According to the Central Bank of Cyprus, the level of non-performing loans (NPLs) in the country as of the end of August 2025 remained stable at 5.5%. This figure demonstrates the resilience of the financial system despite geopolitical and economic challenges affecting the entire European region.
If we look at the NPL ratio under the methodology of the European Banking Authority (EBA), which includes loans and advances to central banks and financial institutions, the picture is even more favorable. At the end of August, the ratio fell to 2.8%, slightly below the July level of 2.9%.
Growth in Provisions and Trends in Restructured Loans
The Cypriot banking sector continues to build reserves to cover risks: the coverage ratio of non-performing loans rose to 62.6% at the end of August 2025. The increase in provisions reflects a conservative approach by institutions and their aim to minimize potential risks in advance.
The total volume of restructured loans reached €1.2 billion, half of which — around €0.6 billion — is still classified as non-performing. This confirms the ongoing efforts of banks to strengthen their loan portfolios and gradually clean up the system.
Slower Corporate Lending and Growing Private Borrower Demand
The Central Bank also reported a decrease of €18.5 million in net new lending in October 2025, bringing the total to €429.4 million. The main reason was reduced demand from the corporate sector.
At the same time, demand from private borrowers continued to grow. Housing loans increased to €117.5 million, and consumer lending also showed solid expansion. This trend indicates sustained public confidence in the economy and the stability of the real estate market.
Rising Interest Rates and Record Liquidity
Average lending rates in Cyprus continued to rise following the broader ECB policy. Mortgage rates reached 3.73%, while consumer loan rates climbed to 6.88%. Despite this, Cyprus remains competitive, as these rates are broadly in line with Eurozone averages.
Meanwhile, deposit rates remain the lowest in the EU. The reason is the exceptionally high liquidity levels in Cypriot banks. The Liquidity Coverage Ratio (LCR) reached a record 329%, far exceeding EU regulatory requirements.
Outlook for the Banking Sector
A stable NPL rate, a high risk-coverage ratio, and impressive liquidity indicators create a solid foundation for further growth in the banking sector. Experts expect that as geopolitical conditions normalize, demand for corporate lending will begin to recover, and competition among banks will lead to more favorable lending terms in the coming quarters.