we support local business by acting globally. When you need us, our qualified specialists work to identical

standards in all parts of the world to ensure professional maintenance, repair and overhaul. Have you seen any negative effect of the recent economic/banking crises in Cyprus on your clients’ businesses and planning? Not at the moment. Having worked with a number of Cyprus shipping companies, what is your overall assessment of the shipping industry’s future? The Cyprus shipping industry has a lot of potential for the reasons that have developed Cyprus as a global shipping centre so far. In our sector, the demands of Cyprus shipping have increased due to the high volume of New Buildings projects in the last years. Furthermore, the offshore activities that will begin in the region of eastern Mediterranean will help the shipping sector to develop even further. How do you view your own company’s short-term and long-term future? Our top priority is to meet all of our customer needs and always be there whenever they need us. We will keep ABB Turbocharging’s market leadership in the New Buildings projects and increase local Original Service business as there will be a high volume of vessels for offshore activities in the region.

ABB is a global leader in power and automation technologies. Based in Zurich, Switzerland, the company employs 145,000 people and operates in approximately 100 countries. The firm’s shares are traded on the stock exchanges of Zurich, Stockholm and New York. ABB’s business comprises five divisions that are in turn organised in relation to the customers and industries they serve. The company in its current form was created in 1988, but its history spans over 120 years. ABB’s success has been driven particularly by a strong focus on research and development. The company maintains seven corporate research centres around the world and has continued to invest in R&D through all market conditions. The result has been a long track record of innovation. Many of the technologies that underlie our modern society, from high-voltage DC power transmission to a revolutionary approach to ship propulsion, were developed or commercialized by ABB. Today, ABB stands as the largest supplier of industrial motors and drives, the largest provider of generators to the wind industry, and the largest supplier of power grids worldwide.

Offshore activities starting up in the Eastern Mediterranean region will help the shipping sector develop even further

CONTACT DETAILS ABB SA 1, Alexandrias Str. Industrial Zone Agios Sylas 3rd phase, P.O. Box: 53878 4180 Limassol Tel: +357 25 34 3428 Fax: +357 25 34 3429 E-mail: philippos.ioulianou@ cy.abb.com

CYPRUS SHIPPING DIRECTORY

BERNHARD SCHULTE SHIPMANAGEMENT (CYPRUS) LTD that all members of the team align to the value creation.

As a ship management company, rather than a ship owning company, what are the various services that BSM provides to its clients? Bernhard Schulte Shipmanagement offers a highly comprehensive range of services through a worldwide network. In addition to our traditional core services of Crew Management and Technical Management, we provide a wide range of value-added services, tailor made to Shipowner clients. These services include Maritime Training for seafarers, Chartering services, Marine Insurance, Maritime and Corporate Travel, Maritime Catering Services, Technical Consultancy and New building and Conversion Supervision, and Radio Accounting Services.

Does the ongoing Turkish embargo of Cyprus-flagged ships affect BSM? Based on our current fleet portfolio, this ban has limited effect on our day-to-day operations. However, it does affect the Cyprus flag and our ability to operate ships freely from within the Republic of Cyprus. The competition in the market today is so intense that any restriction on a vesselâ&#x20AC;&#x2122;s trading ability to call at Turkey places a constraint on the shipowner looking to charter his vessel. The embargo thus strangles our ability to be truly global, offering a comprehensive full Shipmanagement service should the vessel have to call at a port in Turkey. We support strong discussions with all parties on this subject in order to facilitate the need for us, as Europeans, to trade freely. Arthur McWhinnie Managing Director

n 1972, Hanseatic Shipping Co. Ltd, which later became part of the Schulte Group, was the very first ship management company to be based in Cyprus. More than 40 years on, you are still here. Whatâ&#x20AC;&#x2122;s the secret? Actually, we were always part of the Schulte Group from the very first day on the island! One can say the corporate benefits are part of the secret but in reality the people working for the company are what laid down the roots for the 40 years of success in shipmanagement. The secret lies in selecting the right leaders and ensuring

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The downturn in the global shipping industry coincided with the global financial crisis which now appears to be at an end. Are there positive signs for shipping at last? Nobody is yet in a position to say whether we have reached the bottom or not. The excess tonnage of all types of ships is still in the water. Ships do change hands but not for scrapping and they still sail the seas. The contract books in Far East yards are still full and the values for new buildings still up. There is a lot of speculation without logical justification. For the Shipmanagement industry, the shipping crisis

surely creates additional business opportunities. Owners who preferred (never mind the higher operating costs they run in comparison to shipmanagers) to carry out their own management have turned to Shipmanagement companies trying for their own survival in the industry. The major challenge for us Ship Managers is to make sure we do not shift their cashflow problems our way. We need to make sure that for any business project we undertake a rigorous risk assessment is carried out. Has BSM been affected by recent developments in Cyprus, regarding the restructuring of the banking system and the bailout of the economy? It has actually been a bail-in! A bailout would have been much easier to deal with and the Cyprus banking system would have not suffered the way it did! BSM has not in any way been affected by the recent developments. Our business has not been affected either, as our clientele is of international background. Apart from the appointment of an UnderSecretary to the President for Shipping, are there other measures that the Government could and should take to further upgrade and enhance the Cyprus shipping industry? The commitment by the President to appointing an Under-Secretary for Shipping is very much appreciated and welcomed. The need for such a position is something for which the shipping industry in Cyprus has been campaigning for the last ten years. Additionally, as the Government seeks to reestablish Cyprus as a leading nation within Europe, we do see an urgent need to clarify the current structure and appointment of key personnel within the Department of Merchant Shipping. By accomplishing this we will establish strong bonds within Cyprus as well as with other flag states and associated members of the shipping industry. We simply must move forward in the progressive marketing of the worth of Cyprus and the shipping industry worldwide.

BERNHARD SCHULTE SHIPMANAGEMENT (CYPRUS) LTD

Is Cyprus still the most attractive jurisdiction for a company like BSM or are the island’s competitors gaining ground? Cyprus will undoubtedly always be a key maritime centre with a tremendous commercial importance in the maritime trade. Organisations can clearly define the advantages that Cyprus offers with its high standards of capabilities and competences, its geographical location, and of course the existing double tax treaties. Approval by the European Commission for the taxing of Shipmanagement companies under the tonnage tax system rather than with corporation tax is an ideal asset to any Shipmanager. There will always be competitors so the essence is for Cyprus to sustain its competitive advantage and focus on taking advantage of opportunities and minimising the macro- environmental threats that it faces. How important is the BSM Maritime Training Centre to the company, to Cyprus and to the global shipping industry? Shipping is unique as an industry and as such we have to provide our sea and shore staff with the training they needed to meet the demands of this extremely versatile environment. BSM realized this value from the very beginning and hence the reason for founding the School on the island back in 1983. At the time, the Hanseatic Marine Training School was a joint venture with the Government of Cyprus. The establishment of the school in Cyprus was the stepping stone to the further establishment of three other Maritime training centres within BSM across the globe. For Cyprus the school has always been an asset of real value since Cyprus was the only Flag (open registry) to have had a training school. We continue with our motto of; “A ship is only as good as the people who sail in her”. BSM won one of the first CIPA International Investment Awards last year. How important was such recognition to the company?

Bernhard Schulte Shipmanagement (Cyprus) Ltd., formerly the Hanseatic Shipping Co. Ltd., was founded in Cyprus in 1972. As the first offshore and shipmanagement company on the island, it has played an instrumental role in helping Cyprus becoming one of the leading shipmanagement centres in the world. BSM is a highly integrated maritime services group of companies and a market leader in quality and versatility, managing a fleet of more than 650 ships and over 18,000 employees onboard and ashore. In Cyprus, the company employs more than 200 people. BSM offers a highly comprehensive range of services including Corporate Management, Crew Management, Technical Management, Chartering, Insurance, Maritime and Corporate Travel, Maritime Catering, New Building Design & Supervision, Port Agencies, Radio Accounting and BSM Business Solutions. The Award was extremely important as it demonstrates our commitment to the Island and to the shipping industry. All our staff members felt honoured by such an achievement; you have to remember we have loyal staff in the company who have been here since the inception of the company. As with all awards we see this as recognition of our achievements and as a ‘carrot’ to make us continue to exceed the expectations of others.

Cyprus will undoubtedly always be a key maritime centre with a tremendous commercial importance in the maritime trade

CONTACT DETAILS HANSEATIC HOUSE P.O. Box 50127 CY 3601 Limassol, Cyprus Tel: (+357) 25846400 Fax: (+357) 25745245 Website: www.bs-shipmanagement.com

CYPRUS SHIPPING DIRECTORY

DELOITTE LIMITED of the biggest companies in the industry. In contrast with international business in other sectors of the economy, these companies are headquartered in Cyprus, they employ a significant number of Cypriots and, at the same time, they make extensive use of the island’s banking, accounting and legal infrastructure. In these difficult times, their continuing presence in Cyprus is becoming even more significant.

Costas Georghadjis Partner-Head of Audit Services, Deloitte Limited

The local shipping industry has always maintained a perhaps surprisingly low profile. Do you think that it needs to adopt a new, more proactive stance? Do you have any suggestions as to how it should go about this? The interests of the local shipping industry are primarily promoted by the Cyprus Shipping Chamber, the industry’s trade association in Cyprus. The culture of the people that manage the Chamber and that of its members dictates the tone with which business is conducted and effectively promoted. We agree that this culture is one of maintaining a low profile but it is nevertheless highly effective in achieving its goals and objectives. The Chamber has been – and still is – a very influential body when it comes to policy decisions to be taken by the government. In fact, as far as we know, no policy decision on shipping matters is taken before consultation with the Chamber. Evidence of this has been the active participation and huge contribution that the Chamber made in the enactment of the new tonnage tax regime. he importance of the shipping industry to Cyprus has been acknowledged for more than 40 years. How much more significant is it to the economy during these difficult present times? Shipping contributes more than 5% to the GDP of Cyprus. The island’s merchant fleet has been growing steadily, reaching a Top 3 position in Europe and a Top 10 global ranking. Cyprus is the biggest third-party ship management centre in Europe, having attracted to the island some

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Are there steps that the Government could take in order to make Cyprus an even more attractive maritime centre for shipping companies of all kinds to set up their headquarters? 24 March 2010, was a historical landmark for Cyprus Shipping as the European Commission approved the new, fully revised and upgraded Cyprus Shipping Taxation System. This ensures the viability of the

DELOITTE LIMITED

Cyprus Shipping Register and the Cyprus Shipping Industry in general. With the new taxation system, Cyprus is now able to cover all the main activities that are offered today in international shipping, namely ship owning, ship management, crew management and the chartering of vessels This is critical for the further development of Cyprus to remain one of the leading international shipping centres in the world. With this in place and the advantages offered by Cyprus in terms of its educated workforce, the convenient time zone that allows you to be in touch with all the continents during the course of the same day, makes Cyprus an attractive maritime centre for shipping companies of all kinds to set up their headquarters. There can be no doubt the recent events in Cyprus – and their effect on the economy and the banking sector in particular – have dented efforts to attract new shipping business to Cyprus. It is now the time, therefore, for the government to implement measures to make the process of conducting business in Cyprus friendlier and less bureaucratic. And the process begins from the time one applies to register a company. The simplification of the regulatory framework and the reduction of the administrative burden for businesses should now, more than ever, be the top priority. On the political front, efforts to lift the Turkish restrictive measures prohibiting Cyprus flag vessels from calling at Turkish ports should be intensified as this will help the industry in Cyprus tremendously. Also, the creation of a Permanent Shipping Directorate at the Ministry of Communications and

Works as promised by the newly-elected government should be expedited. How important is the Tonnage Tax system to the shipping companies that are already established in Cyprus and to potential new ones? The tonnage tax system, which has incorporated the favourable features found in the tonnage tax systems of other member states, is the latest to be approved by the European Commission. It therefore covers activities not qualifying under the tonnage tax systems of other Member States as yet and/or not covered entirely by any other system while, at the same time, it provides shipping companies not only with a very competitive tax burden but also with certainty as to their future tax position. What kind of services does Deloitte offer to the shipping industry? Deloitte is amongst the leaders in providing professional services to the shipping community in Cyprus and has an excellent reputation in shipping worldwide. We offer our clients a broad range of traditional audit, tax, consulting and financial advisory services. We also offer attestations for the operating effectiveness of systems, a critical certification required by ship managers to be furnished to their customers as evidence of the ship manager’s service organization credibility. In addition, our financial advisory can assist clients in the development of cash forecast models for their business plans which is something very critical for the shipping industry today.

Have you seen any tangible effects on your clients in the shipping industry caused by the agreement reached with the Troika? Unavoidably, our clients operating from Cyprus using the infrastructure to its full extent have been tangibly hit. None, however, have indicated that they will discontinue their presence or otherwise shrink their business conducted through Cyprus. These clients have been – and still are – so loyal to Cyprus and we thank them for the trust and confidence that they continue to show in us and in Cyprus in general. What is your overall assessment of the future of Cyprus shipping? Our assessment is that, despite the challenges faced by the Cyprus economy and particular problems caused in the banking system, the operational and taxation infrastructure are unaffected. The shipping industry has, therefore, huge potential for further growth as a quality and competitive shipping centre.

