“The upwards trend of non-performing loans began to reverse after two years of an increasing trend reflecting the stakeholders’ efforts,” the governor said in the central bank’s 2015 annual report on its website.

Georghadji said that international experience suggests that non-performing loans peak two years after a (financial) crisis and it takes three to five years for a substantial drop provided the economy returns to growth.

The ratio of non-performing loans dropped in December 2015 to 45.8% of total loans, or to €26.7bn, from 47.8% in December 2014, or €27.3bn. In May, while non-performing loans fell to €25.4bn, because their drop was outpaced by deleveraging, their ratio stood at 49.7%. Cyprus’ economy expanded 1.6% last year after contracting for 14 consecutive quarters. Georghadji said that it expects the economy to expand 2.7% this year, which would be the fastest rate since 2008.

In addition to regulatory measures, stronger growth is a precondition for the problem to disappear, she continued.

According to the annual report, the central bank generated last year a €116.1mprofit compared to €166.3m in 2014, mainly on reduced net interest income, which fell by €44m to €149.6m. The government received a €92.8m dividend for 2015 compared to €133m the year before.

Source: Cyprus Mail