Further reduction was presented in the first quarter of 2024 in loan demand, with banks attributing the decrease to high interest rates, while lending criteria towards businesses became stricter in the first quarter of 2024 following three consecutive quarters during which they remained unchanged. Criteria for household loans, on the other hand, remained unchanged in the first quarter of 2024 compared to the previous quarter.

According to the Banking Loans Survey of the Central Bank of Cyprus (CBC), lending criteria towards businesses became stricter in the first quarter of 2024, mainly due to the reduced tolerance of banks to risk, as well as their perception of increased risk concerning the general economic situation and economic prospects.

In contrast, lending criteria for loans to households, both for housing loans and for consumer and other loans, remained unchanged in the first quarter of 2024 compared to the previous quarter.

"All factors affecting lending criteria for loans to households had a neutral impact during the quarter under review," noted the CBC.

On the supply side of loans, lending criteria towards businesses became stricter in the first quarter of 2024 following three consecutive quarters during which they remained unchanged.

According to the Survey, this strictness was primarily influenced by banks' reduced tolerance to risk and their perception of increased risk regarding the general economic situation and economic prospects. In contrast, lending criteria for loans to households, both for housing loans and for consumer and other loans, remained unchanged in the first quarter of 2024 compared to the previous quarter.

Regarding loan demand in the first quarter of 2024, net demand for loans from businesses and, to a greater extent, from households, for both housing and consumer and other loans, recorded further reduction.

"The net reduction in demand for business loans during the first quarter of 2024 is attributed by banks to the increased general level of interest rates," it is reported.

However, it is noted that increased financial needs for fixed investments, possibly reflecting positive development prospects for the Cypriot economy, as well as refinancing/restructuring of debt, positively contributed to loan demand.

As for households, the net reduction in demand for housing loans is attributed by banks to increased interest rates, lower consumer confidence, and weakened prospects in the housing market.

Finally, it is reported that according to the expectations of banks for the second quarter of 2024, lending criteria for both businesses and households are expected to remain unchanged compared to the previous quarter. At the same time, a decrease is expected in net demand for consumer and other loans from households, while demand for loans from businesses and housing loans from households is expected to remain stable.