The need to find a comprehensive and realistic solution for non‑performing loans (NPLs), without actions that could undermine the country’s international credibility, was emphasised by the Chief Executive Officer of Bank of Cyprus, Panicos Nicolaou, during the presentation of the 2025 results. He placed the ongoing discussion about a possible extraordinary tax on the banking sector within the same context, expressing clear reservations.
Foreclosures
Referring to the issue of foreclosures and the public debate that has emerged, the head of Bank of Cyprus stressed that referring cases to special courts with an unknown timeframe for adjudication, or repeatedly suspending procedures, does not address the essence of the problem.
On the contrary, he noted, it may even worsen it. We cannot, he said, have NPLs amounting to €20 billion when the total loans granted by all banks combined are €26 billion.
"If we believe that the solution is to take a case to court and have it heard in five years, the amounts we see today will simply be larger", he said, explaining that interest continues to accumulate and the original debt is not written off.
He underlined that the key question and the core of the problem is whether the borrower has a genuine ability to repay. In many cases, he said, the issue concerns the viability of the loan itself and not only the management of interest rates or charges.
As he explained, time adds debt through the accumulation of interest. "The point is whether the borrower can repay." There are borrowers who were unable to join restructuring schemes or state support programmes (for example Rent for Instalment) mainly because they could not demonstrate long‑term viability.
"We must recognise that there is a problem. And we must find a solution together, the state, institutions and banks", he noted, adding that banks do not reject contributing, provided this forms part of a coherent and workable framework. He reminded that banks participated in previous schemes, accepting write‑offs and restructurings, even below the value of collateral.
He placed particular emphasis on maintaining Cyprus’s credibility as a financial and business centre. As he said, in a small economy the stability of rules and predictability are critical factors for attracting investment.
Taxation
Within this context he also placed the discussion on extraordinary taxation of banks due to increased profitability. He argued that this approach overlooks a series of facts:
- Banks already pay higher corporate tax due to increased profits.
- There has been a special levy on deposits since 2012.
- There was a long period of losses (2012 to 2022) during which shareholders received no dividends.
In 2014 the shareholders of Bank of Cyprus contributed €1 billion for capital strengthening as part of the post‑crisis rescue.
He argued that imposing additional taxation for a "third time", as he put it, could raise issues of equal treatment and possibly constitutionality.
The head of the bank questioned what message the country wishes to send to investors.
"When you are a small country, you must be credible", he said, noting that targeting a sector because of temporary profitability can create a sense of uncertainty.
According to him, in countries where extraordinary taxes were imposed, this occurred mainly in an environment of fiscal pressure and through government initiative, whereas in Cyprus the initiative comes from Parliament.