The minister, who was commenting in response to a question related to alleged panic among depositors who had withdrawn money on fears of a new bail-in on state radio CyBC, said that as the regulatory and supervisory framework in the European Union is getting stricter Cyprus has made progress in reducing both total lending and non-performing loans.

“The stricter framework aims at giving assurances to depositors,” he said, adding “we are not in 2013. The government today is not financially weakened, bankrupt and shut out of markets at such an extent that it could not intervene even if it wanted”.

“Today it can, we have the ways to completely facilitate the consolidation of the banking system so that it can operate safely,” he added.

Cyprus’s banking crisis in which depositors lost €8 billion in total five years ago was also a result of a rapid increase in lending, which went from €28bn at the end of 2005 to €72.5bn seven years later, an increase of €44.4bn. Non-performing loans in the Cypriot banking system stood at the end of 2017 at €20bn, two fifths of total lending, compared with €27.3bn three years before, or almost half.

Total lending fell in January to €51.1bn, according to the latest Central Bank of Cyprus data. In comparison, bank deposits rose in January to €48.6bn from the post-crisis low of €45.7bn March 2016, eleven months after the lifting of capital controls imposed in March 2013. The combination of loan repayments, an increase in deposits and other factors such as the sale of assets allowed Bank of Cyprus, which inherited €11.4bn in emergency funding five years ago from Cyprus Popular Bank, widely known as Laiki, to fully repay it by January last year.

The government, which lost market access in May 2011, managed to successfully issue new bonds over the past years at record low borrowing costs, before and after completing the bailout programme in March 2016. Last year, public debt fell to below 99 per cent of economic output from 107 per cent the year before on a combination of debt repayments and a 3.9 per cent increase in economic output.

A Central Bank of Cyprus source who spoke on condition of anonymity said that while the bank supervisor has not witnessed any unusual outflows of deposits recently, certain lenders with excessive liquidity are not actively trying to attract new deposits because this would imply additional cost for them as a result of the minus 0.4 per cent deposit facility rate of the European Central Bank (ECB).

Bank of Cyprus’s core equity tier 1 (CET1) ratio at the end of December stood at 12.7 per cent compared to a minimum capital ratio requirement of 9.5 per cent. In the case of Hellenic Bank, the CET1 ratio was 13.8 per cent in December compared to a minimum requirement of 9.6 per cent and in the case of the Cyprus Cooperative Bank, it was in September 15.2 per cent and versus a requirement of 11.8 per cent.