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Non-performing loans in Europe – Bulgaria is around average level, Baltic states and Cyprus become top performers

Among the fears related to Bulgaria’s accession to the euro area, the main concerns are linked with inflation and financial sector instability that can spread across borders. While it is difficult to give a straightforward answer about inflation due to various influencing factors, there are clear indicators for the financial sector that show its resilience. One such indicator is the level of non-performing loans (NPLs). When many overdue loans accumulate in the banking system, this has a negative impact on the entire economy, literally blocking the flow of money, limiting lending, often causing growth in the shadow economy (due to attempts to avoid seizure on legally obtained income), and losses for banks. Record high levels of overdue loans were observed in Greece and Cyprus during the financial crisis, but they have gradually reduced.

An analysis of data by the end of September 2025 didn’t show any correlation between membership in the euro area and the NPLs level. The three Baltic states – Lithuania, Latvia, and Estonia, along with Cyprus, are among the top performers in terms of low levels of overdue loans in bank portfolios. Only Sweden, Norway, and Liechtenstein have similar or better indicators. In all these countries combined, NPLs are below 1% of bank portfolios.

 

View BG_Euro and non-euro area NPLs on Beautiful.ai

 

The big surprise is Cyprus, where the level of overdue loans has significantly decreased within just one year – from 2.2% to 0.9%, according to data from the European Banking Authority (EBA). The latest EBA Risk Dashboard report does not provide explanations or details for individual countries, but we can assume that it involves one or several large loan portfolios in the banking system that have either been cleared through debt repayment or sold to a specialized company.

During this period, Greece continues to report a decrease in NPLs down to 2.7% (see the chart). Bulgaria, with a 1.8% level of delinquencies, is around the average for the EU and the European Economic Area. Interestingly, the share of non-performing mortgages is very low here, while corporate loans have a higher delinquency rate. However, in Cyprus, mortgages have a high delinquency rate, while the overall level of corporate loans is below the average for all non-performing loans.

Countries with the highest delinquency rates are Poland and Romania, as well as Hungary, which is catching up with Greece. Other countries with 2% or more non-performing loans include Spain, Austria, Italy, France, and Portugal. In all these cases, unpaid corporate loans are significantly higher as a proportion compared to household mortgages.

Read more news here: theagency.bg