On September 14, the Central Bank of Cyprus (CBC)
published its latest analysis of data on non-performing loans
in the Cyprus banking sector. The analysis covered the period
to May 31 2018, and showed aggregate non-performing facilities
and related indicators for the domestic operations of credit
institutions operating in Cyprus.
During May 2018, non-performing facilities increased by
€14 million ($16.2 million) to €19.9 billion, against
a backdrop of a growth of €262 million in total facilities
over the same period to €46.6 billion. The percentage of
facilities classified as non-performing improved marginally,
from 42.9% at the end of April 2018 to 42.7% at the end of May.
The percentage of non-performing debt covered by impairment
provisions improved marginally to 48.6% at the end of May,
compared with 48.5% a month earlier.
Since the end of 2014, banks have succeeded in reducing
aggregate non-performing debt by more than a quarter, from
€27.3 billion to €19.9 billion, resulting in the
percentage of debt classified as underperforming improving from
47.8% to 42.7% over the same period. In addition, there has
been a marked improvement in coverage by impairment provisions,
with 48.6% of non-performing debt covered by provisions at May
31 2018, compared with only 32.8% at the end of 2014.
At first sight, it is disappointing that non-performing
facilities have increased in absolute terms for the first time
for several years. However, the movements are small, and the
percentages of non-performing debt to overall debt, and of
non-performing debt covered by provisions, both show an
improved position compared to the previous month-end,
indicating that progress is continuing to be made in improving
Legislative amendments were enacted in early July 2018 to
facilitate and speed up the process of reducing non-performing
debt, by making it easier for financial institutions to dispose
of loans, expediting foreclosure proceedings and increasing the
scope of debt relief schemes. The government and the CBC will
no doubt be hoping that those changes will quickly have a
positive impact and that the earlier pattern of a steady
reduction in non-performing debt will soon be restored.