Filenews 22 August 2025 - by Theano Thiopoulou
Strategic defaulters have disappeared from the banking system and those that still exist as a legacy of the past have been transferred to credit acquisition companies when they proceeded to buy loans from the banks.
The data announced by the European Banking Authority show that 90.7% of loans in Cyprus at the end of March that were registered in stage1 and concern smoothly performing loans, increased to 90.7%, from 85.5% in March 2024. The picture presented by the banking system in terms of the percentage of loans normally serviced is much better than the European average, with the index being 88.2% from 88.3% in March 2024.
Banks in Cyprus, after the shock suffered by the financial sector in 2013, became very careful in providing loans by applying strict credit standards for customer assessment, resulting in delays in instalment payments having declined significantly. The highest percentages of loans normally serviced are recorded in Finland (91.5%), Luxembourg 92.75 and in countries outside the Eurozone, such as Iceland 93.1%, Sweden 94.8%. In Greece, the percentage of loans in stage 1 is 88.7%, an increase compared to March 2024 when it was 85.1%.
To see how careful banks have become twelve years after the bursting of the banking bubble, in stage 2 where mid-quality loans are located – which can easily turn red – the percentage in Cyprus has fallen significantly in one year to 5.6% from 8.7% in March 2024. For stage 2 loans, the provisions are increased and affect the capital position of banks. The rate in Cyprus is much lower than the European average which is at 9.5% from 9.4% in March 2024. In the individual countries, medium-quality loans were: Austria 13.6%, Belgium 7.1%, Germany 15.5%, Spain 6.5%, Finland 7.1%, Greece 7.3%, Italy 8.8%, Portugal 10.5%. In stage 3, the category in which the non-performing loans are placed, Cyprus had a rate of 2.2% at the end of March 2025, up from 3.5% at the end of March 2024. Category 3 loans were in Austria 2.6%, Belgium 1.6%, Germany 1.8%, Greece 3%, Ireland 1.9%, Portugal 2.5%, Italy 2.4%.
What is the reason for the change?
But what happened and the borrowers have changed their behavior and we are no longer talking about bad payers in the banking system. Firstly, the banks have become careful to lend up to a cent, and secondly, the problematic loans along with the collateral mortgages have been sold to credit acquisition companies. The Commission and other institutions have acknowledged that Cyprus has achieved a significant reduction in NPLs. 92% of the total stock of NPLs (or €19.66 billion) has been transferred to Credit Acquisition Companies (SPDs), with banks now holding a small share. However, what is being emphasized by everyone is that the numbers should not lead to complacency. The troubled loans did not disappear – they were simply transferred. SPDs currently manage NPL portfolios corresponding to 58% of GDP, with 85% of them covered by collateral, mainly real estate.
Non-performing loans (NPLs) in May 2025 to Cypriot banks have been limited to €1.49 billion and were at the same levels as in April 2025. In April 2025, NPLs in enterprises amounted to €587 million. Households in May 2025 had a total of €811 million. Non-performing loans, while in April they were slightly more, at €815 million. Compared to April 2025, the NPL ratio in relation to global loans in May 2025 amounts to 5.9% and the provisioned coverage ratio amounts to 61%. In April, it was at 60.7%. Total loans restructured in May amounted to €1.3 billion, of which loans amounted to €0.7 billion remain as NPLs.
