Over 50% of NPLs restructured

President Nicos Anastasiades met the management of Cyprus’ largest credit institutions recently in an effort to persuade the banks to increase the pace of restructuring non-performing loans (NPLs).

However, the latest data show that half of the bad loans have been restructured. “The President of the Republic sent a strong message encouraging the banks to move towards sustainable restructuring, facilitating borrowers belonging to vulnerable groups or those who will be able to meet their obligations after a restructuring,” said government spokesman Nicos Christodoulides.

Anastasiades also urged banks to use all the tools that have been introduced in recent months against those borrowers who, as Christoulides put it, “deliberately and although having the ability to meet their obligations, selectively do not do so”.

NPLs stood at €27.4 billion in August, or 47.8% of gross loans according to Central Bank of Cyprus data, and are considered the economy’s most pressing problem.

Bad loans for the corporate sector reached €13.8 billion at the end of August, of which €4.64bn had been lent to large borrowers. Household NPLs account for the largest proportion, however, amounting to €12.7bn at the end of August.

Earlier this week the IMF, the European Commission and the European Central Bank stressed that this problem should be regarded as the ‘top priority’.

“Notably, reducing the excessive level of NPLs remains the number one priority. It is a necessary condition for a sustainable stabilization of the banking system and the resumption of lending,” the lenders said in a statement.

Following a meeting with the Central Bank Governor, Chrystalla Georghadji, the President met with the administrations of Bank of Cyprus, the island’s largest lender, Hellenic Bank and the Cooperative Central Bank.

Half already restructured

Substantial progress has already been made in restructuring loans. According to central bank data, around €14bn or 51.1% of NPLs had already been restructured by the end of August.

“We are beginning to make progress, we have more than 10,500 restructurings this year in our bank, 76% of those are continuing to perform”, said Bank of Cyprus Chief Executive Officer John Hourican, while noting that tackling the problem was “a difficult and pressing task”.

Banks are not allowed to sweep restructured loans off their bad loan accounts until it is clear that the borrower will not slip into arrears again.

Source: InCyprus