Cyprus’s banking system continues to show significant improvement after years of crisis. According to new data from the Central Bank of Cyprus, published as of February 28, 2026, the share of non-performing loans in the country has stabilized at a record low level.
The total volume of non-performing loans (NPLs) in Cyprus’s banking sector stood at €833 million at the end of February. Compared to January, the figure remained virtually unchanged, when it amounted to €831 million. At the same time, the ratio of problematic loans to total lending remained at 1.6%, the lowest result ever recorded in the country’s systematic monitoring of the banking sector.
What Is Happening with Problem Debts
Experts pay particular attention to loans overdue by more than 90 days. In February, their volume reached €649 million, representing 1.3% of banks’ total loan portfolios. These loans are considered the riskiest for the financial system and currently account for approximately 78% of all non-performing loans in Cyprus.
At the same time, the volume of restructured loans continues to decline. In February 2026, this category fell to €783 million compared to €807 million a month earlier. This represents around 1.5% of total lending.
Banks have also strengthened their financial protection against potential risks. The coverage ratio of non-performing loans with provisions increased to 62.4%, up from 62.2% in January. This means banks are setting aside larger reserves to absorb possible losses.
Households Remain the Most Vulnerable Category
Despite the overall improvement, the highest level of non-performing loans is still recorded among households. In the household sector, the NPL ratio stands at 4.5%. The situation is more stable among businesses. For non-financial corporations, the share of non-performing loans is 2.4%, while among small and medium-sized enterprises it is around 3.5%.
Economists note that pressure on families remains due to the high cost of living, rising housing prices, and the increased cost of servicing loans in previous years. However, the gradual decline in eurozone interest rates is already beginning to improve borrowers’ repayment capacity.
How Cyprus Managed to Reduce “Bad” Loans
Just a few years ago, Cyprus was considered one of the most problematic countries in Europe in terms of non-performing loans. Following the banking crisis and financial turmoil, the volume of distressed debt reached critical levels. For comparison, in December 2020 the NPL ratio stood at 11.1%. It fell to 5.5% in 2021, 4.5% in 2022, 3.7% in 2023, and 3.1% in 2024. By February 2026, the figure had dropped to just 1.6%.
This result was achieved through large-scale debt restructuring programs, the sale of non-performing loans to investment companies, stricter banking controls, and the overall improvement of the island’s economic conditions.
Cyprus’s Banking Sector Continues to Grow
The total volume of domestic lending reached €50.93 billion. This reflects continued growth in banking activity and a gradual restoration of confidence in Cyprus’s financial system. Experts believe that current figures demonstrate a much more resilient banking sector than in previous years. However, specialists warn that high property prices and rising household expenses may still pose risks for some borrowers.
At the same time, international rating agencies have recently given positive assessments of Cyprus’s economy and the stability of its banks, highlighting the improvement in loan portfolio quality and the reduction of financial risks.