The timely passage of a bill to strengthen the local insolvency law helped convince both the International Monetary Fund and sovereign bond investors that the Cyprus credit story should not be bracketed with that of Greece.

Restructured and recapitalised, the Cypriot banking sector has emerged from its recent crisis more resilient and far more stable, according to the country's central bank governor, Chrystalla Georghadji.

Cyprus's banks all passed the European Central Bank's stress tests, a result that is indicative of the recovery that is under way in the country's financial sector. However, for these institutions to return to full health they must tackle their non-performing loans, a feat that is as much in the hands of the country's politicians as its bankers.

The first signs of recovery are emerging in Cyprus, and the country's president, Nicos Anastasiades, is confident that the measures and resolutions put in place by the government will see the economy return to growth by 2015.

With Cyprus’s economy moving out of the danger zone, its finance minister is laying the groundwork for a smaller but better regulated banking system.

The situation in Cyprus is at crisis point, as The Banker goes to press, with banks closed to prevent a run in what analysts are calling the eurozone’s muddiest crisis so far. How did it come to this?