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June 7, 2019
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CBC Financial Stability Report

On 31 May 2019 the Central Bank of Cyprus issued its Financial Stability Report (“FSR”) for the year 2018. The FSR covers issues relevant to the stability of the Cyprus financial system and presents, inter alia, the key developments that impact financial stability and the vulnerabilities of the Cyprus financial system.

The following risk-factors have been identified in the Cyprus financial system and pose major challenges for credit institutions.

  • the high level of non-performing loans (“NPLs”) in the banking sector
  • the low asset quality of credit institutions
  • the weak profitability of credit institutions
  • the excessive private non-financial sector debt

 

Credit institutions must continue their efforts to reduce NPLs through viable, long-term solutions. In addition, they must improve their operational efficiency to reduce their expenses in the interest of all stakeholders involved. To do so, credit institutions may expand their client base, invest in innovative technologies in line with the Digital Age and develop customized services for their customers. Importantly, the over-indebtedness of households and non-financial corporations continues to pose substantial risks for the Cyprus economy and, therefore, must be further reduced to improve the stability of the financial system and achieve sustainable growth. Particularly in the event of an increase in the level of interest rates or rapid decrease in economic growth, the private non-financial sector may become more vulnerable.

Our firm provides advice on local and cross-border, secured and unsecured financing and refinancing transactions. Our qualified Insolvency Practitioners advise on restructurings and insolvency proceedings.

Please do not hesitate to contact us if you require any related advice or support.

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