In recent years Cyprus companies have sought, albeit not often, to generate financing outside the regular banking system through unconventional non-bank credit activities (ie, so-called 'shadow banking', which are backed by quasisecurity arrangements). Shadow banking takes the form of, among other things:
- securities lending transactions;
- repurchase transactions; and
- derivatives transactions.
This has created a large sector parallel to the banking system, resulting in a call for strengthened regulations to mitigate risks and support financial stability.
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