The issue returns to the political agenda on the eve of elections, while the broader economic environment is influenced by a period of intense geopolitical turbulence that is creating uncertainty about the cost of financing for businesses and households and the outlook for the economy.
The discussion on the framework for foreclosures and the management of non-performing loans (NPLs) returns to the spotlight on Monday, 9 March, when the parliamentary Finance Committee opens the file of 26 proposals submitted by political parties aiming to introduce changes to loan restructuring procedures and, mainly, to the institutional framework governing foreclosures.
The issue is returning to the political agenda just before elections, while the broader economic environment is affected by strong geopolitical upheavals that are creating uncertainty about the cost of financing for businesses and households and the trajectory of the economy. Within this context, the issue of non-performing loans is once again acquiring strong political significance.
However, as sources from the financial sector and organisations monitoring the issue point out, the public discussion continues to lack clear documentation about what specific problems the proposed changes are trying to address and what the potential consequences will be for the system managing problematic loans. Without an effective framework for recovering problematic loans, uninterrupted financing of the economy at low cost cannot be ensured.
The debate on foreclosures lies at the core of the effort that began after Cyprus’ banking crisis, which peaked in 2013. Since then, reducing NPLs has been a key objective for stabilising the banking system. That objective has largely been achieved, and what was once considered the system’s greatest weakness now produces profits that are distributed to those who invested in the Cypriot banking sector when it was still generating losses.
In recent years, the management of a large portion of problematic loans has shifted from banks to credit acquiring companies, which obtained NPL portfolios through loan sales. It should be recalled that these sales took place during far more difficult periods, including during the pandemic. Today these companies are responsible for managing a significant burden. Their aim, legitimately, is to generate profit, but it should not lead to arbitrary conclusions that underestimate the risk they assumed and the high cost involved in managing such loans.
What happens in practice
Today, according to data provided to Politis by the ACB E-Auctions platform, 85% of auctions concern loans owned by credit acquiring companies, including the state-owned KEDIPES.
This fact also affects the nature of the political debate, since these companies operate under a different business model from banks, often placing greater emphasis on recovering value from loans. However, it is often overlooked that in practice this different model may offer more room for agreement with borrowers, provided that borrowers themselves seek a settlement.
Market executives told Politis that experience shows there is still a significant information gap, resulting in borrowers delaying action. Delays, due to interest accumulation, increase the outstanding debt.
In 2024, 4,211 foreclosure procedures were initiated, including repeated auctions for the same property. In 2025 the number stood at 3,608.
Of the 3,608 cases, 294 concerned houses and 333 apartments, most of them in Paralimni, including properties owned by foreign nationals. Another 517 involved plots with buildings and 278 concerned land with buildings.
In practice, 35.9% of auctions were suspended. Usually around 95% of auctions are halted on the day of the auction or one to two days before, as borrowers appear to negotiate. Even a verbal commitment by the borrower that they wish to find a solution can be sufficient to stop the auction. In 2025, 104 auctions were stopped while they were already under way.
Auctions have also been halted through court orders. This demonstrates that if there is reasonable cause, a court can suspend an auction. Several legislative proposals suggest that filing an application to verify the outstanding debt should also constitute grounds for suspension.
In cases where sales occur, buyers are often relatives of the debtor or the debtor themselves. The law provides an advantage to the debtor if their property is purchased by a relative: property acquired through foreclosure is free of other encumbrances. Consequently, if for example the debtor’s children purchase it, they acquire it without additional liabilities.
In 2025, a total of 739 properties were ultimately sold through auction, including 67 houses and 112 apartments, although it is not known how many were primary residences.
What do the data show?
The number of cases that actually result in auctions is significantly smaller than the number announced publicly, as negotiations for restructuring often take place beforehand. The threat of foreclosure frequently leads to settlements.
Experience in recent years also shows a recurring pattern. Many borrowers take action only when the auction of their property becomes public. Until that point, in many cases the possibilities for negotiation or restructuring are not utilised.
A second conclusion is that there is a lack of information about the procedures and tools available to borrowers. Despite the existence of mechanisms for loan restructuring, a large proportion of borrowers appear not to fully understand the stages of the foreclosure process, when they can intervene to request a settlement and what options exist before the case reaches its final stage.
Debate without a full picture
The new debate in parliament is expected to revive familiar dilemmas without necessarily providing solutions.
How can society be protected from extreme cases of home loss without undermining the framework that allows the management of non-performing loans?
The answer is not simple. On the one hand there is the social dimension; on the other, the experience of the previous decade showed that the inability to manage problematic loans can affect the entire financial system.
Within this context, several observers note that the debate would be more productive if it were accompanied by detailed data on borrower profiles, the stages of the procedures and the outcomes of restructuring efforts.
The main issue at stake is not only whether the foreclosure framework will change. More importantly, it is whether the public debate will move towards an evidence-based approach to managing problematic loans.
Without a clear picture of what works and what does not in the current system, legislative interventions risk creating more problems than they attempt to solve. The moral hazard should also not be underestimated. There cannot be two categories of borrowers: on the one hand those who consistently meet their obligations and on the other those who are rescued and placed in a more advantageous position despite being in difficulty. This gap creates fertile ground for the emergence of strategic defaulters.
Beyond that, the state, which has already created schemes for vulnerable borrowers such as “Estia”, “Mortgage-to-Rent” and “Oikia”, could intervene again to cover special and borderline cases that were unable to qualify for previous programmes.