Α further decrease of €381 million or 5.7% was recorded in aggregate NPLs compared with the end of June 2020.
According to an announcement by the Central Bank of Cyprus, total loans decreased by €111 million or 0.4% from €30,103 million at end-June 2020 to €29,992 million at the end of September 2020. As a result, a fall in the ratio of NPLs to total loans was recorded from 22.3% at end-June 2020 to 21.1% at the end of September 2020. The coverage ratio rose to 53.1% at end-September 2020 compared with 52.7% at the end of June 2020. It must be noted that during the period between 31.12.2014-30.09.2020, there has been an overall reduction in NPLs of €21 billion or 76.9%.
The downward trend in NPLs exhibited in the third quarter of 2020 can be attributed, broken down by significance, to loan write-offs which take place either in the context of restructurings and usually concern amounts that already form part of credit institutions’ loan loss provisions or to non-contractual or “accounting” set-offs made against amounts already provided, aimed at a more representative depiction of loan portfolios. Moreover, loan repayments (including debt-to-asset swaps) and positive migrations of loans which have been successfully restructured and reclassified as performing (cured) at the end of the probation period have contributed to the decrease in NPLs.
Total restructured loans at end-September 2020 amounted to €4,096 million, of which €2,926 million continue to be classified as NPLs. It should be noted that credit institutions apply the definition of NPLs adopted by the European Banking Authority. Based on this definition, when an NPL is restructured it is not immediately reclassified as a performing facility but remains under observation within the NPL category for a further period of at least 12 months, even if the borrower strictly adheres to the new agreed repayment schedule. Therefore, according to the relevant definition, a part of the restructured loans remains non-performing, even if the borrower adheres to the new repayment schedule.