The Republic of Cyprus issued new decrees on 1 September 2014.
The provisions of the previous decrees remain unchanged. The
new decrees are valid until 8 December 2014.
For further information please refer to the updates below.
Relaxation of Restrictive Measures for Branches and
Subsidiaries of Foreign Banks (Decree No
24)
The Republic of Cyprus through its Minister of Finance has
published its twenty-fourth decree of the Enforcement of Temporary
Restrictive Measures on Transactions of Foreign Banks in case of
Emergency Law of 2013 as per articles 4 and 5 of the Enforcement of
Temporary Restrictive Measures on Transactions in case of Emergency
Law of 2013 (the “Law”) on Monday, 1
September 2014 (the “Decree”).
The Decree allows for foreign credit institutions and their
customers to enjoy relaxed restrictions subject to certain
conditions. Eligible credit institutions are entered into a
catalogue and published in the Official Gazette of the Republic.
The Decree is in force until 8 December 2014.
We set out below a summary of the various provisions of the
Decree.
Catalogue Eligibility
In order for a credit institution to be included in the catalogue
to be compiled by the Central Bank of Cyprus, it must apply to the
Central Bank of Cyprus. The Governor of the Central Bank must be
satisfied that all of the following conditions are met:
- The credit institution is a branch or a more than 50 per cent subsidiary of a foreign bank.
- The credit institution for the purpose of giving effect to this Decree internally splits into two operations: one dealing with international customers and the other with domestic customers.
An international customer is a customer who is (a) a non –
resident of Cyprus or (b) a corporation, trust, partnership or
legal entity, whereby 100 per cent of the ultimate beneficial
owners thereof are non resident natural persons or a company listed
on a recognised exchange, outside the Republic and provided that
any such company is not listed in the Cyprus Stock Exchange or (c)
a corporation, trust, partnership or legal entity, whereby more
than 90 per cent of the ultimate beneficial owners thereof are non
resident natural persons and the rest 10 per cent of the
ultimate beneficial owners that are resident natural persons are
not citizens of Cyprus; provided that the Committee’s
approval has been obtained prior to the inclusion of such a
customer in the list of international customers. A domestic
customer is a customer other than an international customer.
- In the case of a subsidiary of a foreign bank:
i. a letter of comfort is
provided to the Central Bank of Cyprus from the parent bank of the
credit institution confirming that, as long as this Decree is in
force, it will always support the liquidity position of the
subsidiary in the Republic so that the subsidiary in the Republic
will not request Emergency Liquidity Assistance from the Central
Bank of Cyprus or liquidity from Eurosystem credit
operations;
ii. a standby credit facility
is provided to the subsidiary by the parent bank for an amount of
at least equal to 30 per cent of customer deposits;
iii. the ratio of liquid assets to
total customer deposits will not be lower than 60 per cent.
With respect to liened (blocked funds) held as collateral for
credit facilities granted, the lower between the liened (blocked)
funds and outstanding credit facility balance shall be excluded
from the total customer deposits mentioned in (ii) and (iii).
- A list of the international customers is submitted to the Central Bank of Cyprus in a standardised electronic template in a format specified by the Central Bank of Cyprus with written confirmation from the credit institution that all the persons included in the list of international customers are international customers as defined above.
- The Central Bank of Cyprus, if it deems necessary, may request the External Auditors of the credit institution to confirm in writing that the credit institution meets all the conditions of this section.
The credit institution, once entered into the catalogue, must
report to the Central Bank of Cyprus any change and submit
electronic reports of the credit institution’s weekly
transactions.
The Central Bank of Cyprus is responsible for monitoring the
continuous fulfilment of the above conditions and report to the
Finance Minister any change that may need to be made to the
catalogue.
Permitted Transactions
The following are permitted transactions in respect of credit
institutions entered on the catalogue and are not subject to any
restrictive measure imposed under any other Decree issued under the
Law:
- All cashless payments or transfers of deposits/funds from a credit institution that is included in the catalogue, for its own account or by the order of an international customer.
- All transactions between a credit institution that is included in the catalogue and an international customer.
- All transactions between international customers.
- All transactions between a credit institution that is included in the catalogue, by the order of an international customer or for their own account, and an entity outside the Republic.
Restrictive Measures
The following restrictive measures are imposed on credit
institutions that have been entered into the catalogue:
- All cashless payments or transfers of deposits/funds from a credit institution that is not included in the catalogue to an international customer of a credit institution included in the catalogue or to such a credit institution’s own account are considered as cashless payments or transfers of deposits/funds to accounts held abroad and are subject to the provisions of any other Decree issued under the Law.
- All cashless payments or transfers of deposits/funds from a domestic customer to an international customer of a credit institution included in the catalogue or to such a credit institution’s own account are considered as cashless payments or transfers of deposits/funds to accounts held abroad and are subject to the provisions of any other Decree issued under the Law.
- Credit institutions that are included in the catalogue are prohibited from servicing domestic customers that maintain accounts with their Head Office or soliciting and obtaining new business from domestic customers or opening new accounts for domestic customers who were not existing customers of the said credit institutions on 25 April 2013; unless the new account relates to a new loan, which is not financed by clients’ deposits, granted after 20 September 2013 and/or new indirect credit facility (e.g. letter of guarantee, letter of credit) provided that:
(i) the account is used for the
servicing of the loan and/or new indirect credit facility and for
the regular activity of the client and not for depositing
purposes;
(ii) the credit balance of the account cannot at
any time exceed the one hundred and twenty percent (120 per cent)
of the loan balance; and
(iii) if only indirect credit facility is granted,
credit balance of the account cannot at any time exceed the one
hundred and twenty percent (120 per cent) of the indirect credit
facility.
