During the month of June 2018, non-performing facilities fell by €3,296 million, from €19,930 million to €16,634 million, against a backdrop of a reduction in total facilities over the same period , from €46,648 million to €41,281 million. The percentage of facilities classified as non-performing improved from 42.7 percent at the end of May to 40.3 percent at the end of June. Total impairment provisions made against non-performing debt fell to €8,031 million at the end of June, compared with €9,697 million a month earlier, resulting in the percentage of non-performing debt covered by provisions at the end of June decreasing marginally to 48.3 percent, compared with 48.6 percent at the end of the preceding month.

Since the end of 2014, banks have succeeded in reducing aggregate non-performing debt by almost 40 percent, from €27,328 million to €16,634 million. Total facilities fell from €57,224 million to €41,281 million in the same period, which meant that 40.3 percent of total facilities were classified as underperforming at the end of the period, compared with 47.8 percent at the beginning. In addition, there has been a marked improvement in coverage by impairment provisions, with 48.3 percent of non-performing debt covered by provisions at 30 June 2018, compared with only 32.8 percent at the beginning of the period.

The latest reduction in non-performing debt is the largest single-month reduction achieved to date. The CBC attributes it mainly to the sale of loans, the reclassification of loans as debt instruments held for sale, the successful completion of the probation period of restructured loans and their reclassification as performing, write-offs, repayments and settlement of debt through swaps with immovable property that is expected to be sold with the aim of a faster cash collection. The CBC’s analysis of additional data it collects with regard to fixed-term loans supports its view that there has been an improvement in the factors contributing to the reduction of non-performing debt such as collections on restructured facilities and amounts transferred to performing facilities due to successful completion of restructurings at the end of the monitoring period.

The CBC also notes that under the definition of non-performing exposures adopted by the European Banking Authority and applied by banks in Cyprus, any restructured non-performing debt remains subject to monitoring for at least 12 months, and continues to be classified as non-performing until completion of the monitoring period even if the customer complies fully with the new agreed repayment schedule. The non-performing debt figure at 30 June 2018 includes €6,444 million of restructured debt subject to monitoring.