Cyprus banks confront tighter credit amid geopolitical tensions and launch new business development agency

European Central Bank economists report that heightened geopolitical uncertainty and trade tensions have lowered demand for loans and prompted euro‑area banks, especially those with significant exposure to U.S. exports, to tighten lending standards. The ECB’s Bank Lending Survey shows that roughly half of the banks surveyed identified commercial risks as a key factor in 2025, with 11 % tightening credit criteria, and the trend is expected to continue into 2026.

In Cyprus, the parliament approved the creation of the Cyprus Business Development Organization (KOAE), a public‑law entity tasked with improving access to finance for micro‑, small‑ and medium‑sized enterprises, startups and the self‑employed. The legislation provides an initial €60 million capital, defines loan and guarantee rules overseen by the finance minister and the Central Bank of Cyprus, and integrates the agency into the national Recovery and Resilience Plan.