The biggest challenge that Cypriot banks have to face today is how to manage and resolve the extremely difficult and sensitive issue of loan servicing… The Cypriot economy needs a functioning banking sector which contributes to the economic recovery. That can only be achieved if the non-performing loan issue is addressed forcefully.
For that, the structure of incentives would have to be changed, so that both borrowers and lenders have a common interest in finding a pragmatic solution to the debt problem. The data tell us that this is not happening. Conversely, non-performing loan levels are continuing to increase. The reform of the foreclosure process is part of the change that has to come about.