{
  "title": "Cyprus: Selected Issues",
  "publication": "IMF Staff Country Reports, December 3, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2018/11/30/cyprus-selected-issues-46410",
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  "summary": "This Selected Issues paper identifies key challenges among households in reducing nonperforming loans (NPL) further in Cyprus, namely, low repayment capacity, particularly among a certain group of debtors; and weak repayment discipline owing to strategic behavior.",
  "sections": [
    {
      "heading": "Key findings on nonperforming loans (NPLs) and household debt",
      "content": "- Identifies two principal obstacles to further reducing household NPLs: low repayment capacity, particularly among a certain group of debtors; and weak repayment discipline owing to strategic behavior.\n- Reduction in credit-to-GDP ratio has been almost entirely achieved by NPL write-offs and sale or transfer of loans out of the banking system, and through denominator effect.\n- Since 2017, bank credit has provided only a moderate amount of new financing.\n- As of 2017:\n  - Credit demand appears moderately strong, in line with robust economic growth.\n  - Credit supply remains broadly unchanged, reflecting continued risk averseness by banks.\n- These trends suggest deleveraging is expected to continue through clean-up of bank balance sheets, while growth in credit flows (pure new loans) are likely to remain at a moderate level until NPL recovery and repayment discipline improves significantly."
    },
    {
      "heading": "Financing dynamics and risks to sustainability",
      "content": "- Role of bank credit as a funding source remains limited despite some revival of lending activity.\n- Current alternative funding sources supporting economic activity include:\n  - External inflows\n  - Drawdown of savings\n  - Use of own funds\n  - Unpaid debt service obligations\n- Concerns: these alternative sources may not be sustainable over the medium term."
    },
    {
      "heading": "Policy implications and priorities",
      "content": "- Addressing NPLs to lower borrowing costs and reviving credit supply are important for supporting longer-term growth.\n- Strengthening repayment capacity among vulnerable debtor groups and improving repayment discipline (reducing strategic nonpayment) are central to further NPL reduction.\n- Continued clean-up of bank balance sheets is necessary, but without improved NPL recovery and repayment discipline, pure new loan growth is likely to remain moderate."
    },
    {
      "heading": "Publication and metadata (as presented in the source)",
      "content": "- Pages: 16\n- Volume: 2018\n- Issue: 338\n- Series: Country Report No. 2018/338\n- DOI: https://doi.org/10.5089/9781484387436.002\n- Stock No: 1CYPEA2018003\n- ISBN: 9781484387436\n- ISSN: 1934-7685\n- Subject: Banking, Credit, Debt service, External debt, Financial crises, Financial institutions, Loans, Money, Nonperforming loans\n- Keywords: cash repayment, CR, Credit, Debt service, Europe, housing loan, IMF staff calculation, ISCR, legacy NPLs, Loans, loans buyer, Nonperforming loans, NPL overhang, NPL problem, NPL reduction, NPL resolution, NPL workout, NPL write-off, pressure bank profitability\n- Publication date on landing page: December 3, 2018\n- Format note shown: PDF available\n\nInternational Monetary Fund. European Dept. \"Cyprus: Selected Issues\", IMF Staff Country Reports 2018, 338 (2018).\n\n---\n\n Content in this bundle\n\n- Country Report\n  - Country Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Country Report (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: December 3, 2018",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781484387436.002",
    "Identifies two principal obstacles to further reducing household NPLs: low repayment capacity, particularly among a certain group of debtors; and weak repayment discipline owing to strategic behavior.",
    "Reduction in credit-to-GDP ratio has been almost entirely achieved by NPL write-offs and sale or transfer of loans out of the banking system, and through denominator effect.",
    "Since 2017, bank credit has provided only a moderate amount of new financing.",
    "As of 2017:",
    "These trends suggest deleveraging is expected to continue through clean-up of bank balance sheets, while growth in credit flows (pure new loans) are likely to remain at a moderate level until NPL recovery and repayment discipline improves significantly.",
    "Role of bank credit as a funding source remains limited despite some revival of lending activity.",
    "Current alternative funding sources supporting economic activity include:",
    "Concerns: these alternative sources may not be sustainable over the medium term.",
    "Addressing NPLs to lower borrowing costs and reviving credit supply are important for supporting longer-term growth.",
    "Strengthening repayment capacity among vulnerable debtor groups and improving repayment discipline (reducing strategic nonpayment) are central to further NPL reduction.",
    "Continued clean-up of bank balance sheets is necessary, but without improved NPL recovery and repayment discipline, pure new loan growth is likely to remain moderate.",
    "Pages: 16",
    "Volume: 2018",
    "Issue: 338",
    "Series: Country Report No. 2018/338",
    "DOI: https://doi.org/10.5089/9781484387436.002",
    "Stock No: 1CYPEA2018003",
    "ISBN: 9781484387436",
    "ISSN: 1934-7685",
    "Subject: Banking, Credit, Debt service, External debt, Financial crises, Financial institutions, Loans, Money, Nonperforming loans",
    "Keywords: cash repayment, CR, Credit, Debt service, Europe, housing loan, IMF staff calculation, ISCR, legacy NPLs, Loans, loans buyer, Nonperforming loans, NPL overhang, NPL problem, NPL reduction, NPL resolution, NPL workout, NPL write-off, pressure bank profitability",
    "Publication date on landing page: December 3, 2018",
    "Format note shown: PDF available",
    "**Country Report**"
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