The shipping industry has huge potential for further growth as a quality and competitive shipping centre

CONTACT DETAILS DELOITTE LIMITED 24, Spyrou Kyprianou Ave., 1075 Nicosia Tel: (+357) 22360300 Fax: (+357) 22360400 Website: www.deloitte.com/cy e-mail: infonicosia@deloitte.com Other offices in Limassol & Larnaca

CYPRUS SHIPPING DIRECTORY

HELLENIC BANK whole. In parallel, such a move would have a positive effect on the shipping industry as well. Finally, the close cooperation of all stakeholders in the shipping sector could prove to be an invaluable element in fostering its growth and decisions such as the appointment of an Under-Secretary for Shipping is a step in the right direction

Marinos Athanassiades Group Global Markets & International Banking

hipping has been a key sector for the Cyprus economy for several decades now. At this crucial time, what can the Government do to ensure that it continues to grow? During these difficult times, one of the key components to achieving the continuous growth of the shipping sector is the stabilisation of the banking sector. The lifting of control mechanisms should also help re-establish the relationship of trust with the banks, within the context of the economy as a

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The term “shipping” covers a vast range of firms and industries. How important are they as clients of the Bank? Do they require special treatment and funding arrangements? Our focus on shipping certainly covers a wide range of activities including ship owning, ship management, chartering, brokerage, bunkering, ship chandlers, marine insurance and more. Each and every one of our shipping clients coming from all these diverse areas is very important to us. That is why we are close to them because in this manner we can receive the right input which can lead to continuous improvement on our part and a better experience for them. The provision of specialised services and support is a key component which

Photography: Jo Michaelides

One of the major problems facing the global shipping industry in recent years has been ship finance. What has Hellenic Bank’s stance been towards the local industry during difficult times? Indeed, there has been a large number of exits by high profile European banking units from ship finance, mainly due to a blitz of recent regulatory measures and the general slowdown of the shipping industry. Hellenic Bank did have a small number of ship finance projects in the past, taking into account the highly specialised field of ship finance of course. Before the decision of the Eurogroup in mid-March, it was part of our agenda to closely look into the matter of reinvigorating this segment. However, at present and as things stand, we do not offer any ship finance. Hopefully things will soon revert to normal and we will be able to re-examine the matter and offer this type of facility as well.

NDIVIDUAL TRAVELLER.

we integrate into the whole equation of our service philosophy. Initiatives such as setting specific timelines for completing the various services to be offered are embedded to the operational functionality of our Shipping Business Centre (SBC). In addition, dedicated Customer Relationship Officers acting as a single point of contact between the SBC and clients and specially optimized systems which can better handle the needs of the shipping industry as such, help boost our drive for excellence. How broad a range of services does Hellenic Bank offer the Cyprus shipping industry? Hellenic Bank offers a vast array of core services while, at the same time, solutions can be tailored to meet the specific requirements of each and every client. Our core services include current and multicurrency accounts, advanced Internet banking services, global transaction services such as salary payments to seafarers and local staff salary payments, cash management services, working capital management, spot and forward foreign exchange contracts, credit facilities for working capital purposes, letters of guarantee and trade finance services, escrow and custodian services, private banking services, hedging instruments, options, futures and more. Have your clients in the shipping industry been affected by the banking restrictions that were imposed following the agreement reached with the Troika on the

restructuring of the banking system? Have you been able to reassure them that the system is now safe? Through the initiatives of the Cyprus Shipping Chamber and with the approval of the Central Bank of Cyprus, when the banks were closed “Emergency Payment” procedures were put in place for the shipping industry. This approval gave shipping companies the right to process payments during that critical period. Overall and based on feedback received, the operations of our clients in shipping have not been affected too much and it is our understanding that our clients today are working quite close to ‘business as usual’. Faith in the system has undoubtedly been shaken but the benefits for shipping companies operating out of Cyprus are so great that they have helped mitigate those concerns. We are in constant communication with our clients so as to best handle anything that comes along in a speedy manner. We believe that all of the above, including our solid financial position, have helped reassure them not only of our commitment but also of the fact that Cyprus is the right place for them. Nevertheless, there should be a continuous effort from all parties involved to ensure that the right measures are implemented so that we not only fully restore faith in the system but we make that faith even stronger. Hellenic Bank has always been the “quiet” third bank of the island’s traditional Big Three. How will the automatic move

You will value the personal touch d thel touch and the factl touch and the factl touch and the factl touch and the factt organised by the Association. He/she is licensed by the Cyprus Tourism Organisation and his/her ACTA membership is recognized as a guarantee of integrity, competence and a high standard of service. up to 2nd place affect the Bank’s philosophy and operations? Will you use the current situation to expand? The Bank’s underlying philosophy of credibility, consistency and prudent management will remain intact. This is what actually differentiates us from our peers. That is why we also intend to maintain this line of thinking. In order to improve our services and to have the capacity to expand further, especially in the international business sector, last year we established a second International Business Centre in Nicosia. In addition, in January of this year, we established the Hellenic Bank Shipping Business Centre in Limassol, the first of its kind in Cyprus exclusively dedicated to serving the shipping business community on the island. However, in the present circumstances, any discussion about aggressive expansion is on the back burner and will most probably have to wait. What is your overall assessment of the future of Cyprus shipping? Cyprus shipping is – and will remain for years to come – one of the most important sectors of the Cyprus economy with the potential for further growth. The establishment of the Hellenic Bank Shipping Business Centre is a clear acknowledgement of that.

Cyprus shipping is – and will remain for years to come – one of the most important sectors of the Cyprus economy

CONTACT DETAILS

HELLENIC BANK PUBLIC CO LTD P.O.Box 24747, 1394 Nicosia, Cyprus Tel: from cyprus: 8000 9999 Fax: (+357) 22500083 Telephone from abroad: 22500500 Email: serviceline@hellenicbank.com Website: www.hellenicbank.com

CYPRUS SHIPPING DIRECTORY

Horwath DSP Limited Member Crowe Horwath International

Limassol port which is now the island’s biggest port. The establishment of these companies in Limassol created hundreds of jobs therefore giving a significant boost to the local economy.

Emilios Ayiomamitis Member of the Board

he importance of the shipping industry to Cyprus has been acknowledged for more than 30 years. How significant is it to the economy of Limassol in particular? The history of shipping in Cyprus goes back hundreds of years due to its ideal location, at the crossroads of Europe, Asia and Africa. Limassol is undoubtedly the shipping capital of Cyprus. If we look back in time the first shipping companies to be incorporated in Cyprus, in the early 70’s, chose Limassol as their base, the main reason being the

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• The appointment of an Under-Secretary to the President of the Republic for Shipping In order to upgrade and restructure the Cyprus Maritime Administration, the Chamber promoted the idea for the creation of such a position, through which there will be faster and more accurate development of Government policies on Shipping in accordance with international conventions and more effective communication with other State authorities or agencies. • Further promotion and expansion of the tonnage tax system The Maritime Administration and the Cyprus Investment Promotion Agency (CIPA) in close cooperation with the Chamber should step up their efforts to promote the advantages and benefits of the tonnage tax system. • Lifting the Turkish embargo The Turkish embargo on Cyprus-flagged vessels is a major obstacle to getting more ships to join the Cyprus register. The Government, along with the European Union, should push for Turkey to lift this illegal embargo. If the above policies are adopted by the Government, I am pretty sure that the shipping industry will strengthen and develop substantially. The Tonnage Tax system is seen as a key factor in keeping existing shipping companies in Cyprus and attracting new ones. Do you share this view?

Photography: Jo Michaelides

This is a time when all the island’s major industries need to be strengthened and developed. Do you see signs that this will happen with shipping? Indeed, shipping is one of the major industries in Cyprus contributing up to 7% of the island’s GDP and I am sure that there’s still room for further development. During the campaign for the presidential elections, the Cyprus Shipping Chamber presented to the three presidential candidates, including the current president, the following three policy requests that are important to be adopted and implemented:

HORWATH DSP LIMITED

I do. Cyprus now has a European Unionapproved Open Registry. The new tonnage tax system covers the main shipping activities of ship owning, chartering and management companies, and ancillary services such as towing, dredging and cable-laying. The new system also allows for mixed activities to be subject to tonnage tax and corporation tax. The low rates of tax and the comprehensive tax system should help Cyprus retain its existing shipping companies and attract new ones.

proposals put forward by the shipping community.

The major Cyprus-based ship owning and ship management companies have already declared that they intend to stay here and support the country as it seeks to reform its economy and banking sector. What else can the government do to encourage others to follow? In my opinion the Government, through the Department of Merchant Shipping, is doing a lot to support the shipping industry. A good show of support for the shipping industry was the setting up of a dedicated desk within the Central Bank in March (when the banks were closed for a couple of weeks) to ensure that payments could be effected so that Cyprus-owned/managed vessels could refuel and their crews could be paid. There are three things that the government can do to encourage shipping companies to stay here and others to move to Cyprus: • As soon as possible, to lift all restrictions on banks, assist the Bank of Cyprus to exit the resolution stage and put an end to the current economic uncertainty. • Devise a marketing strategy worldwide to improve the image of Cyprus and to promote Cyprus as a European financial and shipping centre. • Urgently implement all the improvement

• Compliance and advice on the Cyprus Tonnage Tax System • Compliance and advice on Cyprus shipping VAT issues • Advice on mergers and acquisitions • Advice on structuring of shipping groups • Feasibility studies • Administration, accounting and audit We take pride in providing a timely and competent service of the highest quality.

What kind of services does Horwath DSP offer to the shipping industry? As a member of Crowe Horwath International, our firm is connected with offices in the world’s major shipping centres such as Hamburg and Singapore, and can therefore assist clients worldwide. Horwath DSP offers a range of services to the shipping industry as summarised below:

Since shipping is a global industry, the sector in Cyprus is affected by events and trends beyond its control. What advice can you give your clients during the years when the industry is experiencing a slowdown? The shipping industry had been affected by the financial crisis long before we began to see signs of a slowdown in Cyprus. Since shipping is a cyclical business, it is of immense importance to act against the cycle. In recent years there has been a significant slowdown in the shipping industry, and now should be the time to invest into new, more efficient vessels, or in second- hand buildings at low prices. To make matters worse, along with this historically long-lasting shipping crisis, we now have the ongoing financial

The shipping industry had been affected by the financial crisis long before we began to see signs of a slowdown in Cyprus.

offers audit, tax, risk and advisory solutions to a diverse portfolio of clients in Cyprus, the region and the world. As a member of Crowe Horwath International, it can draw on the know-how of a worldwide network of 160 independent accounting and advisory services firms in over 100 countries. The combination of local and regional talent, coupled with the network’s global reach, provides clients with all the expertise and capabilities they need. crisis. Access to equity or other funds can be crucial in such times. If, in the recent past, there was no sale of parts of a fleet for a reasonable price, traditional bank financing will prove difficult to find and shipowners need to find new ways of raising finance. There could be bond issues, private equity or even mezzanine capital for family -wned or midsize companies. As shipping is a global business, financing could also be sourced globally. Investments in the existing fleet have to be examined very carefully in these times of uncertainty and slowdown. Larger investments such as drydocking expenses for vessels with limited remaining useful lifetimes could be difficult to amortise, as the recovery of these investments depend heavily on the expected increase of the currently very low charter rates. If the latter seems unlikely, scrapping a vessel, at the current high steel prices, could be a realistic alternative. What is your overall assessment of the future of Cyprus shipping? The future of Cyprus shipping is bright. The combination of the benefits offered by the tonnage tax system, the professionalism of all involved in the shipping sector, and the promise given by the new Cyprus Government to implement the improvement proposals put forward by the shipping industry, all bode well for the future of Cyprus shipping.

CONTACT DETAILS HORWATH DSP LIMITED LIMASSOL OFFICE Nicolaou Pentadromos Centre Office 803, 3026 Limassol, Cyprus PO Box 70726, 3802 Limassol, Cyprus Tel: +357 25255550 Fax: +357 25255551 mailbox@crowehorwath.com.cy www.crowehorwath.com.cy

CYPRUS SHIPPING DIRECTORY

KPMG LIMITED the importance of this sector to Cyprus’ economy further as, together with the oil & gas sector, it is one of the major prospects for the island and an area where we currently maintain a competitive advantage. If we take a long-term view as a country and form a robust strategy, the industry will continue to attract significant foreign investment to the island and help the economy return to positive growth.

