articles | 04 September 2015

CBC sets new targets for banks

The Central Bank of Cyprus (CBC) has set targets for the banks in an attempt to increase the volume and improve the quality of debt restructurings.

Specifically, a Central Bank of Cyprus press release issued recently said that these targets concern “four indicators that need to be applied to the whole loan portfolio and to sub-portfolios (residential mortgage loans to households, other loans to households, loans to non-financial corporations with total balances of up to €1 billion and loans to non-financial corporations with total balances of over €1billion)”, noting that “in order to monitor these targets, banks were asked to submit a quarterly return, the first submission being for the quarter ended 30th June 2015”.

For this quarter, banks were asked to submit their actual performance in relation to the four indicators and their targets for the third and fourth quarter of 2015.

The press release also said that “the submission for the next quarter, that is for the quarter ending on the 30th September 2015, banks are required to submit their actual performance for the third quarter of 2015 and their revised targets for the fourth quarter of 2015 and the first quarter of 2016”.

“Banks are also required to provide detailed explanations in case of failure to achieve any of the targets and inform the Central Bank of the corrective measures they will be taking.”

The CBC has imposed an upward revision of the banks’ targets in cases where it considered that the targets set by the banks were low. With every new submission, the CBC will be reviewing and revising the targets on the basis of the developments.

The indicators for which targets have been set are:

Indicator 1: Proposed sustainable solutions as a percentage of the loans presenting arrears over 90 days. This indicator is not cumulative and is calculated for the quarter under reporting and for each of the next quarters.

Indicator 2: Concluded sustainable solutions as a percentage of the loans presenting arrears over 90 days. This indicator is not cumulative and is calculated for the quarter under reporting and for each of the next quarters.

Indicator 3: Loans that have been restructured and present arrears of less than 8 days as a percentage of the total loans which have been restructured. This indicator is cumulative and covers the loans restructured from 1st January 2014 up to the beginning of the quarter under report and measures the success rate of the loan restructurings.

Indicator 4: Loans that presented arrears over 30 days and up to 90 days at the beginning of the quarter but by the end of the quarter do not present any arrears (due to restructuring or other measures taken by the bank) as a percentage of the loans that presented arrears over 30 days and up to 90 days at the beginning of the quarter. This indicator is intended to exert pressure on the banks to act proactively on loans with early arrears before they become non-performing. It is reminded that a non-performing loan that is restructured remains classified as non-performing for at least 12 months even if the new repayment program is fully adhered to, and there are no arrears.

Source: InCyprus

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