According to fresh data released by the Central Bank of Cyprus (CBK) on Tuesday, April 9, the volume of non-performing bank loans (NPLs) in the country fell to €1.9 billion in December 2023.
By the way, NPLs in the Cypriot banking system fell by €19 million or 19% compared to the previous month.
According to the European Banking Authority's directive, problem loans include restructured loans that have been treated as non-performing loans for at least one year.
In turn, loans more than 90 days overdue, which do not include restructured facilities, fell to €1.47 billion, down from €1.83 billion in the corresponding month of 2022 and €1.56 billion in December 2023. The coverage ratio fell to 49.5% from 51% at the end of November.
Of the total number of problem loans, €1.07 billion was attributable to households and €774 million to companies. At the same time, €709 million concerned small and medium-sized enterprises. The remainder were loans in other categories. The coverage ratio for household non-performing loans amounted to 37.6%, while the corresponding ratio for corporate NPLs was 64.8%.
The total amount of loans restructured until the end of December 2023 fell to €1.47 billion against €1.73 billion in the previous month. Of this amount, €0.85 billion is still included in problem loans.
As a reminder, problem loans include loans that are more than 90 days overdue and classified as unsatisfactory, doubtful and uncollectible.
Typically, the European Central Bank forces banks that have a lot of bad loans to hold more capital, which ultimately slows down the economy as banks have less money to make new loans. Non-performing loans are a persistent weakness in the Cypriot banking sector, although it is predicted that things will gradually improve. "Red loans" continue to pose a risk to the stability of the island's financial system and remain the main obstacle to the strengthening of the banking sector.
It is worth noting that de facto non-performing loans are a persistent weakness in the country's banking sector, although the state of affairs is projected to gradually improve. "Red loans" continue to pose a risk to the stability of the island's financial system and remain the main obstacle to the strengthening of the banking sector.