Sylvia Loizides Board Member

The local shipping industry has always maintained a perhaps surprisingly low profile. Do you think that it needs to adopt a new, more proactive stance? Do you have any suggestions how it should go about this? I don’t necessarily agree that our shipping industry has maintained a low profile. However, definitely more can and should be done, given the current economic situation, to further promote Cyprus as a maritime hub. Our new tonnage tax regime is the cornerstone of our shipping industry and this needs to be the centre of all promotions. I believe we should also be targeting maritime countries that have not traditionally been associated with Cyprus, such as Japan, Korea and now China, and actively promoting our regime. Ours is the only EU-approved regime and it is critical that we make the most of this competitive advantage. Also, it is up to us as professionals servicing the shipping industry to go out and ‘sell’ the Cyprus regime as much as possible.

he importance of the shipping industry to Cyprus has been acknowledged for several decades now. How much more significant is it to the economy during these difficult present times? The shipping industry has been a central part of the country’s economy for many years now. It is a large contributor to our GDP, it employs thousands of people and enhances our status as a financial centre. The economic crisis has elevated

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Are there steps that the Government could take in order to make Cyprus an even more attractive maritime centre for shipping companies of all kinds to set up their headquarters? Firstly, I believe the authorities should actively benchmark our tonnage tax regime vis-à-vis competitor regimes both within and outside the EU and seek to improve it where we lack competitiveness but always within the EU guidelines on state aid to maritime transport. This is important to

KPMG LIMITED

ensure we remain up-to-date and maintain our competitive edge and attractiveness to shipping groups. I believe we lost sight of this in other sectors and, as a result, lagged behind other countries, particularly as a tax structuring destination. The same mistake should not be made for our tonnage tax system. Also, competing EU regimes should be monitored on an ongoing basis and any deviations from the EU guidelines on state aid to maritime transport should be reported as this leads to unfair competition. Government departments also need to embrace e-commerce as competitive regimes allow a lot of business to be carried out online and in real time, allowing foreign groups to work in a familiar environment. The working hours of government departments must also be reviewed as these do not always make sense to foreign investors working in separate time zones. Ultimately, the biggest boost to Cyprus’ shipping industry would come from the lifting of the Turkish embargo of our flag, and although this is not necessarily in our Government’s hands, it must become a priority to seek an agreement with Turkey even as part of a ‘goodwill’ gesture ahead of any settlement to the Cyprus problem. How important is the Tonnage Tax system to the shipping companies that are already established in Cyprus and to potential new ones? Our tonnage tax regime is the centrepiece of our shipping industry. In my experience, shipowners in particular always prefer a tonnage tax system to another type of system as it is what they know and understand. Not only is our regime very competitive, it has certainty; and in times of economic crisis, this type of certainty

holds a significant premium which we should actively be promoting. Our regime is approved and will remain in force at least until 2019 (when it will be subject to extension), whereas many competing EU jurisdictions are currently under review or investigation for being in breach of EU guidelines on state aid to maritime transport. What kind of services does KPMG offer to the shipping industry? At KPMG we offer the full range of services for companies operating within the maritime industry. This includes tax planning, structuring and restructuring; registration of shipping companies of all types; ship registrations, deletions, transfers and mortgages; maintenance and full compliance services for Cyprus companies; audit and assurance related services; ISAE3402 reports (reports for use by user organisations and their auditors on the controls at a service organisation that impact the user organisation’s system of internal control over financial reporting – particularly useful for ship managers) and other advisory services. We have a specialist team that has vast experience with all types of shipping activities as we understand that the unique nature of the industry requires a tailored service. Have you seen any tangible effects on your clients in the shipping industry caused by the agreement reached with the Troika? Our clients are, of course, concerned with recent developments and we have been keeping them informed of developments on an ongoing basis to reassure them as much as possible. Although they believe

Our tonnage tax regime is the centrepiece of our shipping industry

KPMG in Cyprus traces its origins back in 1948, and today is one of the largest Audit and Advisory organisations in the Cyprus market. Our Cyprus company comprises more than 750 people, including 37 board members, working from 6 offices throughout the island. KPMG is the global network of professional services firms, providing Audit, Tax, and Advisory services, with an industry focus. For each of these core services, KPMG in Cyprus has specialised departments which are headed by board members with long experience in that field and are staffed by highly skilled personnel. that Cyprus still remains the best jurisdiction for their operations, they expect that the Government will make some serious structural reforms to ensure the island regains its competitiveness outside of the tonnage tax regime, and particularly with respect to the various government departments and associated bureaucracy. What is your overall assessment of the future of Cyprus shipping? I am hopeful that the future of our maritime sector is bright. The gas discoveries provide us with an opportunity and a platform to further develop our shipping industry as the two are closely connected. Furthermore, the difficulties arising from the economic crisis provide an opportunity to focus on building a long-term strategy for our shipping sector and make much needed structural changes to the wider economy so that we will become an even more attractive destination for shipping companies worldwide.

PRIMARY CONTACT SYLVIA LOIZIDES Board Member, KPMG Limited 11, 16th June 1943 Street 3022 Limassol - Cyprus Tel: +357 25 829 101 Fax: +357 25 829 111 e-mail: sloizides@kpmg.com

CYPRUS SHIPPING DIRECTORY

MASS LTD Evripides Gavrielides, Aris P. Hadjipanayi, Partners

What specific services do you offer ship owners? MASS Ltd is a maritime security company specializing in risk mitigation services, employing a number of experienced, fully capable and qualified teams for armed service in the Red Sea, the Gulf of Aden, the Indian Ocean, and the Gulf of Oman. Additionally, the company offers services in the areas of fleet security assessment consultancy, fleet route management and tracking, vessel hardening guidelines and implementation, intelligence updates and pirate movement analysis and a broad spectrum of training modules in security and weapon handling. MASS employs teams of seasoned Greek national veterans with collective experience of over

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Photography: Jo Michaelides

ours is a very young company, involved in a relatively new aspect of shipping: security on board. When did you set up MASS Ltd? The Company was established in 2012 under The Protection of Cyprus Ships against Acts of Piracy and Other Unlawful Acts Law 2012, which entered into force following publication in the Official Gazette on June 15, 2012. Following parliamentary approval of this pioneering bill, an innovative and detailed legislative framework has been established for the lawful use of armed escorts by specially trained and certified guards.

THE ANTI-PIRACY LAW

750 passages in high-risk areas with a relevant professional background in Special Forces Units. And the need for companies such as MASS has arisen from the extremely serious problems caused by piracy in certain areas of the world? Yes, although the scope of the law extends beyond acts and attempts of piracy and purports to address all unlawful acts against a ship or attempts to violate the security of the ship. It includes a broad definition of ‘unlawful acts’ to include any act or suspicious act or circumstance which, by its nature or context, threatens the security of the ship or may cause damage to the ship, to persons on board or to the cargo. What does the law say about the need to protect ships from pirates or any other threat? The law provides that Cyprus ships navigating through high-risk areas must implement compulsory security measures over and above those set out in Chapter XI-2 of the International Convention for the Safety of Life at Sea and the International Ship and Port Facility Security Code, taking into account the relevant recommendations and guidelines published by the International Maritime Organization and the shipping industry. The Cyprus law has won praise in many quarters. How comprehensive is it? The “Anti-Piracy Law”, as it tends to be

called, is currently considered to be the most complete and thorough legislation globally. It provides a response to the cancerous phenomenon of piracy which is currently affecting international shipping and has escalated in recent years with the illegal seizure of vessels and detention of seafarers under inhuman conditions including torture, injuries and even killings, for the payment of a ransom by ship owners for their release. How much is piracy costing the global shipping industry? The cost of piracy in terms of international trade is estimated to have been more than $30 billion over the past three years alone. MASS is the first Cypriot company to adhere to the new legislation and one of only a few pioneers in the field that have recently been accredited by the Cyprus Department of Merchant Shipping (Cy DMS). In accordance with the high standards set by the CyDMS, MASS continuously strives for more innovative risk mitigation strategies at an affordable cost for the Cyprus and international merchant shipping industries. Once your team is on board a ship, how would you describe its mission? Our mission is to protect the crew of any vessel, its cargo and the vessel itself, and to achieve security against pirate attacks, preventively, effectively and peacefully. Our vision is to establish MASS amongst the global leaders in the maritime risk mitigation services sector with world-class, fully-qualified and capable personnel in all high risk areas.

Our vision is to establish MASS amongst the global leaders in the maritime risk mitigation services sector

Law 77(I)/2012) on The Protection of Cyprus Ships Against Acts of Piracy and Other Unlawful Acts Law (published in the Official Gazette of the Republic on 15 June 2012) is an innovative and detailed piece of legislation based on and taking into account International Law, the recommendations and guidance of the International Maritime Organization (IMO) and the shipping industry in general, as well as the provisions of the United Nations Convention on the Law of the Sea. Its enactment is expected to assist in resolving the piracy problem and to make Cyprus the first country in the EU and, possibly, in the world to regulate this issue in such detail. The Law is designed to enhance the security of Cyprus-flagged ships at sea, especially in highrisk areas such as the northwest Indian Ocean, off the west coast of Africa and in the Gulf of Guinea. It establishes the necessary legislative framework for the regulated use of privatelycontracted unarmed and armed security guards on board ships, in addition to measures set out in the International Convention for the Safety of Life at Sea (SOLAS) of the International Ship and Port Facility Security Code (ISPS Code). The Law covers acts of or attempts at piracy as well as unlawful acts, which includes any act or suspicious or attempted act which threatens the security of – or may cause damage to – the ship, cargo or persons on board.

CONTACT DETAILS MASS MARITIME ARMED SECURITY SERVICES LTD 5 Kanaris Street, Apt. 201 2406 Nicosia - Cyprus Tel: 357 22 754474 Fax: 357 22 754474 Mob: 357 96 443044 E-mail: aph@massltd.eu

CYPRUS SHIPPING DIRECTORY

ÖSTERREICHISCHER LLOYD SEEREEDEREI (CYPRUS) LTD

Capt. Eberhard Koch Chairman & CEO, Managing Partner

ive years ago, Österreichischer Lloyd decided to convert its operations from those of a third-party ship manager and to become a pure shipowner. We wanted to concentrate solely on ownership of a particular segment since we had, at that time, a purchase agreement for 6 MPV newbuildings, to complement the other younger ladies in our fleet. The third party managed vessels were becoming of age and, obviously,

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As a ship owning company, what criteria did you take into consideration before deciding to register your vessels under the Cyprus flag? This question is very easy to answer. For Österreichischer Lloyd, Cyprus is an international Maritime Centre with a “white” flag of excellence, with a Department of Merchant Shipping granting us extraordinarily excellent and highly knowledgeable daily support. Cyprus is an EU Member State and offers low set-up and operating costs for shipping companies if one compares them to other shipping-orientated destinations. Cyprus is very strategically located and offers excellent modern communication and travel facilities whilst holding flexible passport of access to three continents within proximity. It offers highly qualified and experienced managerial, administrative and technical dedicated bilingual staff. Corporation tax

Photography: Jo Michaelides

more of an economical burden. The transition has been very successful indeed and we are very happy with the decision taken. We aim at guaranteeing the best possible safety, and quality and competence for which our name stands for competence.. An additional strong positive aspect from this conversion to pure ownership was the utilisation of the excellent skills of the existing seafarer pool , exclusive to our vessels. Each of the valued seafarers thoroughly welcomed our decision and we are receiving the return tenfold on a daily basis. Whilst affording the necessity of dedicating additional quality time and concentration on the specific market segment of our vessels towards our esteemed charterers, we are receptive to strong new investors/strategic partners who are of a similar mind in preparation for the future and new promising projects, or to potential third party management in the future. We are always open, willing, ready and able at any time.

