The purpose of this paper is to assess and analyse the impact of the national economic conditions on the Level of Non-performing loans (NPLs) in the Commercial banks of Cyprus, as well as determine the nature and magnitude of relationship between them. The object of this study is the existing scientifically based theoretical approaches to the study of non-performing loans, as well as economic processes that affected the dynamic of those loans. The paper reviews the impact of the changes in national economic conditions on the Level of Non-performing loans in the Commercial banks of Cyprus between 2005 and 2018. The national economic conditions studied include: Public Debt, Budget Balance and Interest Rate. The results of this study confirms that statistically significant linear dependency exists between Public Debt, Interest Rate and NPLs in Cyprus. In turn, the study confirms that there is not enough evidence to prove that statistically significant linear dependency exists between Budget Balance and NPLs in Cyprus.

Об'єктом даного дослідження є комерційні банки Кіпру. В роботі розглядався вплив макроекономічних змін, зокрема інфляції, на рівень непрацюючих кредитів в комерційних банках. Досліджувані макроекономічні показники включають показники інфляції. Методологія дослідження спирається на теоретичний і методологічний аналіз наукової літератури, статистичний і економетричний методи, а також спостереження, порівняльний метод, опис, вимірювання, аналіз і моделювання. Для розробки статистичної моделі, що представляє взаємозв'язок показників інфляції та неповернутих кредитів на Кіпрі автор використовує просту лінійну кореляцію і такі методи аналізу даних, як коефіцієнт кореляції і коефіцієнт детермінації. Результати даного дослідження показують, що отримана економетрична модель є прийнятною, так як коефіцієнт детермінації дорівнює 0,504, а показники інфляції є визначальними для рівня непрацюючих кредитів. Це пов'язано з тим, що коефіцієнт кореляції між даними змінними дорівнює -0,710, і за шкалою Чеддока магнітуда зв'язку є високою. Крім того, коефіцієнт кореляції показників інфляції та неповернутих кредитів на Кіпрі є статистично значущим, так як значення коефіцієнта кореляції знаходиться за межами показників критичних значень, рівних |0,468|. Також з результатів дослідження було встановлено, що в разі Кіпру показники інфляції негативно пов'язані з безповоротними кредитами, так як отриманий коефіцієнт кореляції -негативне число. Отримана модель не використовується для складання короткострокового прогнозу, в силу недостатнього значення коефіцієнта детермінації (50,4 %). В цілому пропонується, щоб особи, що визначають політику, приділяли значну увагу детерминантам непрацюючих кредитів, так як умови непрацюючих кредитів, що погіршуються, будуть впливати не тільки на банківські установи, а й на загальний стан фінансової системи Кіпру. Практична значимість досліджень, наведених в роботі, полягає в тому, що результати досліджень можуть бути використані в якості довідкового матеріалу для бізнесу, уряду та освіти. Ключові слова: стан фінансової системи Кіпру, безповоротні кредити, комерційні банки, лінійна кореляція.Ptasica T.

The purpose of this paper is to determine and analyze the impact of the macroeconomic indicators on the Level of Non-performing loans (NPLs) in the Commercial banks of Cyprus, as well as determine the magnitude and nature of relationship between them. The object of this study shall be the Commercial banks of Cyprus. The paper reviews the impact of the macroeconomic changes on the Level of Non-performing loans in the Commercial banks of Cyprus between 2000 and 2018Q4. The macroeconomic indicators studied include: Gross Domestic Product at market prices-Real GDP (GDP), Unemployment (UNEMP) and Inflation rates-Harmonized Index of Consumer Prices (HICP). The methodology of the study is based on theoretical and methodological analyses of scientific literature, statistical and econometric methods, as well as on observations, comparative method, description, measurements, analysis, modelling and forecasting. In order to develop the statistical models, representing the relationship between macroeconomic indicators and NPLs in Cyprus, the author is using a Simple linear correlation and such data analysis methods as Coefficient of correlation and Coefficient of determination. For creation of short-term forecast of NPLs in Cyprus between 2019 and 2022, the author has used a Simple linear regression. The results of this study show that the obtained Linear model of relationship between the UNEMP and NPLs is near perfect. Thus, this linear model is used by the author for the preparation of a short-term forecast. In turn, the Linear model of relationship between the HICP and NPLs is describing mentioned data and the studies confirm that a statistically significant linear dependency exists between UNEMP and HICP and NPLs in Cyprus. In addition, the obtained Linear model of relationship between GDP and NPLs does not describe mentioned data (no linear relationship or weak relationship) and the studies confirm that there is not enough evidence to prove that a statistically significant linear dependency exists between GDP and NPLs in Cyprus. In general, the author proposes that the people formulating policies in the country should pay special attention to the determinants of NPLs, since the deteriorating conditions of NPLs will affect both individual lenders and their ability to timely repay the loans, and also the banking establishments and the general financial system of Cyprus. The practical significance of the studies carried out in the scope of the paper is in the fact that the obtained results of the studies may be used as an informative material for the government, business and educational purposes.

The relevance of the article stems from the current level of non-performing loans (NPLs), which remain very high and pose risks of financial instability in Cyprus. Further reducing the high level of NPLs is one of the main strategic objectives of the Cyprus Stability Program for the period 2019-2022. The purpose of this paper is to identify problems and contradictions in the current financial stabilization policy in the banking sector of Cyprus and to help policy makers of financial policy to trace the problems and contradictions in the course of its implementation. The object of the study is the financial and, in particular, the banking sector of Cyprus, which is largely concentrated within the two systemic banks. The methodology of the study is based on theoretical and methodological analysis of the scientific literature, statistical method, observations, comparative method and analysis, as well as analytical and comparative graphs, comparative and analytical approaches. The results of this study show that the profitability of the banking sector of Cyprus is still negatively affected by a long period of low interest rates, as well as the burden of increasing provisions for bad debts. The adoption of the accounting standard (IFRS9) will lead to a further increase in the amount of provisions for impaired loans and thus have a negative impact on the profitability of banks. In addition, the decrease in the loan-to-deposit ratio was mainly due to a significant reduction in the loan portfolio of Cypriot banks. The significant decline in total lending by banks is due to the high level of non-performing loans in Cyprus, accounting for 31.8% of total loans at the end of November 2018. Moreover, about half of all NPLs are NPLs of households. The ESTIA program was created to address NPLs in Cyprus. Overall, the results of the study also show that the launch of the ESTIA program in 2019 will lead to an increase in moral hazard. Significant growth in demand for real estate in Cyprus is due to government policy and is carried out through the Citizenship for Investment program. Increased demand causes prices to rise and forms a bubble in the real estate market. In turn, the formation of a housing price bubble is one of the pre-crisis conditions.