Banks urged to accelerate loan restructurings

Single supervisory mechanism flags credit risk as priority for 2024-2026

The governor of the Central Bank has shed light on the strategy for restructuring Non-Performing Loans (NPLs) and navigating credit risk management. In a proactive move, the governor dispatched crucial correspondence to banks and credit repurchase companies.

The primary focus is on maximizing viable restructurings, given the prevailing global economic landscape and the strains on household and business incomes. Credit buyback firms are urged to engage wholeheartedly with borrowers to identify sustainable restructuring avenues whenever feasible.

Furthermore, discussions surrounding restructuring must be characterized by agility and transparency, aligning closely with economic shifts and pertinent legislation. Swift identification of viable restructurings is not just beneficial but imperative for maintaining financial stability and fostering broader economic health, a win-win for lenders and borrowers alike.

In terms of credit risk management, the Single Supervisory Mechanism has underscored its significance for the 2024-2026 term. It is incumbent upon licensed credit institutions to ensure optimal borrower management, meticulously considering economic dynamics and regulatory frameworks. The expeditious identification of viable restructurings serves the best interests of all parties involved.

Key directives include:

- Prompt identification of repayment hurdles by authorized credit institutions, bolstered by robust procedural frameworks.

- Accelerated, transparent discussions on restructuring, mindful of legislative mandates and evolving economic paradigms.

- Thorough sectoral scrutiny and granular analysis of loan portfolios are pivotal for crafting targeted restructuring solutions, attuned to the unique circumstances of borrowers.

Preventive measures not only bolster financial stability but also extend a lifeline to banks and distressed borrowers, underscoring their importance in fortifying the economy at large.

[This article was translated from its Greek original]

https://knews.kathimerini.com.cy/en/news/banks-urged-to-accelerate-loan-restructurings

Reporting by Maria Heracleous, Kathimerini, 16th February 2024