Cyprus banks have cut bad loans by 21% whilst major northern European economies saw increases, marking a dramatic reversal in the bloc’s troubled loan landscape.
The Central Bank of Cyprus reported that non-performing loans stood at €1.09bn out of total lending of €50.92bn by end October 2025, with the NPL ratio falling to 2.1% from 2.3% in September and 17.8% at end December 2019.
Banks are guarding their clean loan portfolios closely to prevent them turning red again and upsetting the positive picture they’ve created.
Bad loans have been disappearing rapidly from bank balance sheets for consecutive months. Credit acquisition companies are now struggling to collect instalments on the problem loans they bought, despite making various compromises with customers. However, they bought the loans so cheaply they have plenty of room to negotiate with bad payers and write off part of the debt depending on the settlement reached.
The NPL indicator uses European Banking Authority methodology, including loans and advances to central banks and credit institutions.
Of the total €1.09bn in bad loans, business problem loans stand at €541m and household problem loans at €520m.
The data shows a continued downward trend for problem loans with delays over three months. Loans in the “grey zone” – those that have passed 90 days overdue and sit in the “anteroom” of red loans – were slightly lower at end October compared to September and recent years.
The index of total loans with delays over 90 days stood at 1.8% at end October 2025, down from 2.4% in 2024, 2.9% in 2023 and 14.7% in 2019. Loans with three-month delays total €891m.
Total restructured loans stand at €1.06bn, of which €541m remain in non-performing loans, with accumulated provisions of €883m, according to Central Bank figures.
Southern banks outpace north
The picture for bad loans across countries has changed dramatically from recent years, with southern European banks showing strong performance.
The European Banking Authority’s Risk Assessment Report highlights different EU trends on bad loan developments, with southern European countries including Cyprus recording steady de-escalation of their NPL ratios.
The report notes that “countries that in the past had comparatively high levels of non-performing loans, including Spain, Italy, Portugal, Greece and Cyprus, have reported further reductions in their non-performing loan volumes, standing at -11% in Greece and -21% in Cyprus.”
In contrast, some large countries with comparatively lower NPL levels in the past, such as France and Germany, reported increases of 2% and 12% respectively in non-performing loans (by €5bn) compared to June 2024.
Austria, Belgium and Denmark reported single-digit percentage increases in bad loans, whilst Romania reported a much larger increase of 25%.
Read more: