According to the latest data released by the Central Bank of Cyprus (CBK), the volume of non-performing loans (NPLs) in the country fell to 1.652 billion euros in July 2024 from 1.669 billion euros in June.
The number of NPLs in the Cypriot banking system increased by 17 million compared to the previous 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.
The ratio of problem loans to total loans fell to 6.8% in July from 6.9% at the end of June. The coverage ratio increased to 55.2% from 55% in the previous month.
Of the total number of problem loans, households accounted for € 916.6 million and companies for € 695.7 million. The coverage ratio for household NPLs was 38%, while the corresponding ratio for corporate NPLs was 62%.
The total amount of loans restructured until the end of July 2024 decreased to € 1.33 billion from € 1.36 billion in the previous month. Of this amount, € 724 million are still 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 the economy because banks have less money to make new loans. 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 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.