According to new data released on Monday 10th March by the Central Bank of Cyprus (CBK), the volume of non-performing bank loans (NPLs) in November 2024 in the island nation remained at the same level as in the previous month.
In other words, the figure stood at €1.61 billion.
The MEX coverage ratio rose to 56.4% or €993m at end-November 2024, from 56.1% at end-October 2024. The total amount of restructured loans at the end of November was € 1.31 billion, of which € 712 million are still included in non-performing loans. The amount of overdue loans to households decreased to € 882 million (8.3% of total loans) from € 898 million in the previous month, while loans to enterprises increased to € 687 million (5.8% of total loans) from € 676 million in the previous month.
Accumulated provisions for households reached 41% of total loans and for enterprises 59%. Total loans to households amounted to 10.61 billion euro in November 2024, while loans to enterprises amounted to 11.88 billion euro.
As a reminder, non-performing loans include loans that are more than 90 days past due and classified as unsatisfactory, doubtful and uncollectible.
Despite the positive outlook, Cyprus remains one of the euro area leaders in terms of problem loans. In recent years, the country's financial institutions have been active in restructuring debt and selling NPLs to specialised companies, but the problem remains.
The high level of non-performing loans hampers the development of the banking system. Banks need more capital, which limits their ability to lend to firms and households. Financial stability risks remain as the Cypriot economy is highly dependent on the state of the banking sector.
To reduce the number of non-performing loans, banks have resorted to various strategies:
- Debt restructuring - changing loan terms, extending repayment periods.
- Selling non-performing assets to specialised companies.
- Tightening credit policies to minimise new NPLs.
- Government support programmes for borrowers in financial difficulty.