Loan Restructurings in Cyprus Reach Historic High

Реструктуризация кредитов на Кипре достигла исторического максимума
27 December 2021 Liza Medvetskaya

Loan restructurings in Cyprus reach a historic high.

According to the island's Central Bank, the total amount of bloans approached the level of 2 million euros within the first 3 quarters of 2021. This is the highest number since 2014, when the country's main financial institution began to register data.

The number of restructured loans started to grow after the end of the moratorium on foreclosures during the coronavirus pandemic. The total balance of loans, for which a moratorium was imposed, amounted to 11.7 billion euros. The ban affected loans of banks and credit acquiring companies.

The vast majority of restructurings concerned corporate loans in the amount of up to and more than 1 million euros.

Their volume at the end of October amounted to 1.7 billion euros (85% of the total volume of restructurings). By category, the restructuring of corporate loans in the amount of more than 1 million euros amounted to 1.5 billion euros, or 74% of the total volume of restructurings. Housing loans took the second place - 188 million euros, followed by corporate loans up to 1 million euros – 187 million euros. The restructuring of other loans accounted for 63 million euros, and consumer loans - 29 million euros.

It should be noted that business loans account for most of the total volume of loans in the banking system.

Approximately at the end of August (latest data), the balance of business loans amounted to 14.7 billion euros and corresponded to 52% of the total volume of loans, of which 9.5 billion euros accounted for small and medium-sized enterprises.

The restructuring of loans by the end of October 2021 showed an increase of 162% compared to 2020, when this figure was 754.4 million euros. At the same time, the indicators of loan restructuring before the coronavirus pandemic were even lower.

In 2019, the total volume of loan restructurings was fixed at 576.5 million euros, and a year earlier – 324 million euros. In 2017, loan restructuring amounted to 588 million euros. In 2017 and 2016, the restructuring of loans in Cyprus exceeded the mark of 1 billion euros, amounting to 1.28 billion euros and 1.27 billion euros.

As you may know, restructuring is a change in the terms of an existing loan.

The loan agreement continues to be valid, and all issues are resolved in the organization that issued it. The borrower can't go to another bank. This program is aimed at improving the financial situation of a borrower who has difficulties with debt repayment.

Restructuring is carried out according to one of the following options:

  1. reducing the interest rate - a debtor spends less on servicing the loan every month
  2. "stretching" the loan term — the term increases, but the amount of monthly payments decreases
  3. credit vacation — for a while a debtor can only pay interest on their loan
  4. a debtor can pay only interest on the loan
  5. the accrued interest is written off.

Important: the conditions on the loan do not become fundamentally better — for a debtor it is only an opportunity to "get a break", to prevent a difficult situation. Banks agree to restructuring in order not to burden themselves with bad debts and get their money without judicial recovery and confiscation of property.

Реструктуризация кредитов на Кипре достигла исторического максимума

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