The Republic of Cyprus continues to issue decrees pertaining to
the relaxation of restrictive measures.
Legal updates regarding the latest decrees, from Harneys'
Cyprus Banking Group, are below.
Enforcement of Restrictive Measures on Transactions in case of Emergency Law of 2013-Decree No 15
The Republic of Cyprus through its Minister of Finance published
its fifteenth decree as per articles 4 and 5 of the Enforcement of
Restrictive Measures on Transactions in case of Emergency Law of
2013 on Friday, 7 June 2013 Decree. The Decree further clarifies
which restrictions are in place in relation to the use of credit
and debit cards and other payment instruments including the amounts
that can be withdrawn and/or transferred from such instruments. The
Decree also contains a number of prohibitory measures relating to
the termination of fixed term deposits which will not be analysed
in this note. The Decree is in force for 14 days commencing on its
publication date.
We set out below a summary of the restrictive measures and
exceptions thereto.
Cash Withdrawals
The maximum amount of cash withdrawal should not exceed the daily
allowance of €300 per natural person or €500 per legal
person or an equivalent amount in foreign currency, per person in
each credit institution. All cash withdrawals are calculated per
person consolidating all accounts held by the said person in each
credit institution.
Cashing of Cheques
The cashing of cheques is prohibited.
Cashless Payments and Transfers of Deposits/Funds
The following are permitted:
(a) The cashless payment or transfer of
deposits/funds to accounts held in other credit institutions within
Cyprus up to €15.000 per month per natural person in each
credit institution regardless of the purpose;
(b) The cashless payment or transfer of deposits/funds
to accounts held in other credit institutions within Cyprus up to
€75.000 per month per legal person in each credit institution
regardless of the purpose;
(c) A cashless payment or transfer of
deposits/funds to accounts held in other credit institutions within
Cyprus for the purchase of goods and or services up to
€300.000, per transaction provided that the payment is not
made from one credit institution to another into the person's
own account. The credit institution is authorized to request a
justification for the contemplated transaction; and
(d) The cashless payment or transfer of deposits/funds
to an account held in another credit institution within Cyprus for
the purchase of goods and or services for an amount over
€300.000 per transaction upon presentation of documents that
justify such a transaction.
The Decree provides that 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
€500.000 per transaction is not subject to the Committee's
approval provided that the particular credit institution
authorising 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 from €500.001
to €1.000.000 per transaction is subject to the approval of
the Committee. A request for payment or transfer will be made via
electronic form by the credit institution based on the information
provided by the customer. The Committee aims to make its decision
within 24 hours and will take into account the liquidity position
of the credit institution;
(iii) payment and/or transfer of deposits/funds above
€1.000.000 per transaction, is subject to the Committee's
approval. The credit institution is required to submit all of the
relevant documents 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
The Decree provides some welcome relaxation of the amount of money
in cash that can be taken out of Cyprus, in particular, exports of
euro notes and/or foreign currency notes are prohibited in excess
of €3.000 (the previous amount being €1.000 when the
restrictive measures first came into force), or the equivalent in
foreign currency, per natural person per journey abroad.
Opening of New Bank Accounts in Cyprus
The Decree does not lift the restrictions on opening of new bank
accounts in Cyprus and provides that a new bank account for any
customer who is not an existing customer of the particular credit
institution on the date of issue of the Sixth Decree which entered
into force on 11 April 2013, may only be able to open a new bank
account if:
(a) the account is only credited with funds
transferred from abroad into Cyprus; or
(b) the prior approval of the Committee is
obtained.
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
authorised by the Committee.
The Decree generally maintains the status quo of restrictions with
minor relaxations and offers some allowance to the credit
institutions to self-regulate some of the payments/transfers that
would have previously been subject to the Committee's
approval.
Relaxation of Restrictive Measures for Branches and Subsidiaries of Foreign Banks(Decree No 6)
The Republic of Cyprus through its Minister of Finance has
published its sixth 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 Friday, 7
June 2013 (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 for 14
days commencing on its publication date.
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.
- 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, shall be
subject to the restrictive measures contained in any other Decree
issued under the Law.
Abolition of Fifth Decree
The Fifth 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
1. Arab Jordan Investment Bank SA
2. Bank of Beirut SAL
3. BankMed SAL
4. Banque BEMO SAL
5. Banque SBA
6. Barclays Bank PLC
7. BBAC SAL
8. BLOM Bank SAL
9. Byblos Bank SAL
10. Credit Libanais SAL
11. Jordan Ahli Bank plc
12. Lebanon and Gulf Bank SAL
13. OJSC Promsvyazbank
14. Open joint-stock company AvtoVAZbank
15. Privatbank Commercial Bank
16. Russian Commercial Bank (Cyprus) Ltd.
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.