There is a significant difference between the growth rate of deposits in the Cypriot banking system and the rate at which loans are granted.

Taking May 2026 as the reference month, in net terms, deposits increased by €239 million, while loans rose by €173 million. This is also noted in the latest report by the International Monetary Fund.

“Despite the strong recovery over the past decade, the banking sector shows limited momentum. Credit intermediation by banks is sluggish: the loan-to-deposit ratio stands at around 50%, compared to an average of over 105% in the EU.”
IMF

As he explains, although banks have liquidity and the capacity to extend loans, they are not doing so.

Non-performing loans

And while it points out that the proposed changes to the legislative framework concerning non-performing loans and foreclosures would be a step backward, the International Monetary Fund identifies the judicial system as one of the main culprits behind the state of the Cypriot banking market.

“In the judicial sector—where the slow processing of cases is a major obstacle to resolving non-performing loans— additional efforts are needed to strengthen the insolvency framework and creditors’ rights, as well as to improve the efficiency of the courts.”
IMF

More than 30% of the debt of Cypriot households and non-financial corporations is held by debt-purchasing companies. With the International Monetary Fund noting that legislative measures to alleviate the debt of vulnerable households—such as the “Rent in Lieu of Installment” program and the legislation on “trapped buyers”—can help restore households’ creditworthiness.

Watch the report by Kleio Vourkou: