In 2002, the late mortgage payments recorded the highest value in the recent history of Europe. The first sign of a financial crisis appeared in the EU zone alarmed the policy makers and called for an urgent European crisis management framework. Nevertheless even by the end of year 2009 formulating of such an effective crisis management framework had been inadequately progressed. The currently unfolding banking crisis in Cyprus can be considered as the latest stage of EU zone banking crisis.
Fragility of the Cypriot Banking System: Situation before the Bailout
The following chapter presents existing literature regarding the problems of banking system in Cyprus. Gunsel, 2007, defined bank failure as “a situation in which banks were closed because of financial difficulties.” Accordingly during the period of 1999-2002 the rate of banking failure in North Cyprus had been as high as 32.4 percentage proportion of the total banks in the country. The number of total banks in North Cyprus declined from 37 in 1999 to 25 towards end of 2002. Example: the Cyprus Credit Bank Ltd., Cyprus Liberal Bank Ltd., Everest Bank Ltd., Kibris Yurtbank Ltd. and Cyprus Finance Bank Ltd., were closed due to bankruptcy in 2001. Moreover, the Cyprus Commercial Bank Ltd., Yasa Bank Ltd., Tilmo Bank Ltd., Asia Bank Ltd., and Cyprus Industrial Bank Ltd. were taken over by the Saving Deposit Insurance Fund (SDIF) of the country during the same time period. ...Show more