THE Bank of Cyprus (BoC) has started selling non-performing loans, local media reports.
The buyer was a smaller lender, which probably wants to increase its share in the banking system, one report said.
BoC sources, speaking on condition of anonymity, confirmed the reports, saying that the selling of the red loans aims at the reduction of the bank’s non-performing loans as well as a cash inflow and no book loss, as the sale will be completed at the loans’ book value.
BoC was initially selling no more than 50 non-performing loans totaling 20 million euros (21.93 million U.S. dollars), which mostly belong to developers and property owners.
Cyprus allowed the selling of packages of non-performing loans under a 2015 legislation which was passed as part of the eastern Mediterranean island’s obligations to its lenders.
Red loans in the Cypriot banking system shot up to about 50 billion euros or 48 percent of total loans, at the onset of an economic crisis in March 2013, which led to a 10-billion-euro bailout of Cyprus by the Eurogroup and the International Monetary Fund.
The Cypriot banking system itself was resolved, and had to seek recapitalization which changed the ownership of the banks overnight.
BoC turned 47.5 percent of uninsured deposits over 100,000 euros into bank stock, turning its mostly Russian and Ukrainian depositors into its new owners.
Latest figures showed that a year after Cyprus exited its bailout economic adjustment program, non-performing loans dropped to about 22 billion euros. BoC itself owns 11 billion euros worth of red loans or about 50 percent of the total.