Non-performing loans (NPLs) continue to plague the Cypriot economy, despite continuous efforts by banks and the government to tackle them. Currently, the total amount of NPLs in Cypriot banks is EUR2.2 billion, as of March 2023. A decrease of EUR58.5 million was observed compared to the previous month, according to a recent publication from The Central Bank of Cyprus reported on 20/06/2023.
The downward trend in NPLs within banks can be attributed partially, according to the Central Bank, to debt repayments and the successful restructuring and reclassification of loans as performing assets after the monitoring period. However, possibly the most significant contributor driving the decrease of NPLs within banks is the sale of NPL portfolios to private credit acquisition companies. According to recently published figures in the Phileleftheros newspaper on June 20, 2023, the total value of NPLs within the Cyprus economy is much larger, estimated at EUR 25bn. This includes NPLs held by banks and credit acquisition companies.
The volume of the overall NPL market in Cyprus is a cause for concern with the Cypriot government taking steps to address the issue. Recent measures include the Estia and the Rent-for-Installment Schemes. Furthermore, the Council of Ministers is expected to vote on a proposed bill introducing the creation of a specialized jurisdiction court to address foreclosure matters. Should the legislation pass, the court is aimed at borrowers at risk of losing their mortgaged main residence, valued at up to EUR350,000. It is estimated that about 20,000 borrowers will be able to utilize the Foreclosure Court and temporarily protect their main residences from foreclosures, estimates drawn up by the Ministry of Finance report. However, based on some calculations made by various agencies, it is estimated that the red loans secured by a main residence up to EUR350,000 correspond to a value of EUR1.3 billion, a small portion of the overall NPL market value.
As such, should the legislation pass it is not an efficient measure by itself to tackle the greater NPL exposure of the country. To accomplish this, banks and government need to work together to find proposed measures, including but not limited to, increasing asset recovery and restructuring efforts.
GlobalSource, using its regional expertise, extensive network of local contacts, and skill in asset tracing, has developed a unique program aimed at tracing assets and recovering the monies owed to banks or other creditors. We work closely with our clients to ensure that our information is actionable and leads to recovery while sending a broader message to the market in general. Global networks of contacts in various key industries allow GlobalSource to craft customized solutions to asset search and recovery across the globe in jurisdictions including Cyprus and the Mediterranean, Europe, the Middle East, and sub-Saharan Africa.
