Cyprus: troubled loans

The situation of non-performing loans (NPLs) in Cyprus can be compared before the 2011 crisis and after the COVID-19 crisis and the war in Ukraine.

After the 2011 financial crisis, the Cypriot banking system was severely affected and in 2012 Cyprus became the fifth state to apply for an economic rescue package from the European Commission, the European Central Bank and the International Monetary Fund, and the problem of problem loans became relevant again.

After the 2013 banking crisis and bank deposit cuts in Cyprus, problem loans increased rapidly. Foreign companies started managing problem loans and filed a large number of lawsuits in the Cypriot courts. Many banks started to apply''legislation to force the sale of foreclosed properties which were then auctioned.

In the wake of the COVID-19 pandemic, Cyprus, like other countries in Europe, has experienced a decline in the expected volume of problem loan transactions. By the end of 2021, the amount of problem loans amounted to €3 billion.

According to the World Bank, the share of bad loans rose sharply from 18.375% in 2012 to 38.558% in 2013. In 2019, the year before the healthy COVID-19 crisis, the share of problem loans fell to 17.903%. In 2020, the share of problem loans''was 15.019%, and in 2022 the percentage dropped to 7.659%.

In an interview on 16/06/2021, Elizabeth McCaul, a member of the ECB's supervisory board, said that the gradual withdrawal of government support measures could lead to an increase in bad loans.

But at the moment, data from the Central Bank of Cyprus indicates a reduction in problem loans by the end of February 2023.