NICOSIA (Reuters) – Cyprus yesterday said it is seeking an explanation from HSBC over its launch of operations in the northern part of the island, a breakaway Turkish-Cypriot state recognized only by Turkey, which has maintained a sizable occupying force there for over a quarter of a century. The British-based banking giant may have ventured into divided Cyprus’s political minefield after disclosures that it had assumed the operations of Turkey’s Demirbank, which had branches in the north of the island. Usually a step ahead in preventing anything which may be construed as giving the territory some form of international credibility, the Greek Cypriot-led government was caught unawares. «We made contact with London today and we will have more contacts next week to find out the exact situation and ascertain the true facts,» said Afxentis Afxentiou, governor of the Central Bank of Cyprus. The Cyprus Central Bank says it is the only regulatory authority for banks on the island and those in northern Cyprus operate without their supervision or license. «I do not exclude the fact that when HSBC purchased this (Turkish) bank it may not have realized that some sensitivities could be aroused in Cyprus due to these three branches in the occupied area,» Afxentiou told Reuters. On Thursday, Naciye Turksever, who runs two of the HSBC branches in northern Cyprus, said the bank did not expect political problems after taking on their operations. «Business is one thing, politics is another,» she said. The self-styled Turkish Republic of Northern Cyprus is recognized only by Ankara. It has been under an international embargo since Turkey invaded the northern third of the island in 1974 in response to a brief Greek-Cypriot coup engineered by the military then ruling Greece. HSBC acquired Demirbank last year, paying $350 million for what had been Turkey’s ninth-largest bank in terms of assets before it was taken into state receivership during financial turmoil in December 2000. It has now merged Demirbank’s operations with its Turkish subsidiary HSBC Bank AS. Demirbank had three branches in northern Cyprus which were converted over the New Year to show the HSBC logo. HSBC has an offshore banking presence in the internationally recognized south and a 22- percent stake in Laiki Bank, the second-largest financial institution on the island.