FOUNDED IN 1836, Oesterreichischer Lloyd Seereederei (Cyprus) Ltd

remains low despite the recent 2.5% increase and let’s not forget the most recent development – the Tonnage Tax System (TTS) duly sanctioned by the European Union. Moreover, Cyprus has signed double tax treaties with 45 or more countries, it provides a great sense of safety and security compared to other countries and, importantly, it offers a common language – English – in addition to being a healthy, beautiful island. In Austria, with several Governments in place, we had no strong supporting Chamber such as the Cyprus Shipping Chamber to establish TTS although we definitely enjoyed the Austrian flag for more than 35 years (the Administration closed down in 2012). We decided to have a subsidiary in Cyprus as far back as March 1995 and it subsequently became our head office when I took the plunge and obtained permanent residency in 2001 at Ayios Tychonas, Limassol. Does the ongoing Turkish embargo of Cyprus-flagged ships affect your company in any way? At the moment and previous years, yes. Without a doubt, numerous European companies and vessel operators, who are chartering our vessels, would like to utilise the very strong Turkish import and export. This is an ongoing and tremendously important issue that needs resolution sooner rather than later and we believe in and support President Anastasiades in his efforts to finally solve this problem through willing negotiations to reunite Cyprus. Perhaps

the financial crisis will even help accelerate these negotiations. A reunified Cyprus has so much to offer. Have the operations of Österreichischer Lloyd Seereederei been affected by recent developments in Cyprus, in particular by the banking sector restrictions? It goes without saying that Österreichischer Lloyd has been affected by the banking sector restrictions but only in terms of paying our dedicated and loyal employees, Cypriots and other EU member colleagues. Strangely enough, the clearance of inward deposits to our local accounts from overseas has been delayed by German banks. All our operational accounts have been located outside Cyprus since the date of the company’s incorporation, due to the fact that it is only possible to secure ship financing and working capital credit lines outside Cyprus. We are hopeful that Cypriot banks will reconsider their stance on the feasibility of ship financing and offer this important service sooner or later. This could be part of Cyprus’ future strength. Strong support from the President of the Republic would be highly appreciated. What is your overall assessment of the future of Cyprus shipping? In my opinion, President Anastasiades rightly agreed that the local financial sector was far too exposed and should be downsized, and it was correct to take the additional measures such as the resolution of the second largest bank and the

OELSR became one of the world’s leading shipowners by the turn of the 19th century. Nowadays, it is headquartered in Cyprus and owns nine multipurpose vessels. recapitalization of the country’s biggest bank. In this way, Cyprus will remain an attractive international business centre and if in the future resident shipowners may even be able to conclude ship financing, something that has always been attractively offered by major European banks and now increasingly by American interests, then the future seems bright. We are ready to take advantage of such financial opportunities if they are presented locally. Most important is a continuous proactive reliable approach by the recently appointed Government towards our European Partners. Österreichischer Lloyd is very content for its vessels to be sailing around the world while the company stands firmly on Cypriot soil. The high quality standards of the Cyprus Flag and the services provided, in combination with a number of fiscal, economic and benefits, continue to make Cyprus the ideal choice. I sincerely have no wish to add insult to injury to those who have suffered financially in Cyprus because Cyprus has been part of a global crisis, but one has a choice: either panic or trust that all will be well in the long run! There is a great opportunity now for taking positive steps forward for the better but President Anastasiades is now bound by his words! We need an Under Secretary for this important industry and we need to promote the Cyprus flag worldwide much more!

There is a great opportunity now for taking positive steps forward for the better

CONTACT DETAILS ÖSTERREICHISCHER LLOYD SEEREEDEREI (CYPRUS) LTD P.O. Box 57280, 3314 Limassol Tel: 25662555 Fax: 25662666 e-mail: capt.ekoch@cy.oelsm.com Website: www.oelsm.com

CYPRUS SHIPPING DIRECTORY

SALAMIS ORGANISATION Kikis A. Vassiliou General Manager

alamis Organisation has been active for longer than the local industry itself. How has Cyprus shipping changed over the past 50 years? It has certainly changed over the years. There is fierce competition among flags regarding vessel registration, means of transport and volume of cargo as well as the increasing number of shipping companies operating out of Cyprus. However, the quality and service provided to all sectors of the shipping industry have been developed and upgraded over the years to such a high standard that they have put Cyprus on the global shipping map. How significant is the industry to the economy of Limassol in particular? It is a fact that since the 1974 Turkish invasion, the majority of shipping Companies – including our organization – have been based in Limassol and Limassol port has replaced the port of Famagusta. As a result, all these companies contribute to the city of Limassol, both directly and indirectly. Following the recent crisis, all the island’s major industries need to be strengthened and developed. Do you have any indications that this will happen with shipping? The global shipping industry had been

affected a long time before the financial crisis appeared in Cyprus. The Cyprus-based shipping companies will certainly be affected even more and I don’t see too many positive signs for the immediate future. So the industry will certainly need support. Plenty has been said and I hope it will be turned into action. There is definitely much room for further development and expansion of the shipping industry in Cyprus, which will contribute to the economy. How wide a range of services do you provide to the Cyprus shipping industry? What are these services? Our organisation is perhaps one of the few to offer specialized and integrated services in almost every sector of the shipping industry because it is active in ship owning as well as being a shipping agent and involved in transport services. These specialized services are ship management, port agency and port operation, road transport in Cyprus and Europe, air freight, cargo handling and international forwarding, customs clearing & warehousing, oil & gas logistics, logistics and marine insurance. Since shipping is a global industry, the sector in Cyprus is affected by events and trends beyond its control. Where do you see the industry right now? Are things improving again? Due to the reduced volume of freight transport and high management and running expenses for vessels, as well as intense competition, it is difficult to see how things are going to improve for the time being. That said, only those companies that offer top quality and do not attempt to exceed their true capabilities will manage to survive. The major Cyprus-based ship owning and ship management companies have already declared that they intend to stay here. Is there more that the government

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can do to encourage others to make Cyprus their headquarters? It is my personal belief that these companies will indeed stay but we, as a society, together with the Government and semi-government services, need to upgrade and improve the quality of the services through extensive and continuous training, the proper infrastructure and competitive charging. How do you see your company’s immediate and long-term future? Salamis Organisation, in addition to the various foreign companies that it represents and which call at Cypriot ports, maintains its activities in the cruising sector with Limassol as a home port for cruises by its own Cyprusflagged cruise ship Salamis Filoxenia. In addition, it maintains maritime links between Cyprus, Greece and Israel on a weekly basis with its own Cyprus-flagged Ro/Ro vessels, transporting all types of cargo in its own containers, reefer trailers, etc. Furthermore, following recent developments in the energy sector, Salamis Organisation has invested in oil & gas logistics, offering transport and storage services for various cargoes relating to this industry.

CONTACT DETAILS SALAMIS SHIPPING SERVICES LTD 124, Franklin Roosevelt Ave., P.O.Box 55609 3781 Lemesos, Cyprus Tel.: +357 25899999 Fax: +357 25563426 e-mail: shipping@salamis-shipping.com website: www.salamisshipping.com

CYPRUS SHIPPING DIRECTORY

SUPERNOVA CONSULTING Kyriacos Stylianides Managing Director

he island’s shipping industry has been a major contributor to the local economy for several decades now. In your experience, have Cyprus-based shipping companies kept up with the latest technology and business solutions? Shipping companies have only started to implement the latest technology in recent years, especially business solutions such as ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), BI (Business Intelligence) and Mobility. Actually, this is something we have noticed in other regions and countries. They have relied mainly on in-house developed applications and localized solutions rather than international vendors’ solutions. However, during the last 4-5 years we have seen local shipping companies investing in the latest business solutions. This is a trend that we, within the SAP ecosystem, have experienced not only internationally but also in several other segments of the Logistics & Transport industry including Liners and Freight Forwarding companies. What kind of services do you provide to the shipping industry here? Supernova Consulting is a Gold SAP channel partner and probably the largest in Cyprus. The offering of our solutions and services is mainly SAP related including business applications consulting – services covering the full scope of a business software implementation, from business processes analysis & consulting

to implementation and support. Our business applications and technology solutions offering for the Shipping industry includes: • Business applications including ERP covering mainly Financial & Cost Accounting, Procurement and Billing, Human Resource management & payroll and CRM • Analytics, including BI, Planning & Consolidation and Risk Management Are ship owning/ship management companies in any way different from the other firms to which you provide business and IT solutions? If so, how much of a challenge is it for you to give them what they need? For Supernova Consulting, the local ship owning and ship management industry is a strategic industry. We have been servicing this industry since 2009, counting a number major key players. High-profile companies are international by nature, they have high expectations and require nothing but the best services offering and support they can get. The level of professionalism that we have seen in the shipping companies, and the bonds of this business community, are something unique. We are glad to be part of this industry and, as an associated member of the CSC (Cyprus Shipping Chamber), we contribute in different ways in the local industry. Have you seen any negative effect of the recent economic/banking crises in Cyprus on your clients’ businesses and planning or is now the time when they should take advantage of a company such as yours in order to gain a competitive edge? We have not seen anything negative for the time being at least. On the contrary, we have been experiencing growth and our business solutions offering is becoming an integral part of our shipping clients’ success by improving operational efficiency, reducing costs, helping them identify new opportunities and providing

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SUPERNOVA CONSULTING LTD

Supernova Consulting Ltd is the first SAP channel partner that has achieved Gold SAP channel partner status in Cyprus and it offers SAP Business All-in-One, SAP Business Objects and SAP Business One solutions. This is the highest level of recognition attainable within the SAP PartnerEdge™ program. Supernova’s team of certified management consultants, ERP consultants, IT consultants and qualified accountants – with local and international project experience – offers affordable, personalized, professional services and IT solutions to accelerate business performance. real time information for accurate decision support making. Cash flow position & projection, budgeting, planning and risk management are now more critical than ever for shipping companies. Having worked with a number of Cyprus shipping companies, what is your overall assessment of the shipping industry’s future? In our opinion, Cyprus shipping companies have been a vital part of the local economy and society. We strongly believe that shipping is one of the key and strategic industries in Cyprus that can support and drive the economy out of the current economic environment. The international shipping industry has been facing difficulties in recent years. While there have been recent signs of improvement, it might need some more time to recover and when it does, it will be a major boost for the local economy as well.

CONTACT DETAILS SUPERNOVA CONSULTING 34 Arch. Makarios III Ave., Off 301, CY-3065 Limassol, Cyprus Tel: 25817880 Fax: 25817881 e-mail: info@supernova-consulting.com Website: www.supernova-consulting.com

consulting I technology I outsourcing

With SAP@ solutions implemented by Supernova Consulting you can operate more efficiently, sell more effectively and respond more rapidly to market shifts. SAP • SAP • SAP • SAP • SAP • SAP •

Business All-in-One (ERP) Business One (ERP) Customer Relationship Management (CRM) BusinessObjects Business Intelligence NetWeaver Business Intelligence (BI) Mobility

Tel. +357 25 817 880, Fax. +357 25 817 881, 34 Arch. Makarios III Ave., Off 301, CY-3065 Limassol, Cyprus, info@supernova-consulting.com www.supernova-consulting.com @2013 Supernova Consulting Ltd. All rights reserved. @2013 SAP AG. All rights reserved. SAP@ Business All-in-One and SAP Business One and other SAP products mentioned herein are trademarks or registered trademarks of SAP AG in Germany and in several other countries.

Be Predictable! eurozone

By Kyproula Papachristodoulou. Photo by Philippos Christou

How successful has Portugal been in implementing its stability programme? Professor Luis Campos e Cunha sees negative and positive results and asserts that a key aspect is predictability and stability in policymaking 76 Gold the international investment, finance & professional services magazine of cyprus

or several days in the wake of the Eurogroup’s decisions on Cypru s (on 15 & 25 March), international new spapers reported that customers of Portugue se banks were feeling extremely nervous. The banks experienced move cash from deposit acc a rush of customers wishing to ounts into vaults inside the The European banking sys banks. tem was clearly being roc ked to its foundations. Trust had bee n jeopardized. Portuguese Professor of Economics Luis Camp os e Cunha, a former Vic e-Governor of the Central Bank of Po rtugal, confirmed the rep orts. “The first Eurogroup decision had a huge impact on the Portuguese people, who lost trust in the banks. Banks only ope rate if we trust them. If we don’t, the y hav Campos e Cunha, who wa e no future.” s in Cyprus in May to add rd 3 Nicosia Economic Co ress the ngress, told Gold that pri or to the onset of the global financ ial crisis the credentials of the Portuguese banking sector had been excellent. “However, the crisis, subsequent unemployment and its impact on non-perf orming loans as well as the Greek haircut [Portuguese banks owned a sizeable amount of Greek debt] had a negative impac their capital ratios.” The t on Government’s response wa s to inject money into some banks, though the total amount did not exceed €3 billion. “Some ban money to the government, ks are already paying back that ” he said, adding, “I presum e that it is going to be possible for these banks to completely resume to private funds now.” The truth is that the whole of the country’s banking under pressure as a result sector is of the shrinking economy , rising unemployment and worsenin g bad debts. Some analys ts predict that Portuguese banks ma y need further government assistance in the future. How can the ECB help eur ozone governments and the banking sectors to survive ir financial instability and res tore confidence? The Portugue se professor answered in a simple, concise way: “What they have to do now is what the y have promised to do. You do no t need to do much for the financial markets, as long as you are credible.” “The ECB has promised to provide liquidity to stre ssed

Luis Cam e Cunha pos

uis Cam pos e Cu nha is a former P ortugues e Ministe of Finan r ce and c a Profes urrently sor of Ec onomics Universid at the ade Nov a de Lisb Portugal. oa, He earne d his Ph Columbia .D . from Universit y and late as Vice-g r served overnor of the Po Central B rtuguese ank form 1996 to also serv 2002. He ed as a F inance M a short p inister fo eriod in r 2 0 05. Curr is on the ently he board of Fundaçâ and Fun o Serralv daçâo C es CB, he is executiv a none board member Energia of Galp and Cha irman of Fiscal of the Cons Banco S elho antande addition r Totta; In he has b een Pres civic NG ident of O SEDE the S since 2 009.

