Cyprus Banks Beat EU Benchmarks As NPL Ratio Drops

by THEFUTURE.TEAM

February 18, 2026

The Central Bank of Cyprus has unveiled compelling improvements in the nation’s banking sector. As of December 31, 2025, the non-performing loans (NPL) ratio has fallen below the European Union average for the first time since 2014, marking a pivotal shift in asset quality management.

Asset Quality Convergence With European Peers

Excluding loans and advances to central banks and credit institutions, the NPL ratio declined sharply from 4.5% at the end of September 2025 to 3.2% by December. Under the European Banking Authority Risk Dashboard methodology, which incorporates these specialized exposures, the ratio likewise fell to 1.6% from 2.3%, reinforcing the sector’s progress toward aligning with EU standards.

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Strategic Adjustments And Provisioning Dynamics

Despite the overall improvement, the coverage ratio for non-performing loans with provisions dropped from 68.5% in September 2025 to 62.3% by December 2025. This adjustment reflects a recalibration in provisioning levels as banks streamline their balance sheets. Additionally, total restructured loans amounted to €0.8 billion by the end of December, with €0.3 billion remaining classified as non-performing, illustrating both the successes and ongoing challenges in asset management.

Implications For Sectoral Stability

This achievement is a significant milestone, indicative of the banking sector’s enhanced risk management practices and improved asset quality. By narrowing the gap with European peers, the CBC underscores a commitment to maintaining financial stability and bolstering investor confidence in the region’s banking system.

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Cyprus Central Bank Reports Sharp Decline In New Loans For January 2026

by THEFUTURE.TEAM

March 8, 2026

Overview Of Lending Trends

The Central Bank of Cyprus (CBC) reported a marked downturn in total net new loans for January 2026. The figures reveal a decline of €377.7 million in net new loans compared with the previous month, reflecting broader adjustments in both consumer and housing credit markets.

Detailed Lending Activity

Net new loans in January totaled €247.3 million, based on €495.9 million in total new lending. In December 2025, net new loans reached €625.0 million from €986.9 million in total lending. Changes were recorded across several credit categories. Net new consumer loans increased slightly to €18.9 million from €17.2 million in December. Housing loans declined to €95.7 million from €135.4 million in the previous month.

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Interest Rate Movements

Interest rates for both consumer and housing loans declined slightly during the period. Consumer loan rates fell to 7.20% from 7.22%, while housing loan rates decreased to 3.70% from 3.78%. Deposit rates showed limited changes. Household term deposits remained at 1.20%, while deposits from non-financial corporations increased to 1.34% from 1.27%.

Comparative European Context

In comparison with other euro area countries, lending rates in Cyprus are close to the median for outstanding loan balances. Margins for households are around 0%, while margins for non-financial corporations stand at approximately 0.4%. The transmission of monetary policy in Cyprus broadly follows developments in the wider euro area, particularly during periods of monetary tightening or easing. However, the pass-through of rate changes to new loans, especially those issued to non-financial corporations, appears lower than in some other euro area markets.

Shifts In Borrower Behavior And Market Dynamics

The CBC report also highlights changes in borrower preferences regarding interest rate structures. The share of new housing loans with variable interest rates has declined from nearly 100% in early 2022 to 11.6%. Fixed-rate loans have become more common in new housing lending, although many of these products later transition to variable rates.

Banking Liquidity And Deposit Rates

In addition to lending trends, the Central Bank of Cyprus noted that deposit rates in Cyprus remain among the lowest in the euro area. High liquidity levels within the banking system contribute to this trend. Cypriot banks reported a liquidity coverage ratio of 319% in December 2025, compared with a euro area median of 192% and an EU average of 161%. These liquidity levels influence the pricing of deposits in the domestic market. Changes in policy interest rates have also shown limited pass-through to new deposits, reflecting the structure of Cyprus’s relatively small banking sector. The CBC report highlights ongoing developments in both lending and deposit conditions within the country’s banking system as economic conditions and borrowing preferences continue to evolve.

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