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Saturday 18th September 2021
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News from the Cyprus banking sector

Non-performing loans (NPLs) in the banking sector increased in April according to a report that the Central Bank of Cyprus issued on Friday.

NPLs in reached €5.14 billion in April compared with €5.13 billion in March, while the ratio of NPLs to total loans rose to 18.1% and total loans fell to €28.44 billion from €28.63 billion in March.

At the end of April, loans in arrears for more than 90 days had fallen to €3.92 billion from €4.00 billion the previous month.

Total restructured loans at the end of April rose to €3.79 billion (of which €2.33 billion were classified as non-performing) compared with the March figure of €3.53 billion (of which €2.22 billion were classified as non-performing).

Total provisions at the end of April stood at €2.60 billion of which €2.48 billion concerned non-performing loans.

Of the total  €5.13 billion NPLs in April, €2.75 billion were held by households and €2.18 billion were held by businesses.

The high level of NPLs are a threat to the stability of the island’s financial system and the principal stumbling block to strengthening the banking sector.

Banking sector NPL report

See: Aggregate Cyprus banking sector data (non-performing loans data) with reference date 30 April 2021 from the Central Bank of Cyprus.

Negative interest rates

We have also learnt that the Cyprus banks are considering the introduction of negative interest rates for individuals with bank deposits exceeding €100,000.

Currently, people (and businesses) are holding too much money in the banks with the expectation that their deposits will be worth more tomorrow than today. This can result in a sharp decline in demand, and send prices even lower.

The imposition of a negative interest rate is designed to help the economy grow by encouraging consumer spending.

The European Central Bank introduced negative rates in 2014. Its deposit rate is currently -0.5%. More recently, the central banks of Germany, Sweden, Denmark and Switzerland have lowered their rates below zero.

2 COMMENTS

  1. Statistics can be misleading. .

    What is the criteria for a loan to be declared ‘non-performing’ or ‘performing’.

    A loan restructured over a 100 year term is considered performing? An infrequent installment paid now and then is performing or non-performing?

    • The Central Bank of Cyprus defines a loan as non-performing when the borrower has not made a monthly interest or principal repayments for more than 90 days.

      NPLs also include restructured loans which, at the time of restructuring were classified as non-performing.

      I think restructured loans continue to be classified as non-performing until 12 months have elapsed during which time the borrower has maintained regular interest and principal repayments.

Comments are closed.

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