Is the Cyprus Financial Sector Expanding, Diminishing or Plateauing? Hidden Messages from the CySEC Annual Reports

The number of entities supervised in Cyprus rose from 805 to 837 in 2022, stayed at or near that level for three years and fell back to 808 in 2025. Over five years the net change is three entities, which is easy to read as stability. The underlying figures tell a less settled story. Between 2021 and 2025 the sector went through two sharp contractions, one of which CySEC's own reporting explains and the other of which coincides in timing with the tightening of EU restrictions on Russia. The recovery that followed has been uneven, and reported headcount has not come back.

This analysis draws mainly on two publications of the Cyprus Securities and Exchange Commission (CySEC): the Annual Statistical Bulletin 2025 and the Annual Report 2025. The Bulletin provides the regulated-entity series, including the 2021 total, and the main figures used from 2022 to 2025. The Annual Report supplies the 2021 financial, client and employment figures used here, as well as CySEC's explanation of the 2024 fall in CIF clients. Ratios and percentage changes marked as derived are my own calculations from the published figures. Where I connect a movement to a cause that the reports do not state, I say so.

1. An entity count that says very little

Table 1 of CySEC's Annual Statistical Bulletin 2025 (pages 11 and 12) gives two totals, and they do not move together. The headline total of regulated entities, which went from 805 in 2021 to 837, 837, 834 and then 808, includes among others registered AIFs and listed issuers, which CySEC supervises but does not license. The narrower total of entities licensed by CySEC fell every year, from 588 in 2022 to 539 in 2025, about 8% lower (derived). Over the same period the number of registered AIFs rose from 121 to 141. The growth in registered funds partly offset the decline in licensed entities, which is one reason the headline figure held steady for three years.

Sources: CySEC Annual Statistical Bulletin 2025 for the regulated-entity series and 2022 to 2025 figures. CySEC Annual Report 2025 for the 2021 financial, client and employment figures. The 2021 employee total is the sum of the three sector figures in the Annual Report.

The entity count is the least informative line in that table. What matters sits in the total assets, client and income rows.

2. 2022 and 2023: the first contraction

The first contraction coincides with the tightening of EU restrictions on services to Russian entities. CySEC does not attribute the fall to Russia, so the connection is an interpretation of the timing rather than a reported finding. The movements themselves are not in doubt.

Total assets of Cyprus Investment Firms (CIFs) fell from €10.46bn at the end of 2021 to €4.88bn a year later, a reduction of about €5.6bn or 53% (derived). Across the wider supervised CIF population, the number of firms increased from 243 to 248 over the same period, although the financial statistics cover the subset of entities from which CySEC collected data, so the two figures do not describe exactly the same group. Neither report explains the fall in assets.

Administrative service providers (ASPs) followed a year later. Their total assets dropped from €388m in 2022 to €134m in 2023, about 66% lower (derived),and here the Bulletin does give a reason. It attributes most of the decline to one ASP that waived its authorisation from the beginning of 2023 and had total assets of about €244m in 2022. Without that entity, the decline would have been about 7% (derived). ASP trading income fell by only 8% in 2023 (derived).

In the fund sector, assets under management fell from €11.55bn in 2021 to €8.56bn in 2023, down 26% (derived). The Bulletin states that AUM is calculated taking into account the audited financial statements of the companies.

Practitioner interpretation: Earlier in 2022, the EU prohibited the provision of accounting, auditing, bookkeeping, tax consulting, business and management consulting and public-relations services to the Russian government and entities established in Russia. Separate restrictions also applied to specified services involving trusts and similar legal arrangements connected with certain Russian persons. The eighth sanctions package, adopted in October 2022, added architectural, engineering, legal-advisory and IT-consultancy services, with a termination period for certain pre-existing contracts running to 8 January 2023. CIF total assets halving in 2022 and an ASP waiving its CySEC authorisation at the start of 2023 fit that sequence, but neither report names Russia as the cause. The fund figures need similar care. Because AUM is based on financial-statement values, the decline cannot be read as investor outflows alone. Valuation movements, subscriptions, redemptions, fund openings, closures and other changes may all affect the figure.

3. An uneven recovery

Funds have largely recovered. AUM reached €10.07bn in 2024 and €11.20bn in 2025, about 97% of the 2021 level (derived). Over the same stretch the number of management companies and UCIs under CySEC's supervisory remit fell from 333 in 2022 to 312 in 2025, although that count and the AUM figure are not drawn from an identical population.

ASPs have not followed. Their total assets held at €134m, €132m and €130m from 2023 to 2025, and trading income stayed between €114m and €116m. Client numbers kept falling every year, from 18,211 in 2021 to 12,590 in 2025, about 31% lower (derived). The Bulletin itself records a 25% fall between 2022 and 2025.

CIFs sit somewhere in between. Trading income in 2025 was €2.61bn, 11% above 2021 (derived),yet total assets of €5.64bn were only about 54% of the 2021 figure (derived). Income has come back. Total assets have not.

At sector level, reported ASP trading income has remained broadly stable while client numbers have declined. For an individual ASP, that makes client and revenue concentration worth testing explicitly in the business-wide risk assessment rather than assuming the sector trend applies to the firm.

