As of the end of May 2025, the level of non-performing loans (NPLs) in Cyprus's banking sector had stabilized at 5.9%. This data was released on Tuesday, August 19, by the Central Bank of Cyprus.
This figure was unchanged from April, which experts view as a positive sign for the financial system. For comparison, NPLs accounted for nearly 48% of total loans in December 2017. Today, reducing this indicator to single digits is considered one of the greatest successes of the Cypriot banking system in recent years.
Strengthening protection and stability
At the same time, the coverage ratio of non-performing loans by provisions for possible losses improved, rising to 61%, indicating a more conservative risk management policy by banks. This reduces potential pressure on balance sheets and increases confidence in the financial sector.
The Central Bank notes that banks are shifting their focus from managing old problem loans to financing new projects in construction, trade, services, and sustainable investments.
Restructuring and new challenges
As of the end of May, the volume of restructured loans amounted to approximately €1.3 billion, of which nearly €0.7 billion remains in the problematic category. This means that some restructured loans will remain on the NPL list for at least 12 months after the terms have been changed, so they will have to stand the test of time.
Despite these successes, experts emphasize that long-term payment discipline among borrowers remains a key challenge. This is particularly true for companies in the construction and trade sectors, which have historically had the highest share of non-performing loans.
Business and Household Lending
An analysis of the data reveals differences between economic sectors. Government entities have no outstanding debt, while the corporate sector is more vulnerable. Among non-financial companies, the NPL ratio was 5.1%, while among small and medium-sized businesses, it was 7.4%.
Households are one of the most problematic categories, accounting for €811 million in non-performing loans, corresponding to 7.6% of the total. The coverage ratio for banks is lower here, at only 47.4%.
Prospects for the banking sector
According to the CBC, total loans amounted to around €25 billion at the end of May 2025, of which approximately €1.48 billion were non-performing. Forecasts point to a further decline in NPLs amid economic growth and cautious banking policies.
European analysts note that the decline in non-performing loans increases Cyprus's investment attractiveness and strengthens international markets' confidence in the country's banking system.