My feeling is that private investment is not going to pick up soon

Marina Theodorou xxxxxxxxx xxxxxxxxxx

eurozone

y market for sovereign banks and to intervene in the secondar reach the countries bonds to make sure that low interest rates promise to be this For d. that are under stress,” he told Gol ld be in the markets. meaningful, however, the countries shou to issue bonds re“That’s why it was necessary for Portugal t. If the interest cour ’s ECB the cently,” he said. “Now it is in by Portugal are ntly rece d issue ds bon ear 10-y rate yields of the too high, the ECB can intervene.” government bonds On 4 May, Portugal issued its first new ut two years ago, in an since requesting an international bailo n. The issue was a billio €3 offer of 10-year debt that raised bid to regain full try’s coun s-hit crisi the crucial milestone in its planned exit of d access to international debt markets ahea me. Demand ram prog ut bailo ar in June 2014 from a three-ye than the €3 er high s time e thre than e mor from investors was d strongly rallie has ket mar billion on offer. The eurozone debt tral Bank Cen pean Euro by 2012 in ge since the oft-quoted pled the save to s” take er it President Mario Draghi to do “whatev . tries coun ut bailo by kets mar euro and speed up the return to cribed subs over ily heav a in n billio €5 d In March, Ireland raise sale of a 10-year benchmark bond. the important role Luis Campos e Cunha also highlighted ). “The ESM also (ESM sm hani Mec ility Stab of the European so we have now kets, mar has the possibility to intervene in the tion than we situa the with cope to pe more instruments in Euro act to bring also ld shou did two years ago,” he said. “The ECB ve that it belie le peop sure e about the banking union and mak policy etary mon keep to has also It . idea is serious about the eased for the next two years, at least.” money in the marPortugal may have succeeded in raising ntation of the Troika’s kets but reports regarding its impleme they are somewhat ed, programme are not so positive. Inde measures were overthe of e som after y disappointing, especiall try’s Supreme Court. turned as unconstitutional by the coun be a success story, to ugal Asked whether he considers Port little too early to “a was it that d Gol told Campos e Cunha aspects. “The main y say” though it has been successful in man n in the markets tatio repu try’s goal was to maintain the coun ect, it has been resp this in and, cing finan of ty and the possibili a success.” have been mixed and He acknowledged that, overall, there the country entered even some negative results. “First of all, ys implies extremely alwa that into a very deep recession, and d. “We are currently aine expl he t,” men ploy high levels of unem ployment rate, at unem experiencing probably double the past probably reach will it year the of around 17% and by the end l point of view, that 19%-20%. From an economic and socia been doing very well have is a big failure. Fortunately, exports rt sector working expo all over the with s, over the past few year at full capacity.” Portugal provides The financial assistance programme for the country’s interto nts stme adju l tura for some serious struc ntation of these leme imp nal market and its public sector. Has ess? iven petit com try’s measures increased the coun of exports are ease incr the to ted ribu cont that rs “The facto Campos e said tly,” direc not related to the Memorandum but eased incr gs savin ate priv of level the n Cunha. “You see, whe ped stop cally mati as a result of the recession – people auto domestic demand fell. consuming the way they did before – market would be Companies understood that the domestic lerated and enacce pretty depressed for several years so that

78 Gold the international investment, finance & professional services magazine of cyprus

Portugal

needs stable, predictable policies.

couraged the export effort. And it worked. Portuguese exports to third countries and to new markets are booming. To boost the economy now, we need private investment”, he added. “But unfortunately, my feeling is that private investment is not going to pick up soon.” Is that because potential investors do not believe in the country’s prospects for future growth? Campos e Cunha blames “unstable policies” for the lack of investment interest in the country. “You need a stable environment to understand what the future will be and, based on that understanding, you make a business plan and take decisions in terms of investment,” he explained. “When you change the tax laws, the labour laws and the regulatory environment every other day, people simply don’t know what is going to happen.” Professor Campos e Cunha pointed to two main factors to which instability can be attributed. “First of all the MoU was based on targets,” he said. “Portugal was supposed to reach a certain level of deficit and it had to implement a number of measures to achieve this. If the measures proved to be insufficient, according to the Memorandum, Portugal was supposed to take additional measures. But if the targets were unrealistic or over-optimistic, it was obvious that conditions for instability would be created.” Then some of the measures were deemed to be unconstitutional so Portugal had to substitute them with alternatives. “This procedure has made the country’s fiscal policy random. Portugal should now be entering the second phase,” he said. “It needs stable, predictable policies.” Reminded that when Portugal entered into an agreement with the Troika, the country was excluded from the international markets and had no alternative course of action, the former Finance Minister hesitated: “Well”, he said, “that depends on when you are talking about. If you are talking about two years ago, yes, we had a choice of accepting the MoU or going bankrupt. If you are talking about five or six years ago, however, there was an alternative. But it did not suit the politicians or, at least, that is what they thought at the time.” To be fair, he acknowledged that “Economic forecasts are always difficult, especially when a country finds itself in an unstable situation such as the one Portugal was in. When times are calm, it is much easier.” Is the Portuguese government to blame for the instability? “Of course,” Campos e Cunha replied. “The Government is supposed to have a clear view, a clear mind and a clear purpose. But such is the situation that there is very little room for manoeuvre. When you have to fulfil certain criteria for funding to be released and those criteria cannot be met and as a result you have to take new measures, how can you create the conditions necessary for a stable environment? You actually create an explosive mix and that leads to a spiral of recession.”

PROFILE

Recognised

on Merit Limassol-based Meritkapital Ltd was recently named Best Asset Manager in Cyprus for 2013 at a ceremony in London. The companyâ&#x20AC;&#x2122;s Executive Director, Persella Ioannides, spoke to Gold about the award, the firmâ&#x20AC;&#x2122;s recent expansion into to new sectors and how she views the post-bailout situation in Cyprus. By John Vickers, Photography by Jo Michaelides

Gold: Congratulations on your latest international award. What was it for? Persella Ioannides: Meritkapital Ltd received an award from World Finance as Best Asset Manager in Cyprus for 2013. The candidates for this award enter the final round after they have been voted by various bodies in our respective industry which include Bloomberg, Reuters and the like. Once the applicants reach the final round, each has to complete a thorough application pack depicting its investment procedure and respective historical returns, risk management policies and relative risk monitoring systems, reporting infrastructure to clients, corporate governance etc. Gold: How important are such awards to you and the company? P.I.: I have been involved in competitive sports from a young age and I maintain a competitive attitude in the professional arena too, as must probably do most of my colleagues in the business world. Awards in business, as in sport, represent recognition of accomplishment and thus provide a psychological boost

Once the foundation is there and it is an efficient model, it attracts more beneficial business dynamics into the equation to maintain stamina for a continuing upward momentum. Moreover, in the professional arena, brand-building is essential, especially for the small to medium sized companies, and a comprehensive marketing strategy is required to facilitate this. Awards definitely fall within such a marketing context so we will continue to pursue such nominations both for personal aspirations and also in an effort towards enhancing our companyâ&#x20AC;&#x2122;s image.

Gold: Tell us about Meritkapital’s main activities. P.I.: Meritkapital Ltd is an investment firm licensed by the CySEC. Our main activities include brokerage, custody, asset management and most recently dealing on own account. We are based in Cyprus but cater to an international clientele which is predominantly Russian. As such, our line of services is much in line to the services offered by other Russian brokerage houses with a similar client profile. Due to the fact that a large number of licensed Russian brokerage houses are also based in Cyprus, the close proximity of our operations has been beneficial in a number of ways. We have established credit lines, accounts of various types amongst other collaborations with one another and this has provided us with an insight into their standards and services and has enabled us to benchmark against them. We have thus developed considerably through them. Gold: In the asset management part of your business, do you operate using a single strategy or do you have to adapt considerably according to the client? P.I.: We have been through two crises – the sub-prime loans and the euro debt crisis – and we have clients that mainly have high liquidity needs and short investment horizons so their funds must be made easily available to accommodate their respective operational needs. We thus have, mainly, a single strategy that encompasses a conservative approach to investment which is predominantly fixed income, though we do vary the type of underlying instruments as per the ensuing economic environment. For instance, we increase allocations to convertible bonds that are tied to equities in a bullish market, to floating rate bonds in global central banks’ monetary easing policy environments, in higher yielding bonds on a ‘risk on’ market, and perpetual bonds with a bet on the yield to call date in changing legislative times, as per the latest BASEL III amendments. Gold: You have recently expanded into the brokerage business. What made you take this decision? P.I.: We have expanded into the brokerage business and particularly the electronic trading business for equities whilst we have

It is not too late to enter the Funds sector, especially with a potential inflow of interested investors chasing good asset valuations. established credit lines with numerous market makers on the fixed income side. Once again, as we benchmark against our peers, we need to strive to build a par infrastructure, albeit on a smaller scale to start with. To develop is to aim higher and for us aiming higher means comparing ourselves to our competitors which, by the way, are gaining quite a foothold in western capital markets; While a number of the Russian Investment Firms are members of the LSE, they have also established a top ranking as far as flow is concerned on numerous exchanges, such as the LIOB (London International Order Book) where most Russian DRs are listed. Moreover, some Russian trading technology companies that offer DMA (Direct Market Access) to global markets are now competing with global technology players. Lastly, Russian Investment Firms are spreading globally with a presence in, at least, the main capital markets of the world. Another reason to expand into the brokerage business is to diversify of our product offering as a safeguard in changing and turbulent economic times. Gold: The CFD and FX sector appears to be one of the few sectors that is thriving in Cyprus these days. Why do you think this is? P.I.: The CFD, FX and more recently the binary options markets continue to perform well for a number of reasons. The FX industry has performed very well despite the global financial crisis, as the underlying movements in currency are more variables of volatility than of directionality. Also, the considerable leverage enables retail clients to gain significant exposure and have a chance – although usually against the odds – of a decent winning. So the industry is also growing on a global standalone basis. Growth in Cyprus specifically is tied to a few factors:

• Our regulatory authority, CySEC, which abides by the latest EU legislation and enables common passporting within the EU, • The initial entrants that built the industry and its respective reputation and set high standards for subsequent entrants, • The market gateway that these firms have established, particularly to Asia, China which are sizeable markets. Concurrently, they have proved prudent with their choice of custodians and the vast majority have remained unaffected by the haircuts of the island’s two biggest financial institutions following the EU/IMF bailout agreement. Gold: What does having Cyprus as a base do for such firms? Is it the EU ‘guarantee’ of proper regulation or is it more than that? P.I.: I believe that once the foundation is there and it is an efficient model, it attracts more beneficial business dynamics into the equation. The profitability of current players and the presence of branded FX companies has attracted competitors and related firms such as technology and online marketing companies amongst others. Moreover, as one service offering has proved successful, such as FX and CFDs, other service offerings come into play, such as binary options, and the respective Cypriot industry expands with them in tandem. Gold: One of the areas in which Cyprus has consistently been outflanked by its competitors is the Funds Industry. In this new post-bailout era, is it too late to enter this sector or is now a good time for the island to be making new offerings? P.I.: This argument could hold true across all services offered in Cyprus, from fiduciary services and company incorporations to Cyprus investment firms (CIFs), ICIS Funds etc. Yes, the country risk on Cyprus is currently on orange alert when screened by the compliance of banking institutions, potential clients, investors and the like. However, once an extra screening of the underlying structure of the legal entity, CIF, ICIS funds, etc., is performed, the foundations are solid: the choice of custodian, portfolio manager, board of directors, underlying investments and business strategy. Then the respective rating attached to each of these Cypriot

the international investment, finance & professional services magazine of cyprus

Gold 81

PROFILE

entities is automatically upgraded. It is not too late to enter this sector especially with a potential inflow of interested investors chasing good asset valuations. It may be prove opportune for the Cypriot Funds Industry to provide for such a potential demand under an appropriately structured Central Bank Fund. Gold: Have your clients shown any negative reaction to what has happened to Cyprus, and particularly to its banking sector? P.I.: We are thankfully amongst the investment firms that took the decision to hold funds with global, reputable custodians at the origins of our operations. At the time we thought of it as a way to attach ourselves to a brand, given that we were a newly-incorporated financial institution that needed to secure our clients’ trust in the safeguarding of their assets. Not that the reputation of Cyprus banks at the time fell short of gaining clients’ confidence. As such, our operations have remained unaffected and we are pleased to say the same for our portfolio of clients. Gold: Was your firm affected by the terms of the resolution/restructuring of the island’s two main commercial banks? P.I.: Meritkapital had some company operational cash in the two main commercial banks but it was not a considerable amount. Gold: Given that the investment services sector depends on the larger investment banks, do you believe that the government should be doing more to attract such banks to Cyprus? P.I.: What we are currently experiencing is a fragmented banking sector whereby the bigger foreign institutions operate with no capital controls for foreign residents and the local institutions are restricted by capital controls (for funds deposited prior to the bailout) for foreign and local residents alike. Larger investment banks could perhaps boost investor morale and the image of Cyprus but the situation is currently so vague and uncertain due to the liquidity crunch and the way matters are handled that it seems unlikely that larger investment banks will enter the market. Moreover, investment banking was not part of the operations of the two main commercial banks under restructuring nor is it among the operations of the remaining banks in the industry facilitating the international business of clients. Corporate banking is, however, and a bank with a focus on corporate banking operations with an infrastructure in par with that of Laiki and Bank of Cyprus that developed considerably in sophistication over the years

