Loan restructurings in the banking system reach a historic high

Loan restructurings in the Cypriot banking system edged close to €2 billion in the first ten months of 2021, marking the highest figure according to Central Bank of Cyprus (CBC) records which began in end-2014.

According to CBC data, restructured loans in the end of October rose to €1.98 billion as banks accelerated loan restructurings following the termination of the payment holiday in the end of 2020 enforced due to the Covid-pandemic. The Cypriot payment holiday was considered as broadest in the Euro area, affecting loans totalling €11.7 billion both in the banking system and the credit-acquiring companies.

The vast majority of restructured loans concerned corporate loans (both up to and over €1 million) which in end-October amounted to €1.7 billion or 85% of total restructurings, CBC data show.

By category, restructurings for corporate loans over €1 million had the highest share with €1.5 billion or 74% of total restructurings. Housing credit facilities marked the second highest with restructured loans amounting to €188 million by end-October, followed closely by corporate loans up to €1 million with restructurings amounting to €187 million.

Restructurings of other loans amounted to €63 million while restructured consumer loans amounted to €29 million.

Corporate loans comprise the majority of the loans in the banking system, with the outstanding volume of corporate credit facilities by end-August 2021 (latest data) amounting to €14.7 billion or 52% of total loans, while €9.5 billion concerned small and medium sized enterprises.

Covid accelerated restructurings

The CBC data show that banks accelerated restructurings after the payment holiday following repeated calls by the Central Bank Governor to commercial banks in a bid to address the challenges facing both households and businesses due to the Covid pandemic.

Loan restructurings by end- October 2021 show an increase of 162% compared to 2020 when renegotiated loans amounted to €754.4 million, while pre-Covid restructurings were even less.

In 2019 total loan restructurings amounted to €576.5 million while the year before was limited to €324 million. In 2017 loan restructurings were €588 million, while in 2017 and 2016 loan restructurings exceeded €1 billion amounting to €1.28 billion and €1.27 billion respectively.