4. 2024: the UK decline

CIF client numbers fell from 4,719,891 at the end of 2023 to 3,005,090 at the end of 2024, a drop of 1,714,801 or about 36% (derived). The Annual Report explains the fall on page 9, in the section presenting regulated entities in numbers, where the client chart runs from 2021 to 2024. It attributes the decrease mainly to a single CIF discontinuing services to clients in the United Kingdom, and names market conditions, including increased volatility and weaker investor confidence, as further contributing factors.

What the report does not give is the size of that firm's UK business. The sector-wide decline was 1,714,801 reported clients. CySEC says the fall was mainly attributable to one CIF discontinuing services to UK clients, but the published data do not disclose the number of clients affected at that firm. Since the sector figure is a net movement, the firm's gross loss cannot be worked out from it.

The UK timing is still worth setting out. After Brexit, EEA firms that had been passporting into the UK could continue through the Temporary Permissions Regime (TPR) while they sought full UK authorisation. According to the FCA, the TPR came into effect at 11pm GMT on 31 December 2020 and ended at 11.59pm GMT on 30 December 2023. Of the 1,191 solo-regulated firms that entered it, 212 secured full UK authorisation, 875 did not seek it, and a further 104 sought authorisation but were unsuccessful. The FCA notes that the 875 firms that did not seek authorisation either applied to cancel their temporary permission and left the UK perimeter or entered the Financial Services Contracts Regime (FSCR) to run off remaining UK business.

The FSCR is a narrow route. It lets eligible firms perform pre-existing UK contracts only to the extent necessary for an orderly exit, it does not allow new UK business, and the FCA expects firms in it to run down their UK business promptly. For a firm that left the TPR without UK authorisation and used the FSCR, 2024 was therefore the first full year of operating within those limits.

On the income side, the Annual Report links 2024 trading income to increased market volatility, driven mainly by the US presidential election in November. CIF trading income rose by 28% that year, from €1.77bn to €2.26bn (derived).

Practitioner interpretation: The timing fits, but it does not prove why the CIF stopped serving UK clients. The Annual Report does not say which route the firm was on or why it stopped. A transfer of clients to a UK-authorised entity in the same group would also fit the wording, in which case the clients left the Cyprus regulatory perimeter rather than necessarily leaving the wider group. The income figures carry a similar limit. Sector client numbers fell by 36% in 2024 while sector trading income rose by 28%. That is consistent with the lost clients having lower-than-average activity, but the aggregate data cannot establish this because increased activity elsewhere in the sector may have offset lost revenue.

The 2025 figure needs its own caveat. CIF clients rose to 4,739,163, and the Bulletin attributes the increase to new investors and heightened investor interest in international markets. It also states that part of the increase reflects changes in the reporting methodology adopted by certain CIFs, which resulted in a more comprehensive capture of their client base. The rebound is therefore not fully like for like.

5. Recovery without the headcount

Trading income and fund AUM are back at, or close to, their 2021 levels. Reported headcount is not. The two income ratios use trading income, which is revenue, so they say nothing about profitability. The AUM ratio is only indicative, because the AUM population includes collective-investment assets that are not perfectly coextensive with the employment population. Neither report explains why headcount is lower.

Group functions performed outside Cyprus, outsourcing, automation and consolidation are all possible explanations, and the published data do not allow them to be told apart. The sector is operating with fewer reported employees overall. The published figures do not show whether compliance teams themselves became smaller, so firms should test resourcing against current client, transaction and asset volumes rather than infer adequacy from historical headcount.

6. Questions for compliance teams

Sector statistics cannot tell any single firm how its own controls are performing. They do suggest three questions worth asking internally.

How does your firm define and count a client, and how is a methodology change governed and documented? The national CIF client total fell by 36% in 2024, and CySEC says one firm's decision to discontinue services to UK clients was the main contributor. A year later, methodology changes at certain firms contributed to the rebound. Where client numbers are reported to a supervisor, the definition, the treatment of dormant relationships and any change of approach are worth recording and approving before the figures are filed.

If a third-country permission ended tomorrow, is the run-off plan already written? The UK regime ran for three years and offered eligible firms a defined run-off route. Even so, the 2024 client figures show how sharply one firm's withdrawal from one market can register in national data. A firm serving clients outside the EU under local permissions or exemptions is better placed if it already knows how it would stop, which contracts it could still service and for how long.

Is compliance capacity tested against today's client, transaction and asset volumes rather than historical staffing levels? CIF trading income per reported employee is about a third higher than in 2021. That says nothing about any particular compliance team, but it is a reason to measure capacity against current volumes rather than past headcount.

7. A note on the sources

The Bulletin states that CySEC does not verify the data submitted by regulated entities as to accuracy, truthfulness or currency. In the Annual Report, the section presenting regulated entities in numbers (pages 7 to 10) shows data to 31 December 2024, and the highlights page refers to a 2.53% increase in regulated entities, which does not reconcile with the Bulletin's movement from 834 to 808. This article uses the Annual Statistical Bulletin for the regulated-entity series and the main 2022 to 2025 statistical figures. It uses the Annual Report for the 2021 financial, client and employment figures and for CySEC's explanation of the 2024 client decline.

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This article is for information only and does not constitute legal or regulatory advice. Figures are taken from the publications listed above and have not been independently verified.