According to the latest data released by the Central Bank of Cyprus (CBK) on Thursday, February 1, the volume of non-performing bank loans (NPLs) in the country fell to €1.999 million in November 2023 from €2.015 million in the previous month.
By the way, non-performing loans in the Cypriot banking system decreased by €16 million.
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 €1.56 billion from €1.57 billion in October 2023. This corresponds to 6.5% of total loans. In turn, total loans decreased to €24.17 billion from €24.36 billion at the end of November 2023. The ratio of problem loans to total loans fell to 8.27% from 8.33%. The coverage ratio remained almost the same: 51% at the end of November compared to 50.8% at the end of October 2023.
Total loans restructured by end-November 2023 fell to €1.735 billion, of which €895 million are 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.