Abstract
The chapter examines the experience of Cyprus in dealing with non-performing loans in the immediate years before and after the Eurogroup decisions of March 2013. Following a presentation of the structure of the domestic banking system and the events leading to the crisis, the paper investigates a number of institutional, legal, and behavioral factors that contributed to the high number of NPLs even before the crisis. The interplay of such factors points to serious weaknesses in the design and implementation of the regulatory and supervisory framework as well as in the operating environment and the institutional infrastructure, which led to the widespread practice of lending primarily on the basis of collateral and not on future cash flow, income, or ability to pay.
Marios Clerides is an economist, Michalis Kammas is the Director General of the Association of Cyprus Banks, and George Kyriacou is the Director of Economic Analysis and Research at the Central Bank of Cyprus. The views presented here are those of the authors and do not reflect in any way the views of the institutions that are associated with.
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Clerides, M., Kammas, M., Kyriacou, G. (2017). The Cyprus Experience in Dealing with Private Sector NPLs. In: Monokroussos, P., Gortsos, C. (eds) Non-Performing Loans and Resolving Private Sector Insolvency. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-50313-4_7
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DOI: https://doi.org/10.1007/978-3-319-50313-4_7
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