BASED on our research, the swelling of non-performing loans (NPLs) in
The new definition by the troika is very strict compared, not only to all other bailed-out southern EU countries, but to economically advanced EU nations as well We could not therefore agree more with BoC's CEO
NPLs in the island can only decrease to more acceptable levels and ratios if, together with the other measures currently being discussed such as proper restructuring, lowering of lending interest rates, and pressing those who can pay etc, the NPL definition in
The troika has no excuse whatsoever to reject such a change in the NPL definition if it's well justified and documented by the Cypriot authorities.
After all, the troika has tolerated relative relaxations in other bailed-out EU countries. If the definition of NPLs in
Comparison of NPLs definition applying in
(a) As far as the basic NPL criterion is concerned (arrears in excess of 90 days irrespective of collateral), the Cypriot banks/co-ops are since mid-2013 on the same footing as their European counterparts, with the exception of banks in
(b) In addition to the above basic criterion, there are in place some additional rules in the EU for classifying a loan as NPL. While all these additional rules are currently being applied strictly by Cypriot banks/co-ops this is not so in a number of EU countries. The troika and/or the
For example, a housing loan of €400,000 has arrears amounting to €8,000 over three months. A Portuguese commercial bank will present in its books an amount of only €8,000 as the NPL, whereas a bank/co-op in
Again, for example, a customer has four loans of €250,000 each. Only one loan is problematic, with arrears over three months, amounting to €50,000. In most EU countries this customer's NPLs would amount to €250,000 – balance of problematic loan. In
Finally, we could not agree more with CBC's Directive that new loans should be granted by banks/co-ops only to customers with repayment ability and not to those who can offer satisfactory collateral, irrespective of their cash-flow.
However, when the restructuring of an existing unsecured customer loan takes place in
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