Latest Headlines

Construction sector worst non-payers

Half the businesses in Cyprus are failing to repay their loans, with the construction sector being the worst offender as non-performing loans reached 72 percent in June according to the Central Bank.

construction-sector-debtorslNON-PERFORMING LOANS (NPLs) in the Cyprus banking system swelled by €317 million at the end of June 2014 compared with the previous month, despite a reduction in the total amount of loans, according to data released by the Central Bank of Cyprus on Monday.

At the end of June NPLs amounted to €27.81 billion or 46.5% of total loans amounting to €59.80 billion, compared with 45.55% or €27.49 billion on 31 May 2014, when total loans amounted to €60.34 billion.

According to the latest figures released by the Central Bank, NPLs in the banking sector in June 2014 amounted to €20.78 billion or 44.65% of total loans amounting to €46.54 billion, compared with €20.51 billion or 44.59% in the previous month. At the end of June, NPLs in the Cooperative Sector amounted to €13.26 billion or 53.02% of the total loans amounting to €7.03 billion, compared with €6.98 billion, or 52.62% in May 2014.

Commercial bank loans

In the Cyprus commercial banks, corporate loans stood at €29.15 billion in June, of which 49.62% were classified as non-performing, compared with 48.31% in the previous month.

Loans to individuals and households rose to €13.96 billion in June, of which 45.22% were non-performing, compared with 44.70% in the previous month.

NPLs in the construction sector jumped to 72.05% of a total of €7.15 billion, compared to 70.12% in May 2014 when the total loans were €7.19 billion. NPLs in real estate amounted to 54.54% of a total of €4.19 billion, compared with 52.52% in the previous month.

Cooperative sector loans

The majority of loans in the Cooperative sector were granted to individuals and households. These amounted to €10.38 billion in June, of which 55.10% were non-performing, compared to 54.82% in May 2014.

Regarding loans for the purchase of real estate, the total loan facilities amounted to €5.11 billion in June, of which 46.77% were classified as non-performing, compared with 46.55% in the previous month.

Consumer loans in June stood at €4.29 billion, of which 62.93% were non-performing, compared to 62.64% in May 2014.

Foreclosures bill

Meanwhile it is anticipated that a revised version of the contentious foreclosures bill will be placed before an extraordinary plenary session of parliament for voting this Friday together with a number of other pieces of legislation.

Costas Melas, the head of the association for the protection of borrowers, has called lawmakers to pass the bill saying that “The consequences from its implementation and how they can be tackled is another matter” following a meeting with President Anastasiades.

Readers' comments

Comments on this article are no longer being accepted.

  • demetri says:

    @hector and all, the 660 million that troika is to release is to fund the govt machine, correct? who needs the govt. anyway?, failing hospitals, schools, and public services that are a law unto themselves….I say let them go unpaid for a month or two see what happens

  • hector says:

    I have to agree with MartynG and Peter Davis. Once the Troika has given in and lent yet more money (is that a NPL as well?), I will await the ducking and diving by the politicians and debtors in finding ways/reasons not to pay the loans and not implementing laws re selling of land/property and bankrupting companies.

  • demetri says:

    @Tony, I agree, duped buyers being lumbered first with the IPT and potentially dodgy developers debts, and trust me sources I have say “fair enough you don’t own the property but make use of it, so must pay the tax!” this is the argument that will be used for those who dispute IPT in court.

    I think “no title deed no sale” is what always comes to mind as does very tight regulation of who can be a property developer…

  • Stuart says:

    @Janine.
    A pity the UK’s Financial Conduct Authority has no jurisdiction in Cyprus. On the other hand, as Peter Davis suggests, why does anyone in Cyprus bother to pay back anything at all if they can get away with it?

  • Tony Fletcher says:

    It is about time that banks, developers, etc. stood up and accepted the NPL situation and not pass the buck onto customers who bought properties in good faith.

  • @dimtri on 2014/08/27 at 12:22 pm – Non-performing loans are summarized in paragraphs 4.84 and 4.85 of the IMF’s Compilation Guide on Financial Soundness Indicators 2004 (Guide) as follows:

    A loan is nonperforming when payments of interest and/or principal are past due by 90 days or more, or interest payments equal to 90 days or more have been capitalized, refinanced, or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons – such as a debtor filing for bankruptcy – to doubt that payments will be made in full.

