The portfolio is granular and diverse, but is focused on lower value, real estate secured connections in the SME and retail portfolio.

Bank of Cyprus has an overall NPL exposure of around €8.8bn and holds the largest exposure of distressed debt in Cyprus.

“Pepper will bring their own experienced workout professionals, initially amounting to around 40 employees, who will focus on resolving a specified portfolio of circa €800m retail and SME non-performing loans,” said the Bank of Cyprus.

“This will accelerate the pace at which the bank can resolve specific problematic small-ticket loans, which is critical to, and entirely consistent with, the bank's commitment to fully resolve the non-performing exposures issue in the shortest possible time.

“The agreement with Pepper improves the ability to deliver non-performing exposures reduction across Cyprus in a category of loans critical for the entire economy.”

Pepper will commence its work immediately and the Bank of Cyprus expects the servicing solution to be scalable during 2018, which will allow it to achieve greater pace in delivering asset quality improvements.

The Pepper team will be led by Mark Caplan, managing director of Pepper's commercial real estate loan servicing division in the UK.

“We already had the infrastructure, technology and track record of setting up and rapidly scaling business units – having done so relatively recently with our CRE divisions in both the UK and Ireland,” said Fraser Gemmell, COO and managing director for CRE for Pepper Europe.

Nick Smith, head of restructuring and recoveries at Bank of Cyprus, added: “We sought Pepper UK on the basis of its reputation for quickly deploying teams of experts into new territories at short notice.

“We invited Pepper into a Europe-wide competitive tender process, which it won based on the quality of its proposition and clear commitment to rapidly establishing itself on the island.”