The European Central Bank published an interview with Supervisory Board member George Ioannou outlining how Cyprus’s banking sector moved from the 2013 crisis to improved asset quality, and how ECB Banking Supervision and the Central Bank of Cyprus are tightening and simplifying non-performing loan (NPL) supervisory frameworks across bank types. The interview attributes progress to banks’ actions and sustained supervisory pressure, including large-scale disposals of NPL portfolios, restructurings, stronger governance and business model adjustments. It describes a prudential underwriting framework built on Central Bank of Cyprus directives that has remained in place alongside record-high new lending activity in 2025 with “solid” loan quality. On NPL provisioning, it notes that less significant institutions (LSIs) still face higher NPL levels and structural constraints, and that the Central Bank of Cyprus became the first national supervisor in 2025 to implement an LSI provisioning calendar mirroring the regime for larger banks, aiming for full coverage of long-standing NPLs by 2027, ahead of the 2028 final target in the ECB Guideline on coverage of non-performing exposures at LSIs. For larger banks, it points to supervisory space for a simplified NPL framework as legacy pressures recede, stressing that simplification is part of a broader European effort and “does not equate to deregulation.” Looking ahead, the interview flags increased cross-border merger and acquisition activity and argues that deeper integration requires robust cross-border cooperation and completion of the banking union. It also highlights priorities in the Supervisory Board’s agenda to make supervision more efficient, effective and risk-based, including clearer communication across European supervision, common behaviours and training, and staff exchanges between the ECB and national supervisors.
European Central Bank 2026-02-11
European Central Bank interview sets out Cyprus banking recovery lessons and earlier NPL provisioning expectations for smaller banks
The European Central Bank published an interview with Supervisory Board member George Ioannou on Cyprus's banking recovery since the 2013 crisis, highlighting improved asset quality and efforts to tighten non-performing loan (NPL) supervisory frameworks. It notes the Central Bank of Cyprus's pioneering LSI provisioning calendar and emphasizes the need for robust cross-border cooperation and completion of the banking union amid increased merger and acquisition activity.