    After a loan is classified as nonperforming, it (and/or any replacement loans(s)) should remain classified as such until written off or payments of interest and/or principal are received on this or subsequent loans that replace the original.

  • dimtri says:

    NPLs I am by no means backing the banks here but have heard over and over the criteria used by the troika in determining if a loan is bad is way harsher than those used in all other countries troika have set foot in. Govt. opposition says that more should be done to fight this set of criteria, but as usual the govt. is just acting as troikas pet, blindly following every command.

  • Janine says:

    40% – 72% NPL’s – I Wonder Why?
    This is what the Cypriot Banks have been getting away with (and more) –

    UK news 27th Aug 2015:

    xxxxx Bank has been fined £14.5m by the Financial Conduct Authority (FCA) for “serious failings” in its mortgage sales business.

    The City watchdog said the bank did not ensure that it gave suitable mortgage advice to customers.

    The bank said the failings were “unacceptable and should never have happened”
    The watchdog said that the Bank had failed to consider the full extent of a customer’s budget when making a recommendation. The banks also failed to give proper debt consolidation advice, and had not advised customers what mortgage term was appropriate for them, the regulator said.
    “Only two of the 164 sales reviewed were considered to meet the standard required overall in a sales process,” the FCA added.

    The director of enforcement and financial crime at the FCA, said: “Poor [mortgage] advice could cost someone their home so it’s vital that the advice process is fit for purpose.
    The Bank failed to ensure that their customers were getting the best advice for them.

    Taking out a mortgage is one of the biggest moments in our lives, and customers have every right to expect the very best service when making this decision.

    It is clear that in the past the bank didn’t get this right, and this was unacceptable and should never have happened.

    The FCA has fined a number of banks and financial institutions this year, including a £12.4m penalty handed to a Bank in March for failures in investment advice.

    Penalties have also been applied to various Banks for underhand and illegal practices.
    Comment:

    I have no doubt that the appalling Bank lending practices in Cyprus would make the FCA’s findings of a UK bank seem quite trivial.

    As for the Troika handouts – Compensate the consumers, not the banks that have failed us and ruined our lives! After all, they are non human organisations and have no feelings – unlike their innocent victims – the consumers.

    So what is more important here? Loss of bank bonuses for failing employees, or the ruination of 1000s of consumer’s lives?

    Never mind a Foreclosures Bill, what about a Consumers Rights Bill to counter malpractice and incompetence, past and present?

  • John Swift says:

    Still getting emails from Buysell asking fantasyland prices, no wonder the property market is stagnant.

  • Deanna says:

    I think it’s time we stopped sugaring the pill, stop calling them NPLs and call them what they are: nearly €28 billion BAD DEBTS.

  • Peter Davis says:

    No incentive to pay, unlike other countries where people are made bankrupt and companies are liquidated.

    If we get together and no one pays what is the worst that can happen?

  • UBoat says:

    What a surprise that the construction side of the economy are the worst !

    They are the main cause of a lot of this and the solution ! But NO ONE wants to insist they conform to the laws as the rest of us interpret them.

    Just Bury your head in the sand as usual and find the excuses and wriggle holes.

    The solution is in front of us But it would seem its too late to drag a lot of the confidence back, once bitten twice shy springs to mind.

  • MartynG says:

    Shame on the Construction sector, shame on the Cyprus banks.

    And the Fudge continues…..

    Looks like the required Bill will get passed, ‘one way or another’………

    So that the next tranche of Troika funding gets released…….

    And then the various parties will engage in further relentlessness and convoluted negotiating ploys to ensure progress on dealing with the NPLs, Foreclosures etc gets further delayed.

    Nobody in Cyprus really wants the real radical progress that the Troika demands, the various parties, factions and ‘duckers & divers’ will do their best to slow things down.

  • Mike says:

    No surprise there then; was this not as predicted by all except those of the Ostrich mentality who just so happen to lay down legislation and presumably are directly or indirectly nett beneficiaries of the situation?

    As for an “association for the protection of borrowers” – where did that come from. It seems we have either an association, Union or protective for every conceivable group, occupation, profession or collective in Cyprus. Each of course with a council and administration. Is there anyone left who actually undertakes a full days self determining labour with associated responsibility in return for reward commensurate the effort applied. Or is it the old Cynic in me rising to the surface again?

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

  • Text size

Back to top