Meritkapital

eritkapital, Meritservus (fiduciary services) and DI Ross (accounting services) all belong to one group of companies and are affiliated by common ownership. In 2005 Meritservus became wholly independent from

Deloitte (Cyprus) through a successful management buyout. Demetris Ioannides had then stepped down as Chairman of Deloitte to head Meritservus. In December 2006, Meritkapital was formed to facilitate the financial services needs of the clients of Meritservus

is what is required. Moreover, those banks worked with clients from Russia and the CIS countries for over a decade and are familiar with their business lines and particular way of working. Any western banks that enter our market must also have such relative experience as to enable the continuation of such international banking operations. Once the picture becomes clearer and investor sentiment has a chance of a turnaround, any efforts by the government or other parties to attract such industry players will be easier and thus more rewarding. The focus for now should be on resolving the issue of the restructuring of Bank of Cyprus at a much speedier but productive pace, as well as on the issue of capital controls on the rest of the banking industry. Gold: How do you view the future of the professional and financial services sectors today? P.I.: That’s the million-dollar question! It is hard for anyone to predict the future of the respective services sectors. It is also very much dependent on other forces that may be dictating our geopolitical and economic game. Latvia, for example, has been the beneficiary of a considerable portion of the capital outflow from Cyprus since the crisis initiated. In 2008 Latvia itself requested a bailout of $10 billion and, concurrently, its second-biggest financial institution (Parex Bank) was close to failure until it was nationalised. It has since imposed strict fiscal discipline, reduced its budget deficit, redeveloped a solid banking sector and is in line for joining the euro with strong support from the Managing Director of the IMF, Christine Lagarde. So Cyprus can also achieve a comeback. Investors’ memory is short and forgiving and this is evident also in the financial markets where investors re-assume risk, despite experiencing past heavy losses.

82 Gold the international investment, finance & professional services magazine of cyprus

and, shortly after, DI Ross was also incorporated to meet their respective accounting requirements. Meritkapital has since grown its product offering and client pool considerably and now extends its services to a client audience much outside the scope of Meritservus’s.

Gold: Much is being made of the promise of natural gas revenues but given that these are not expected to arrive until 2020, how do you see the next 7 years for the Cyprus economy? How easy will economic growth and cutting unemployment be in the short term? P.I.: It is all a vicious circle where economic growth results in lowering unemployment but in an environment of austerity, as can be seen elsewhere in Europe, the policy often defeats the purpose. My view is that we must focus on our current industrial core and attempt to maintain it as best we can. This core includes professional services firms, the investment services sector, the growing commodities sector, the international companies that are based in Cyprus, tourism, local businesses, real estate, renewable energy. Within this sphere we can work at providing an exceptional service, be creative in our product offering, relieve any unnecessary political or bureaucratic obstacles that may be in the way of development, work at smartly rebuilding a brand and try to price ourselves fairly and competitively. Moreover, we should attempt to squeeze extra margins by exploring new markets and to diversify our potential client pool.

The focus for now should be on resolving the issue of the restructuring of Bank of Cyprus at a much speedier but productive pace

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Gold 83

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84 Gold the international investment, finance & professional services magazine of cyprus

t a low-key ceremony in Limassol earlier this month, Ali Al-Tameemi, Chairman of the Jordan-based Al-Muthana Group of Companies, was honoured by the management of Kardex Systems Ltd for posting the Best Performance of 2012 among all the company’s distributors. Perhaps surprisingly, Mr Al-Tameemi’s awardwinning work was in Iraq, where his business began to flourish in the 1990s under the UN’s Oil for Food Programme. “We were dealing with a lot of international companies and, after an enforced break, we re-started in 2003,” he said. “We were promoting and providing new products, equipment and solutions for a wide range of firms and in 2007 we came into contact with Kardex Systems and began to supply their products to companies operating in a wide range of sectors – financial, industrial, manufacturing, automotive, electronics, oil, chemicals and others.”

Ali Al-Tameemi stresses that the company’s successful collaboration with Kardex Systems Ltd is all down to his team’s hard work, good media promotion, and the support and feedback from the company’s Cyprus headquarters and its Area Sales Director Demetris Kouloundis, who was behind the decision to honour the Al-Muthana Chairman for his remarkable achievements in 2012 which, he noted, are all the more impressive given the difficult territory in which Mr Al-Tameemi is working. “I wanted to express the company’s gratitude to him and his sales team in some way,” he said, “and we thought that he would appreciate this public recognition by way of a small but significant award.” How does Ali Al-Tameemi view his award? “It has great sentimental value to me,” he said. “It expresses the company’s recognition and appreciation for what we do and gives us the motivation not only to keep up our good work but to perform even better. It gives me a feeling of great

satisfaction that all our efforts have been shown to be worthwhile from the very start.” Mr Al-Tameemi’s recent visit to Cyprus was his third but it will certainly not be his last. “I am actually considering the idea of residing here,” he said. “Cyprus has a lot of positive points that I am considering as an investor and businessman. Cyprus is a safe haven in the Middle East region and yet it is close enough for us to be able to deal with clients and customers quickly and easily. It is a very interesting location, both for the purpose of residence and for setting up alternative business headquarters. Cyprus is well-organised and it is culturally much closer to the Middle East than any other EU Member State, so it is very attractive to us in a number of ways. And the fact that it has honoured me with an award fills me with even warmer feelings towards the country and its people, in particular Mr Kouloundis and everyone at Kardex Systems.”

{June 14 – July 13, 2013}

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LIFESTYLE: Inferno By Dan Brown 97

92 {money}

88 No Alternative Cyprus’ banking sector “had to shrink” says Petr Zemcik of Moody’s Analytics. 91 National Bank of Greece NBG Group reports profitability for second consecutive quarter.

{economy}

92 Future Bank Resolution through Franco-German Eyes Germany has its own views of what a banking union means and, surprisingly, France agrees.

{lifestyle}

94 Lights, Camera, Action! Investing in movie memorablilia.

the international investment, finance & professional services of cyprus

Gold 87

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Petr Zemcik

etr Zemcik is Director of Economic Research at the London office of Moody’s Analytics. He is responsible for analysis, modellng, and forecasting for Europe. Dr. Zemcik also supervises real-time coverage of Europe for the Dismal Scientist website. He previously worked at CERGE-EI, a joint workplace of the Center for Economic Research and Graduate Education of Charles University in Prague and the Economics Institute of the Academy of Sciences of the Czech Republic, and at the Southern Illinois University. He has published numerous articles on econometric methodology and on real estate bubbles in the United States and in Europe in peer-reviewed professional journals. He holds a Ph.D and an M.A. in Economics from the University of Pittsburgh and an M.Sc. in Econometrics and Operations Research from the University of Economics in Prague.

t was necessary for Cyprus’s banking sector to shrink, whether such a development was imposed by the Troika or not, according to Petr Zemcik, Director of Economic Research at Moody’s Analytics London office. Zemcik, who spoke to Gold during his recent visit to Cyprus where he addressed the 3rd Nicosia Economic Congress, does not see anything bad in principle about Cyprus having a large banking sector. However, he notes that the island’s banks lacked the necessary knowledge and expertise to channel the deposits into productive sectors. As a result of the Eurogroup’s decision on Cyprus, the country’s banking sector was downsized immediately and significantly to 350% of GDP from around 550%, which domestic banking assets, including those in the cooperative credit institutions, represented until recently. As Zemcik sees it, “Cyprus has been running up big current account and fiscal deficits for many years. That means that for a long time it was spending money which was coming from outside the country through the banking sector. If you consider the balance sheet of the banking sector in Cyprus, the deposits were very large. The question that arises is how should those deposits have been used? Some of them ended up in the property market, some ended up in Greece. The Cyprus economy could not absorb these cash inflows so they ended up as loans that turned not to be that efficient. The banking sector had to shrink.” Why is Zemcik so adamant in this position? It is not a question of principle, he insists: “I do not have a problem with Cyprus having a banking sector business model. Think about Luxembourg or Switzerland, but having a large banking sector also means developing expertise in what to do with the money you attract. The money flows in and you have to find a good way of using it, either

cyprus

{money}

Cyprus should concentrate on what it knows best, which is tourism and perhaps property and, in the future, the energy market in the country or mainly outside the country because the Cyprus economy is small. This expertise seems not to have been here.” The question now is whether it should be developed or not. Zemcik believes that, “Given that the expertise was not here and, as a result, the money was not used in a good way, my sense is that the banking sector probably needs to shrink even further and Cyprus should concentrate on what it knows best, which is tourism and perhaps property and, in the future, the energy market.” When it is pointed out that the prospects for growth in the tourism sector are rather modest, he comments that “Of course you cannot expect double-digit growth in the tourism sector but there is actually a promising future for Cyprus’ tourism, despite the crisis. Cyprus’ prospects are better than Greece’s because the tourism sector represents a larger portion of the economy.” Zemcik has a very clear view on the country’s future: “If you implement what the Memorandum of Understanding (MoU) stipulates and you make sure that the property market is transparent and everybody can buy – even people from abroad – and property rights are protected, then you will have a functioning market and a mini-boom might be created in the real estate market as well. Once the situation stabilizes,” he explains, the tourists will be back. You cannot expect growth of 10%-12% of GDP a year but you can expect reasonable growth. The problem in Cyprus at the moment has to do with consumption and investment. Nobody is investing because of the unstable environment and nobody is consuming either. Domestic demand must be boosted as well.” Zemcik considers the European Commission’s economic forecasts (on which Cyprus’ MoU with the Troika are based) to be reliable and well-founded. “It is hard to estimate the impact of what has already happened in the

banking sector on the economy as a whole,” he admits. “You can only guess. But the Commission’s estimate of a contraction of around 13% for 2012 and 2013 is fairly realistic. Such numbers were not even considered in the case of Greece. There is more realism in the case of Cyprus. You have to bear in mind that there is not much difference between a 13% and a 15% contraction. It is just bad.” Petr Zemcik believes that Cyprus’ MoU with the Troika contains “a lot of sensible reforms” in the areas of the labour market, the welfare system, the property sector, transparency, government finances, employment in the government sector etc. “These reforms are not only reasonable but Cyprus should have introduced them itself years ago,” he says Asked whether he sees anything negative in the MoU, Zemcik is adamant that there should not have been any tax increases. “The VAT rate is already quite high, not only in Cyprus but throughout the whole of the eurozone. Any increase in VAT, he says, impacts negatively on consumption. Zemcik is one of the few to be negative about the rise in the corporate tax rate from 10% to 12.5%. “I do not see the point of increasing the corporate tax rate”, he comments, adding that, “Other problems should be addressed There is no reason to focus on increasing the level of corporate tax.” Generally speaking, he asserts, “Cutting spending should be the way to go. Once you clean up the Government’s finances, that should improve the business environment. Progress has even been made in Greece.”

