Gold Magazine June - July 2013, Issue 27 | Page 84

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 c ould 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

M

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