DBRS Commentary: Cyprus – Acceleration in The Banking Sector’s NPL Reduction

DBRS Ratings Limited released a Commentary on “Cyprus – Acceleration in The Banking Sector’s NPL Reduction”. Some key points of the commentary are:

• DBRS views positively the government’s and the banks’ recent efforts to speed up the reduction of banks’ non-performing loans (NPLs), which are a rating challenge for Cyprus. The reduction in Cypriot banks’ NPLs has accelerated in recent months.

• In line with the Cypriot government’s strategy, part of Cyprus Cooperative Bank (CCB) has been sold, resulting in a significant drop in the banking sector’s NPLs. At the same time, banks are proceeding with their sales of NPL portfolios. After the resolution of CCB, the second largest reduction in banks’ NPLs in 2018 is originating from the sale of NPL portfolios. Together, the liquidation of CCB and the banks’ sale of NPLs will have almost halved the stock of the banking sector’s NPLs close to EUR 10 billion this year.

• Strengthening the effectiveness of the legal framework and tackling NPLs related to retail mortgages – the two other elements of the strategy – have also progressed. The Cypriot parliament approved a new law on securitizations and the strengthening of the insolvency and foreclosure framework and the sales-of-loans law in July 2018. The government has also designed a social scheme aimed at vulnerable households to encourage them to make loan repayments and reduce strategic defaults.

The Commentary entitled Cyprus – Acceleration in The Banking Sector’s NPL Reduction is available at www.dbrs.com.

For more information on the Republic of Cyprus, visit www.dbrs.com or contact us at info@dbrs.com.