Cyprus’ MoU with the Troika contains a lot of sensible reforms

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europe

o isi

{money}

y take and im swiftl main and th plement d l e b an hou al do king bold e s he fisc p sec dec ro in t tor u E

n its regular six-month report, which was published last month, the OECD (Organization for Economic Cooperation and Development) states that the prolonged weakness in Europe “can turn into stagnation with negative implications for the global economy”. The OECD again slashed its forecast for the economy of the 17-country eurozone, saying that it will shrink by 0.6% this year, after a 0.5% drop in 2012. It had predicted a 0.1% decline for the eurozone in its previous report while this time last year, it forecast growth of nearly 1% for 2013. The OECD is not the only international body that predicts further economic contraction for Europe. The European Commission itself expects to see a contraction of 0.1% in the EU and 0.4% in the euro area this year. Petr Zemcik says that this contraction will continue in the second quarter but by the end of the year “There is hope that some growth will appear which will originate from outside the eurozone”. Noting that the economic prospects of the US and some emerging markets are much better than those of Europe’s Zemcik explains that, “One of the things that helped the US is that they cleaned up their banking sector years ago. This is still having a positive impact to this day. The balance sheets of their banks are very strong, which means that credit is flowing into the economy. The housing market is now going very well after years of downturn.” The US economy is predicted to grow by perhaps 2% this year, Zemcik adds. “The only risk to its outlook is US fiscal policy, which is problematic.” China is expected to experience a slowdown. “We cannot expect a growth rate of 8% or 10% as we saw in the past,” he says. “It is going to be around 7%, maybe less. China is going through the transition from an economy which relied on investment to a consumption economy. The transition is going to take some time but growth, even though slower, will be sustainable.” Asked about other emerging markets such as Brazil and Russia, he notes that both economies have slowed down. “This poses a risk to the European economy,” he warns. If the emerging markets are not doing well, Europe is not going to do well either.” It might be expected that Europe will be unable to generate growth amid a prolonged

very slowly and they pay off even more slowly in many cases. We have already seen some improvement in competitiveness but it will take much longer to bring about a greater effect. A positive impact might be witnessed in a year or two at the earliest.” The benefits of austerity are not always obvious but is there a real choice? Can austerity be avoided? No, says Petr Zemcik. “Clearly, there isn’t a choice. We need to correct the fiscal deficits, to make it very clear what the fiscal position is, and to make it sustainable in the long term. Some countries are making progress, including Greece and Italy, where the cyclically adjusted deficit is actually close to zero this year. The question is how to go about it. How to reform the budget and how to spread the reforms over time? There are lessons to be learned. Unfortunately they are not learned fast enough. For example, it is generally better to cut spending than to increase taxes. This has better growth perspectives. If, on the other hand, a country must increase taxes, it makes more sense to increase property taxes than VAT, for example.” According to Zemcik, cleaning up fiscal budgets will bring some confidence back to the markets and it will boost consumption and investment. “Domestic consumption and investment are actually the most problematic areas at the moment because of the uncertainty. People are not investing because of higher taxes and uncertainty regarding their future incomes.” Equally important is the banking sector, he says. “Reform of the banking sector is a crucial component which needs to be stabilized. The lack of credit is the biggest problem in Europe right now. The banking sector needs to be cleaned up and for that to happen we need to move towards a banking union.” The eurozone, as Zemcik sees it, faces a double problem with its banking sector. “On the one hand,” he says, “we want the banks to be safe, while on the other we want them to lend to boost the economy. Both supply and demand of credit are low at the moment. Demand is low because of the investment environment and supply because of conservatism.” What banks should be doing, he says, is increasing confidence and, simultaneously, being able to provide loans. “One way of doing this is to establish the banking union. If the banking sector works, no matter what the government does, then we solve the problem.”

Clean-Up Time period of austerity imposed on a number of its member states but will austerity eventually bear fruit? Zemcik replies affirmatively. “In the long run, some of the structural changes imposed through the austerity programmes, such as lower unit labour costs and corrected current account balances, etc., are going to have an impact. We expect it to appear in the next year. Growth will probably start by the end of this year and will be relatively accelerated next year but in order to reach the GDP level of 2008 we shall probably have to wait up to 2015.”

It is generally better to cut spending than to increase taxes But are the ultimate benefits of austerity strong enough to justify the pain related to fiscal consolidation measures? Zemcik believes that, despite signs of increasing competitiveness in a number of the countries which are undergoing structural reforms, more was expected. “We have not seen the results we wanted to see. For instance, we would like current account balances to be corrected by increasing exports rather than by cutting imports.” And what are the underlying reasons for these worse-than-expected results? “What seems to be happening is that these economies are closing down instead of opening up,” says Zemcik. “Structural reforms are being implemented

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banking

NBG Group reports profitability for

{money} Alexandros Tourkolias

second consecutive quarter

ational Bank of Greece Group has reported profitability for the second consecutive quarter, as net profit in Q1 2013 amounted to €186 million, compared with losses of €265 million in Q1 2012. After taking into consideration the non-recurring impairment loss resulting from the acquisition of Eurobank, totalling €159 million, net profit amounted to €27 million. The contribution by Finansbank was particularly positive, as it posted net profit of €155 million, while the Group’s SE Europe subsidiaries posted a positive contribution to profitability following five successive negative quarters. In addition, progress made in Greece’s economic adjustment programme resulted in an upgrade in the country’s credit rating, allowing the write-back of provisions against claims on the Hellenic Republic totalling €276 million. On this point, NBG Group CEO Alexandros Tourkolias, said, “The discernible improvement in the economic climate reflects the belief that Greece has made significant progress in its efforts to become more competitive and forge a sustainable growth path. Combined with progress in a series of macroeconomic indicators, the banking sector witnessed the gradual but steady return of deposits and the relative improvement in the quality of the loan portfolio. In general, the core profitability of banks is now showing clear signs of improvement.” The stabilization of the Group’s core banking revenue, after a long series of quarters of decline, is seen as particularly encouraging, as these developments provide solid evidence that the slowdown in the top line is bottoming out. This development of particular note, as the Group showed a stabilization across the main components of core revenue (net interest income and fees) as well as across all geographical areas where the it operates. The Group’s strategic focus on rational-

izing operating expenses continues to generate results; operating expenses in Greece and SE Europe decreased by 10% and 3% respectively, year on year. This trend is expected to continue, inter alia, on the back of a new sectoral labour agreement that was recently signed. “NBG continues to undertake initiatives to further strengthen its profitability and balance sheet,” said Tourkolias. “Specifically, it has made significant progress in productivity by reducing its domestic operating costs by approximately 25% since the beginning of the crisis, and is ready to implement further significant costcutting measures. In addition, the Bank has launched a series of actions aimed at improving its capital adequacy. It is important to stress that NBG currently has a comparative advantage in terms of liquidity, as the loan-to-deposit ratio is on a declining path in Greece and is already at 95%. The Bank’s healthy balance sheet serves as a secure foundation on which it can further grow its profitability from sustainable and recurring sources.” With respect to the quality of the

Greece has made significant progress in its efforts to become more competitive Group’s assets, the slower pace of new loan delinquencies continued, with new NPLs totalling €616 million compared to €662 million in Q4 2012, and €1,244 million at the height of the crisis in Q2 2012. Nevertheless, cash coverage levels remain high at 54%. As regards capital adequacy, pro-forma Core Tier I (under EBA) stood at 9.3%, inclusive of the advances from the HFSF under the Bank’s recapitalization process. Deleveraging of the domestic loan book continued, posting a 4% decline in total loans year-on-year. Relative to the peak in

loan balances in Q2 2010, the decline has totalled 14% for gross loans, and 22% for net loans. A particularly positive development has been the significant slowdown (by 51% year-on-year) in new loan delinquencies in Q1 2013 (at €456 million). In addition, the ratio of +90 dpd to total loans stood at 24.3%, up by 120 basis points since the end of 2012, as compared with the average per quarter in 2012, which was more than double this figure, at circa 250 bps. The provision coverage ratio for +90 dpds continues to remain high at 53%, in spite of the fact that the Bank has been able to reduce its provisions.

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banking union

{economy}

Future bank resolution through

Franco-German eyes

Opposition to a strong and interdependent framework for the repair and recapitalisation of eurozone banks dominates By Kyproula Papachristodoulou German Chancellor’s meeting with the French President is in every other way resembling previous meetings between Merkel and Nicolas Sarkozy

nce again Berlin has been imposing its ideas of what a banking “union” in the context of a European “Union” would mean on France. Ironically, it has being doing so with the backing of France. After a meeting between German Chancellor Angela Merkel and French President François Hollande, which in every other way resembled previous meetings between Merkel and Nicolas Sarkozy, the two leaders distributed a detailed document setting out their vision on issues currently troubling the eurozone. In the document, the German view that there should not be a strong and interdependent framework for the repair and recapitalisation of eurozone banks dominates. This is strongly at odds with a proposal being prepared by the European Commission and the wishes of the European Central Bank. Experience has shown, however, whose position will prevail in the end. Under the Franco-German plan, bank bailouts would be handled by a “single reso-

The French stance has found support in Brussels lution board involving national resolution authorities”. This formulation is significantly different from the original intention of the EU authorities as presented when the idea of a “banking union” was launched last year. ECB officials have been particularly concerned about leaving control of bank cleanups to national authorities. The concern is that the ECB will have the authority to declare that a eurozone bank is insolvent but it will have no power to do anything about it except exert pressure on national governments to do something. Berlin has publicly disagreed with the ECB, saying that current treaties do not give the EU authority to perform bank bailouts on its own and that the legal authority must only come after the treaties are changed. The German-French view came as no surprise. German Finance Minister Wolfgang Schäuble had pre-announced their stance in an opinion piece published on 13 May in the

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Financial Times advocating a “two-step approach” towards a European banking union, He wrote that a limited “timber-framed” union, set up without changing European treaties, would buy time to create a future “steelframed” union. While today’s EU treaties provide “adequate foundations” for putting in place a new pan-European bank supervisor and a single resolution mechanism to wind down bankrupt banks, “they do not suffice to anchor beyond doubt a new and strong central resolution authority,” he wrote. The rescue of Cyprus has shown that shareholders and creditors need predictability when winding up a bank, he explained, stressing that “those affected will seek redress” and that “a solid legal base” was needed to address this. So what is the French contribution in the German-French banking union plan? French officials – as reported by the international press – insist the “resolution board” is an important step further to what Berlin had originally envisaged. They argue that the creation of a board is closer to what the Commission had originally planned, i.e. a resolution authority, rather than to the initial German wish for cooperation among a network of national central banks. The French stance has found support in Brussels. According to media reports, the European Commission supported the view that the joint agreement allows for “decision-making at the central level” – something Berlin appeared to previously oppose. “It was never planned, nor would it be possible, to eliminate the national authorities from the system,” said one Commission official, according to the FT, arguing that the document also appears to give them leeway to propose a single European bailout fund. The implementation of the so-called “direct recapitalisation” – where the ESM would inject cash directly into failing financial institutions – which was the cornerstone of a deal reached last June among EU leaders, now looks as doubtful. Under the German-French deal, such a plan will be put off until agreements on more incremental banking regulations are completed.

Lights, , a r e m a c action! {lifestyle}

movie memorabilia

Movies: magical, meaningful, and memorable. They have been enchanting audiences for over a century now and the related movie memorabilia market shows no signs of its thrall waning. Quite the opposite in fact: the action has only just begun. By Chloe Panayides

“O

h, do you feel the breeze from the subway? Isn’t it delicious?” Upon reading this line, you may not be inspired or overcome with a sense of recognition. And yet, these are the exact words uttered by none other than Marilyn Monroe, seconds before that scene: yes, the famous subway scene through which her ivory-coloured dress, clinched at the waist, seductively flairs up in the wind, exposing her curves. Though some details are increasingly lost from people’s consciousness (for example, that the movie was entitled, The Seven Year Itch, and released in 1955), this image endures indelibly: a signature Monroe moment, an iconic image belonging to 20th century pop culture, a fond memory of monstrous value – a monstrous $5.6 million, to be precise. The dress worn by Monroe during this scene was initially sold for $400 in 1971, meaning that the multi-million dollar figure

it commanded in June 2011 reflects a 27% rise in value per annum, betraying, furthermore, just how far collectors will go to own a piece of movie history. Industry insiders concur that at the heart of the movie memorabilia scene are enamoured eyes, hypnotised, one way or another, by motion pictures. Having only been in existence since the 1970s, the economic downturn of late has done little to deter this young market, with recent sales testifying to the ever-increasing intensity with which hungry movie-predators stalk their memorabilia-prey. It seems that the allure of redirecting one’s money into a tangible asset provably on an upward trajectory, and bringing near something inspired by a dear memory, seems irresistible. Take the Heuer Monaco watch that graced the wrist of Steve McQueen in the acclaimed 1971 movie, Le Mans. Having passed through the hands of several collectors since the early 2000s, it finally came up again for auction on July 31, 2012, courtesy of auction house, Profiles in History. Utterly devouring the $300,000 estimate, the private buyer bid a winning $799,500 (representing an increase of

Recent sales testify to the ever-increasing intensity with which hungry moviepredators stalk their memorabilia-prey 116.5%) in order to satiate his ravenous appetite and bring into his personal possession an item that once belonged to the actor idolised as the ‘King of Cool’. Indeed, it is thought that recent financial woes, besides not affecting the movie memorabilia market, have actually invigorated it, with many unique – and previously untouchable – pieces finding their way back into the limelight. Thus, opportunities are ready and waiting as collectors are hungry and willing. The lights are bright, the camera is ready to roll: so where does the action begin? Broadly speaking, movie memorabilia may be demarcated into two categories: rare, screenused artefacts (props, costumes, posters, and

Cybernetic arm from The Terminator

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movie memorabilia

You Must Remember This…

hey came to auction, they saw what they wanted, and they conquered: the following is a collection of notable movie memorabilia sales. Notice the figures? Clearly, there is no economic mountain high enough to keep rabid collectors from getting to what they desire.

