Tightened lending criteria and reduced loan demand in Q2 2023

During the second quarter of 2023, lending criteria for both businesses and households in Cyprus remained stringent, with banks exercising caution. Loan demand declined across all categories, primarily due to high-interest rates and decreased consumer confidence, according to the Bank Lending Survey by the Central Bank of Cyprus. Lending criteria remained strict, indicating banks' vigilance in extending new loans to minimize the risk of non-performing loans. Banks also focused on sustainable loan renegotiations to maintain the quality of their loan portfolios.

In the coming third quarter of 2023, banks expect lending criteria for business loans to remain unchanged but anticipate stricter criteria for all household loan categories, suggesting a continuation of reduced lending. Net loan demand is also expected to decline further, both for businesses and households, reflecting the cautious lending environment in Cyprus.

[Information sourced from CNA]