According to new data released by the Central Bank of Cyprus (CBK), the volume of non-performing loans (NPLs) in the country rose to €1.9 billion in January 2024.
NPLs in the Cypriot banking system rose by €7m, or 7.9 per cent, on the month.
According to the European Banking Authority directive, problem loans include restructured loans that have been treated as non-performing for at least one year.
Loans more than 90 days past due, excluding restructured loans, rose to € 1.58 billion, an increase of € 11 million compared with December 2009. However, there was a decrease of €420 million compared to January 2023. The coverage ratio increased to 50.1% from 49.5% at the end of December.
Of the total number of problem loans, households accounted for €1.07 billion and companies for €0.78 billion.
0.72 billion were to small and medium-sized enterprises. The rest were loans in other categories. The coverage ratio for household NPLs was 38 per cent, while the corresponding ratio for corporate NPLs was 62 per cent.
The total amount of loans restructured by the end of December 2023 decreased to € 1.47 billion, compared with € 1.73 billion in the previous month. Of this amount, € 0.85 billion is still included in problem loans.
As a reminder, problem loans are loans that are more than 90 days past due 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 lend. Indeed, non-performing loans are a persistent weakness in the Cypriot banking sector, although the situation is expected to gradually improve. "Non-performing 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 situation is expected to improve gradually. "Non-performing 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.