- All domestic customers are also subject to the restrictive measures imposed by any other Decree issued under the Law.
Any accounts held by international customers that have been
credited with funds from accounts of domestic customers and with
funds from domestic banks since the entry into force of the
Enforcement of Temporary Restrictive Measures on Transactions in
case of Emergency First Decree, i.e. 27 March 2013, until the date
that the relevant credit institution is included in the catalogue,
shall be subject to the restrictive measures contained in any other
Decree issued under the Law.
Abolition of twenty-third Decree
The twenty-third decree of the Enforcement of Temporary Restrictive
Measures on Transactions of Foreign Banks in case of Emergency Law
of 2013 is abolished.
The abolition does not:
- restore anything that was not in force or in existence at the time of abolition; and
- affect the previous effect of the abolished Decree or anything that was concluded normally or was allowed under the said Decree; and
- affect any right, privilege, obligation or responsibility, which is obtained, derived or resulting from the abolished Decree; and
- affect any penalty, confiscation or punishment, which resulted in relation to a crime committed under the abolished Decree; and
- affect any investigation, legal proceedings or remedy, in relation to any right, privilege, obligation, responsibility, confiscation or punishment as mentioned above
And such investigation, legal proceedings or remedy may be
initiated, carried on or fulfilled, and such penalty, confiscation
or punishment may be imposed as if the Decree had not been
abolished.
Catalogue of Credit Institutions
- Arab Jordan Investment Bank SA
- Bank of Beirut SAL
- BankMed SAL
- Banque BEMO SAL
- Banque SBA
- Barclays Bank PLC
- BBAC SAL
- BLOM Bank SAL
- Byblos Bank SAL
- Credit Libanais SAL
- Jordan Ahli Bank plc
- Lebanon and Gulf Bank SAL
- OJSC Promsvyazbank
- Open joint-stock company AvtoVAZbank
- Privatbank Commercial Bank
- Russian Commercial Bank (Cyprus) Ltd.
Enforcement of Restrictive Measures on Transactions in case
of Emergency Law of 2013-Decree No. 31
The Republic of Cyprus through its Minister of Finance has
published its 31st decree as per articles 4 and 5 of the
Enforcement of Restrictive Measures on Transactions in case of
Emergency Law of 2013 on Monday, 1 September 2014 (the
“Decree”). The Decree is in force
until 8 December 2014.
The restrictions have been greatly relaxed since their original
enforcement. Particularly, the following restrictions have been
abolished:
-
Restrictions on the maximum amount of cash withdrawal per person
(natural and legal);
- Prohibition
on the cashing of cheques;
-
Restrictions on the payment and/or transfer of deposits/funds
between credit institutions within Cyprus;
-
Restrictions on the opening of new bank accounts in Cyprus.
We set out below a summary of the remaining restrictive measures
and exceptions thereto.
Cashless Payments and Transfers of Deposits/Funds
Abroad
Cashless payments and/or transfers of deposits/funds to accounts
held abroad are prohibited. This is however not an absolute
prohibition so that the following exemptions apply:
(a) for transactions that fall within the normal business activity
of the customer who may be required to provide documents justifying
such transactions:
(i) payment and/or transfer of deposits/funds of up to
€1.000.000 per transaction, is not subject to the
Committee’s approval provided that the particular credit
institution authorizing such a transaction has reviewed the
necessary documents and reached a conclusion based on such
documents that the transaction is justified;
(ii) payment and/or transfer of deposits/funds above
€1.000.000 per transaction, is subject to the
Committee’s approval. The credit institution or payment
institution is required to submit all of the relevant documents as
well as the name of the involved credit institution and in
providing its approval the Committee will take into account the
liquidity position of the credit institution;
(b) payments made for salaries of employees upon the presentation
of relevant supporting documents;
(c) living expenses of up to €5.000 per quarter as well as
tuition fees, of a person who is studying abroad and is a first
degree relative of a Cyprus resident. Supporting documents will
need to be provided and the tuition fees must be paid only to the
beneficiary educational institution. The credit institution will be
required to maintain a record of all such transactions and to
monitor these for any irregularities.
(d) transfers of deposits/funds outside of Cyprus not exceeding
€5.000 per month, per person for each credit institution
and/or payment institution regardless of the purpose.
Export of Euro Notes/Foreign Currency
Exports of euro notes and/or foreign currency notes are prohibited
in excess of €3.000, or the equivalent in foreign currency,
per natural person per journey abroad.
General Exemptions
The Decree does provide a number of general exemptions to the
restrictive measures, which are as follows:
(a) all new funds transferred to the Republic
from abroad provided that any re-transfers to a second credit
institution in the Republic will only be exempt if the first credit
institution that the new funds were transferred to states that the
funds are already exempt;
(b) withdrawal of cash using credit and/or debit and/or
prepaid cards issued by foreign institutions on accounts
abroad;
(c) the cashing of cheques issued on accounts
held with foreign institutions abroad;
(d) cash withdrawals from accounts of credit
institutions with the Central Bank;
(e) payments and receipts of the Republic of
Cyprus;
(f) payments and receipts of the Central
Bank;
(g) the foreign diplomatic missions and the UN
missions in Cyprus based on the exemptions specified in the Vienna
Convention for Diplomatic Relations and the Agreements between the
Republic and the United Nations and other international Agreements
which have precedence over national legislation;
(h) the payments via a debit and or credit and or
prepaid card; and
(i) transactions or payments that have been
authorized by the Committee.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.