Central Bank of Cyprus releases 2025 financial stability report

On July 28, 2026, the Central Bank of Cyprus (CBC) published its annual Financial Stability Report for 2025. The report concludes that while the domestic financial system remains resilient and well-capitalized, the country faces significant external risks. These include heightened geopolitical tensions, particularly due to conflicts in the Middle East, volatility in global financial markets, cyber threats, climate change, and risks associated with global debt and the property market.

Data from the report shows that the private non-financial sector has continued to deleverage, with the total debt-to-GDP ratio falling to 119.7% by the end of 2025. Specifically, business debt reached 65.5% of GDP, well below the European Commission's 85% limit, while household debt dropped to 54.2%, slightly below the 55% benchmark. Despite this progress, the CBC warns that businesses in trade, tourism, and real estate, alongside low-income households, remain highly vulnerable to energy price hikes and weakened external demand. Conversely, sectors such as information, communication, and professional services demonstrate greater stability.

To safeguard the economy, the CBC emphasizes the need to maintain strong liquidity buffers, enhance corporate governance, and practice prudent fiscal policies. The bank stresses that its forward-looking assessment, which utilizes extreme but plausible scenarios, is intended as a precautionary measure to identify risks early rather than a prediction of an imminent crisis.