The Central Bank of Cyprus (CBC) announced that non-performing loans (NPLs) in the Cypriot banking sector further decreased to €1.7 billion at the end of June 2024, down from €1.8 billion in March 2024.

According to the data, the coverage ratio of NPLs with provisions for bad debts rose to 55% (€0.9 billion) at the end of June 2024, compared to 53.3% (€0.9 billion) at the end of March 2024.

The CBC attributed the decrease in NPLs during the second quarter of 2024 primarily to the write-offs of loans related to restructurings or non-conventional "accounting" write-offs for amounts already included in the provisions.

Additionally, the reduction was influenced by the sale of small NPL portfolios and loan repayments, including debt-for-asset swaps. The drop in NPLs was also due to the successful restructuring of loans, which were reclassified as performing loans after completing the monitoring period.

As of the end of June 2024, the total restructured loans in Licensed Credit Institutions amounted to €1.4 billion, of which loans totaling €0.7 billion remained classified as NPLs.

Credit institutions are required to apply the definition of NPLs set by the European Banking Authority. According to this definition, when a non-performing loan is restructured, it does not automatically return to the performing loan category but remains under observation in the NPL category for an additional period of at least 12 months, even if the borrower follows the new repayment schedule without delays. Therefore, part of the restructured loans remains classified as non-performing, even if the borrower complies with the new repayment terms.