1. The Wizard of Oz - Cowardly Lion Costume. Sold for $826,000. Lost for over three decades, this costume - an embodiment of just how endearing a movie The Wizard of Oz remains was discovered in a California barn in 1970. Having been in the safekeeping of collector Bill Mack for over two decades, Mack finally sold the costume in 2006 at a Beverly Hills auction for $826,000. Mixed feelings ensued, with Mack having stated: “I’m going through seller’s remorse now. But it’s a big number, so it’s good.”

more), and items belonging to the authorised reproduction trade. The latter has come into sharp focus of late, due to the plethora of first-timers embracing the trade, and the healthy numbers being generated. Bryan Ono, president of Californiabased, eFX (licensed by companies such as Lucasfilm and Disney to replicate film props), firmly endorses authorised reproductions, explaining that often it is the only feasible way for fans to purchase movie mementos. Take the Star Wars franchise, for example. Having financed the sequel, The Empire Strikes Back, himself, director George Lucas reused helmet props from the first movie, A New Hope. Thus, with even fewer authentic props available for collectors to pursue, eFX recreated the magic, producing – in a limited edition – Star Wars Stormtrooper helmets. With an original 2008 selling price of $399, these items are

2. Chitty Chitty Bang Bang - Red and Yellow Car. Sold for: $505,000. A children’s musical based on the Ian Fleming novel of the same name, Chitty Chitty Bang Bang captured the hearts of people the world over upon its release in 1968. The famous red and yellow flying car was sold in 2007 to collector Ralph Spencer for $505,000.

$120,000 high pre-sale valuation. 4. Titanic - Kate Winslet’s ‘Jump Dress’. Sold for $330,000. Worn by actress, Kate Winslet, during the pivotal scene through which ill-fated lovers, Kate and Jack, meet for the first time, this dress sold at a California-based auction in 2012 for $330,000.

5. Saturday Night Fever White Polyester Suit. Sold for $145,000. 3. The Lord of the Rings - Legolas’ Famously worn by John TraBow. Sold for $372,000 volta in the movie that gave Proving that iconic everyone disco fever, this suit need not necessold for $145,000 at a 1995 sarily equate with Christie’s auction. Upon disvintage, Legolas’ covering that the winning bidbow from the der was late film critic, Gene contemporary Siskel, Travolta playfully wrote The Lord of the on the inside of the suit, “To Rings trilogy comGene, So here’s to a classic, Your friend, manded $372,000 at a 2012 auction; a sprightly 210% above its John Travolta”.

Opportunities are ready and waiting as collectors are hungry and willing now commanding $1,500. In 2010, another authorised reproduction trade company, Factory Entertainment, created 1,000 18-carat gold plated replicas of the golden gun used in the eponymous James Bond movie. In keeping with the film version, these 1:1 reproductions dismantle into their component parts, with the barrel becoming a fountain pen, the body serving as a lighter, the handle and trigger housing a cigarette case, and the trigger disassembling to form cufflinks. Then, a collector could have purchased a piece for $649. Today, figures of resale items seldom fall below the $1,500 mark. Still, the original golden gun used onscreen was last valued in 2008 for more than $110,000, proving that as commendable as the authorised reproduction trade market is, it serves as a mere scene setter, warming viewers up to behold the movie memorabilia market in

Sam played it again on this piano in Casablanca

96 Gold the international investment, finance & professional services magazine of cyprus

all its glory. The key to unlocking its potential lies in targeting the iconic: actors embodying the Hollywood flair that has inspired the dissemination of a celebrity-driven culture the world over (engaging collectors in a love affair of the most zealous kind), or movies representative of innovative developments in the industry. Joe Maddalena, president and CEO of Profiles in History, advises, furthermore, to combine the two, pursuing pieces attached to both iconic names and iconic projects. For example, Audrey Marilyn’s dress sold for $5.6 million in 2011

Reproduction Stormtrooper helmet from Star Wars. Yours for $1.500

Hepburn has become as much a household name as the title Breakfast at Tiffany’s has infiltrated the world’s collective cultural consciousness. Moreover, the Givenchy dress the actress wore in the movie is credited as having inspired the ‘little black dress’, making it a mainstay of every woman’s wardrobe. Oozing elegance and class, this dress (worn by Hepburn in the opening credits of the film) cemented her status as a style icon and stands as a stalwart symbol of Hollywood glamour. The price one anonymous bidder chose to pay at a 2006 Christie’s auction to acquire it? $923,187. Another example for your consideration: in 1984, whilst making a little-anticipated science-fiction action movie, director James Cameron and crew knew little of the success that awaited them on the other side of the film’s release. Almost 30 years have since past, and The Terminator has been preserved at the recommendation of The Library of Congress in the United States National Film Registry, being deemed ‘culturally, historically, and aesthetically significant’. Movie collectors agree. Following the explosive climax of the movie, Shay Austin, assistant art director on The Terminator, collected a piece – an arm, to be exact – of the cybernetic killing machine, (brought to life by Arnold Schwarzenegger), keeping it safe until recently. The ‘T-800’ arm has garnered great interest from prospective collectors, with estimates circling the $15,000 mark. More impressive still, a full T-800 Endoskeleton brought to the auction market by special effects master, Stan Winston, sold for a staggering $425,000. Besides the difference in make-up (arm versus entire body), expert Maddalena maintains that collectors should not underestimate the power of provenance. Put simply, the reason Winston’s item sold for so much more than Austin’s item’s estimate, is because of who he is.

Audrey Hepburn has become as much a household name as the title Breakfast at Tiffany’s has infiltrated the world’s collective cultural consciousness Artefacts from key creators in the movie command more in value than lesser known crew. Maddalena warns: “The biggest part of these collectibles is where they come from, the authenticity and the provenance.” James Comisar, a Los Angeles-based curator and a consultant in the field, agrees. He cautions that prospective collectors must, even when sure that an item is coming from a verified source, engage in a little detective work to ensure that the piece in question is also as authentic as its seller. Consider the memorable leather jacket worn by Schwarzenegger in the Terminator franchise. With nearly 40 identical versions made for production, not all were worn onscreen. Real value lies in the genuine product, worn by the actor and filmed for all to see. Comisar suggests keenly inspecting any item prior to purchasing, looking for subtle signs of usage (in the case of costumes and props), such as perspiration stains or makeup residue. And the detective work should not stop there. Experts advise that researching the market thoroughly is a must. Devour film magazines and websites in their masses to ensure you are aware of all developments in the industry. For example, the production of a new film belonging to a seasoned franchise may boost the value of related memorabilia once the new movie is released. Landmark anniversaries may be approaching which, if you are unaware of them, may constitute a missed opportunity. The upright piano from the 1942 Humphrey Bogart film Casablanca, at which the character Sam, sat and obediently played the melancholy song As Time Goes By, originally sold at a 1988 Sotheby’s auction for $154,000. In 2012, the 70th anniversary of the film’s release, the very same piano sold at a 291% increase for $602,500. When investing in memorabilia, timing is of paramount importance, and research will facilitate sound decisions concerning when and what to invest in. When considering sources from which to buy investment-grade memorabilia, specialist dealers, dedicated auctions (Christie’s and Sotheby’s have memorabilia departments, and

Profiles in History, Julien’s, and Heritage Auction Galleries specialise in memorabilia), online auctions, and private sales via other collectors, constitute safe options. As movie memorabilia is often accompanied by signed documentation such as letters, certificates or photographs, a seller – any seller – that is unable or unwilling to produce such documentation should be regarded with caution. Still, heed the risks and the benefits may be bountiful. Are you ready to take your cue in the movie memorabilia collecting scene? Take 1.

BOOK REVIEW Inferno By Dan Brown (Bantam Press, 2013)

RRP: £20 (£9 from amazon.co.uk) hatever you may think of Dan Brown, you can be certain that this, the 4th adventure starring Professor Robert Langdon (after Angels & Demons, The Da Vinci Code and The Lost Symbol), is going to be the biggestselling work of fiction in 2013. This time Langdon is drawn into a mystery linked to Dante’s Inferno. Brown not only lays a trail of clues about Dante but he plays games with time, gender, identity, famous tourist attractions, futuristic medicine and more as the hero rushes around Florence in the company of his brilliant and pretty doctor. There is also the obligatory sinister cultism, this time involving overpopulation, genetic manipulation and the idea of a global plague. Luckily there is also a playful side that saves Brown’s books from becoming too ponderous. When Langdon calls his publisher to ask for a private plane, he is told, “We don’t have access to private jets for authors of tomes about religious history. If you want to write ‘Fifty Shades of Iconography,’ we can talk.” Nice one!

Audrey Hepburn in Breakfast at Tiffany’s the international investment, finance & professional services magazine of cyprus

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Maybe it’s just because of the magic

the last word

Greeks, Turks and the Aegean By Peter Economides

I’m a Greek. But don‘t ask me why our Easter sometimes coincides with everyone else’s and sometimes it doesn’t. Maybe the Church gets it but I don’t. Despite my theological ignorance, I am touched by the beauty of Easter in Greece. And this year’s was more beautiful than ever. On Good Friday this year (the day the Greeks refer to as “Big Friday”) I set sail from Bodrum on White Wings, a thoroughly modern and luxurious 140 ft take on a traditional Turkish gulet. An incredibly seaworthy wooden beauty designed to cope superbly well with the Aegean. On board were Çem, Ali, Peter and crew. Friends. Kindred spirits. We headed up to Patmos. If you’ve been there then will understand its spiritual magnetism. It’s the place where St John is believed to have received the visions which he recorded in the Book of Revelations. Many islands have their Chora. But the Chora of Patmos is something breathtaking to the spirit. We docked early and headed up the hill. A couple of Turks and a Greek. Good Friday in Patmos was a revelation. To this Greek. And to his Turkish friends. Greek or Turkish, Christian or Muslim, anyone would be touched by the simple beauty and spiritual complexity of what we witnessed in the little square in the shadow of the monastery. And the image of the little boy tugging at the gilded sleeve of his bearded, singing priest father resplendent in the trappings of the Greek Orthodox Church

will remain etched in my mind forever. We celebrated the Resurrection in Amorgos the next night. With fireworks, gunfire

Sailing around the Greek islands is a revelation

and, I swear, a few sticks of dynamite, followed by a traditional meal of stuffed goat and a traditional soup which I have found inedible since my childhood. From Amorgos we went on to Koufounisia (what beaches!), Schinoussa, Ios, Santorini, Folegandros, Milos, Sifnos, Serifos, Kythnos and Tzia, docking in Athens where I am now writing this piece. Sailing is a joy. But sailing around the Greek islands is a revelation. And I think of this introduction I recently wrote for a recipe book called Cooking on the Boat written by Lale and Çem Ape: At anchor off a Greek island. Or somewhere off the Turkish coast. A warm late afternoon. The sea gently lapping against the sides of the boat. The outline of an ancient temple on the hillside. A fisherman’s caique cutting across the horizon. Great friends. Lively conversation. A glass of ouzo. Or raki. That’s magic. This planet is full of magic, but much as I have travelled I have not found anywhere like the Aegean. It’s a gentle place, an embracing place. A place of warmth. A place where life is lived with love. And where it is lived to the full. Not necessarily with opulence, but with a richness you will not find elsewhere. I am Greek, but my ancestral home is Turkey – it’s where my grandparents grew up. Maybe that’s why I love both sides of this ancient sea as much as I do. Or maybe it’s just because of the magic.

info: Peter Economides is a Brand Strategist and founder of Felix BNI. He is a former Executive Vice President and Worldwide Director of Client Services at global advertising agencies McCann-Erickson Worldwide and TBWA\Worldwide. He has worked on some of the world’s most iconic brands including Coca-Cola, Apple, Absolut, illy, Audi and Nike. In Cyprus, he has been involved in branding projects for Bank of Cyprus, Sigma Television and easy-forex. Peter is based in Athens. Follow Peter on facebook at http://www.facebook.com/economidespeter or on Twitter @petereconomides

98 Gold the international investment, finance & professional services magazine of cyprus

More than just a holiday destination with pristine white beaches and 300 days of sun shine, Cyprus can also cater to your business needs ranging from registering and setting up your company’s operations to managing your EU, North African and Middle Eastern clients at a considerably lower cost. As well as being an EU country and a mem ber of the European Monetary Union since 2008, Cyprus enjoys a competitive corpo rate tax rate. Cyprus belongs to those juris dictions on the OECD White List which have substantially implemented the internation ally agreed tax standard. In addition to this, Cyprus provides efficient business services, has a transparent legal and regulatory system and is committed to sustainable growth. Cyprus welcomes both visitors and investors to work here, so, if you are searching for a new business base, consider Cyprus. It’s more than just beaches and sun.

Cyprus Investment Promotion Agency Tel + 357 22 441133 Fax + 357 22 441134 www.cipa.org.cy info@cipa.org.cy

Ministry of Commerce, Industry & Tourism Trade Service Tel: + 357 22 867100 Fax:+ 357 22 375120 www.mcit.gov.cy/ts ts@mcit.gov.cy

“Columbia’s growth and expansion over the years is attributed to the uniqueness of Cyprus; being the island’s strategic position at the crossroads of three continents, its comprehensive legal framework, double tax treaties regime, communication system, banking system, infrastructure in general and last but not least its highly educated labor force.” Captain Dirk Fry, Managing Director Columbia Ship Management Ltd

“The favorable business climate, the excellent

telecommunications

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structure, the well educated and skilled human resources, the favorable tax rates and the proximity to the Middle East and Africa markets, were some of the key factors that enabled NCR to decide to move its regional offices to Cyprus in the 80’s. Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.” Managing Director of NCR Cyprus, Mr. George Flouros

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