Cyprus’s banking sector continues to demonstrate resilience. According to data from the Central Bank, published on Wednesday, September 24, the volume of non-performing loans (NPLs) dropped to €1.46 billion as of the end of June 2025. For comparison, at the end of March the figure stood at €1.53 billion.
Decline in the Share of Problem Loans
The NPL ratio in the banking system fell to 5.6% from 6.1% at the end of March 2025. At the same time, the coverage ratio for potential losses improved to 62%, compared to 60.5% a quarter earlier. These figures reflect the sector’s growing resilience and the ability of banks to minimize risks. By debt structure, households accounted for €798 million in NPLs, while businesses accounted for €624 million.
Factors Behind the Decline in NPLs in Q2 2025
The Central Bank attributes the reduction in the share of problem loans to a combination of factors. These include currency fluctuations, partial and full loan repayments, debt-for-asset swaps (such as real estate), successful restructurings and the reclassification of some loans back into the performing category, as well as write-offs carried out under agreed settlements.
It is particularly noted that restructured loans do not always immediately move into the “healthy” category. Under European Banking Authority rules, even after a new agreement is reached, a loan remains under monitoring for at least 12 months. Therefore, some of these loans still appear as non-performing in statistics, even if the borrower is making payments under the new schedule.
Restructuring and New Indicators
The total volume of restructured loans at the end of June 2025 stood at €1.2 billion. Of this, about €0.6 billion is still classified as problematic, reflecting banks’ cautious approach to statistics and credit risk management.
This is an important indicator for investors and international rating agencies: high coverage levels and declining NPLs increase confidence in Cyprus’s banking sector, which in recent years has been actively recovering from the crisis.
Context and Significance for the Economy
The reduction in non-performing loans carries strategic importance for Cyprus’s economy. It not only strengthens the resilience of the financial system but also opens new opportunities for lending to small and medium-sized businesses, as well as for the mortgage market.
For Cyprus, where real estate remains a key sector of the economy, access to credit and reduced banking risks directly influence the country’s investment appeal. Against the backdrop of rising interest in real estate from foreign buyers, improvements in banking indicators further enhance Cyprus’s position in international competitiveness rankings.
Outlook for 2025–2026
Experts forecast that if current trends continue, the NPL ratio could fall below 5% by mid-2026. This would place Cyprus among the EU countries with the most resilient banking systems—an especially important factor for maintaining confidence in the financial sector and attracting new investments.