Phone ringing, debt ignored: Cyprus faces loan repayment hurdles

Despite efforts to reduce Non-Performing Loans (NPLs) in Cyprus, the lingering burden continues to weigh heavily on the country's economy and society. International assessments echo this concern, highlighting the need for a comprehensive solution.

According to an article by Panayiotis Rougalas, published in Kathimerini's Wednesday's edition, while banks and Debt Acquisition Companies (DACs) offer restructuring options with fixed interest rates to shield borrowers from rate fluctuations, borrower interest remains low. Few borrowers with NPLs have responded to restructuring calls, preferring to wait for alternative solutions.

Recent legislative amendments aim to strengthen borrower protection during auctions. However, delays and changes in the auction framework have deterred many borrowers from restructuring.

The Rent Against Installment Plan offers additional protection for vulnerable borrowers, but there are concerns about low participation due to disclosure requirements.

Efforts to address NPLs include the sale of performing loan packages and the potential sale of restructured loans by KEDIPES. However, challenges persist, and a comprehensive approach is necessary.

The banking sector remains exposed to credit risk, with a significant portion of the balance sheet comprising loans and advances. The ECB's recent rate hikes have impacted variable interest loans, affecting borrowers.

Debt Acquisition Companies play a crucial role in efforts to improve loan portfolio quality. Despite challenges, their impact on financial stability remains low.

Efforts to reduce NPLs are crucial for Cyprus to alleviate economic strain and stimulate market growth.