Reduction of non-performing loans in the Cyprus banking sector

The Central Bank of Cyprus (CBC) has released its latest analysis of data on non-performing loans in the Cyprus banking sector, covering the period to 31 March 2017 and showing the aggregate non-performing facilities and related indicators for the domestic operations of credit institutions operating in Cyprus.

In the first quarter of 2017 non-performing facilities fell from €23,844 million to €23,206 (a reduction of 2.7%) against a backdrop of a very small reduction in total facilities, from €50,525 million to €50,486 million, over the same period. As a result, the percentage of facilities classified as non-performing fell from 47.2% at the end of December 2016 to 46.0% at the end of March 2017. Total impairment provisions made against non-performing debt fell from €9,936 million to €9,909 million between 31 December 2016 and 31 March 2017, leaving 42.7% of non-performing debt covered by provisions at 31 March 2017, compared with 41.7% three months earlier.

The CBC attributes the reduction in NPFs to increased repayments, restructurings successfully completed and reclassified as performing facilities, write-offs and settlement of debt through swaps with immovable property intended to be sold with the aim of faster cash collection. As the CBC has previously pointed out, there are limits to how fast property disposals can be achieved without adversely affecting the property market.

The CBC continues to encourage credit institutions to make intensive efforts to restructure NPFs in cases where viable settlements are possible. At 31 March 2017, out of a total of 21,703 applications for restructuring received by banks, 22.8% were successfully resolved, with restructuring agreements concluded, 7.3% were rejected either by the bank or the borrower, and 69.9% remained outstanding.