By Lefteris Adilinis and Fiona Mullen
Deciding to set up a bank in the middle of a financial crisis is a bold decision. But this is exactly what Sievert Larsson, director and founder of the newly-established Ancoria Bank, decided to do during the Cyprus financial crisis of 2013.
However, for Larsson it was not a leap in the dark. Originally from Sweden, he first set up an insurance company in Cyprus in 1987, taking advantage of Cyprus’ status back then as an offshore centre.
The opportunity was provided by capital controls in Sweden, which did not join the EU until 1995. Not unlike Cyprus before it joined the EU in 2004, Sweden imposed limits on the amount of local currency that could be exported by ordinary citizens.
“We have had the insurance company here since 1987. We needed an offshore location for the Swedish clientele because there were currency controls at the time,” Larsson told the Cyprus Weekly.
One of the only opportunities for investing abroad was via insurance. “Offshore business was allowed so it was very convenient,” he said.
Larsson joined forces with an expert in taxation, who was already well known to Swedes because of a book he had written on the tax system.
“It was a bestseller because he made the tax system easy to understand,” Larsson says, smiling. 
He and his partner started searching for a location with a good tax system. They settled on Cyprus, which at the time had an offshore corporate tax rate of 4.5%. “The corporate tax wasn’t the main thing. The main one was that investment income was tax-exempt,” he explained.
Under the offshore regime, Ancoria Insurance was initially only allowed to do business with non-Cypriots. That changed when the offshore regime was abolished in 2004, as part of Cyprus’ preparations for EU membership.
Seeing an opportunity
Just over 10 years later, Cyprus found itself in the midst of a severe financial crisis, as a result of which Laiki Bank was closed, Bank of Cyprus (BoC) was rescued by the unprecedented bail-in of depositors and Cyprus once again found itself subject to capital controls (which were fully lifted in April 2015).
“With the economic crisis and the severe hit taken by the banking sector, we saw an opportunity in setting up a completely new bank. Before that we didn’t even think about it,” said Larsson.
Having prepared the ground, Ancoria Bank made its official application in 2013 and received its licence in November 2014.
Ancoria Bank is the first fully fledged local bank to open in the Republic of Cyprus since 1964.
One opportunity he spotted was the ability to attract talent.
“With many staff members of other banks choosing to leave, it was an opportunity for our bank to select experienced professionals and get them on board with us,” he explains.
“We do believe in a good mix though, so we have also chosen to give opportunities to many young graduates who were seeking employment. These opened a possibility to start a fresh, new bank.”
One of the benefits of starting a new bank, he explained, is that Ancoria Bank does not carry any ‘baggage’ such as, for example, high levels of non-performing loans.
This reduces the relative costs.
Transparency and openness
Larsson is also keen on instilling the renowned Nordic culture of transparency and openness at the bank, including in areas such as lending policy.
“If we do it in an extremely honest and transparent way we will appeal to the Cypriots,” he said.
Another advantage of being able to hire talented and hard-working staff is in areas such as risk management, where rules have tightened up considerably since the crisis.“They are very good in evaluating the credit situation,” he says.
Risk management also means making sure the bank is not over-focused on one particular sector.
“As a bank, we have carefully defined our risk limits from the start. We have limits on sectors, persons and companies, so from the bank’s perspective we spread the risk.”
Seeking businesses
Ancoria Bank is keen on attracting well-run businesses that have been squeezed out of credit because of the crisis.
“What we want is good, prosperous businesses. … If you know the business is profitable and know what they are doing you can extend the credit to them.”
Ancoria Bank has also allowed people to refinance mortgages from other banks.
“We can offer lower rates because we do not have the NPL cost,” Larsson said.
Ancoria’s founder is positive about the future for Cyprus.
“Cyprus is an exciting place because there are a lot of entrepreneurs here, a lot of people who want to start up. This is probably one of the reasons why Cyprus is successfully recovering from this disaster,” he said.