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The main legal frameworks that regulate banking activities in Cyprus are the Central Bank Law and the Banking Law. The amendments that have been brought to the law since it was first issued in 1997 refer to:
According to the Banking Law in Cyprus a bank is a legal entity enforced by the Central Bank of Cyprus to conduct financial activities under a special license.
The main types of financial institutions in Cyprus are public companies, affiliates of foreign banks incorporated as Cypriot private companies, branches of foreign banks, cooperative banks, representative offices of international banks and the Housing Finance Corporation.
The Central Bank of Cyprus is the main supervisory authority of financial institutions in Cyprus. It makes sure the Cypriot financial system is stable; it supervises payment and makes sure the payment protocols are respected; it collects data about the banking system according to the regulations of the European System of Central Banks. The Central Bank of Cyprus must protect the interests of depositors and minimize the risks of losing their deposits. However, the main objective of the Cypriot Central Bank is to make sure that price stability is accomplished. The Central Bank has also the authority to issue new laws and to enforce penalties whenever the banking system or banking laws have been infringed.
In Cyprus any action of lending money is considered a banking activity. Loans can take the form of deposits, securities or any other proof of obligation. Bank activities in Cyprus also refer to deposits that are regarded as sums of money given or received under certain conditions that will be repaid with or without interests, or under certain terms agreed by the person giving or receiving the money. Deposits cannot be related to the sale of real estate property, providing services or issuance of shares. Banks are not allowed to engage in any other activity than financial ones. The Cypriot Banking Law allows international banks to open representative office that will not be considered legal entities in order to promote their services.
The Central Bank of Cyprus is in charge with granting the licenses for banks wanting to operate in Cyprus. The process to obtain a banking license requires pre-application meetings, the actual application, the licensing and the authorization to start operating.The pre-application meetings will be held in order to obtain data about the application process and the documents to be prepared. The application stage consists of submitting the Memorandum and Articles of Association and an application form that must contain the name of the management board, directors and managers of the institution, the source of funding that must be transparent and legitimate, the financial status of the owner, and a plan that states the business activities and the structure of the institution. However, if the Central Bank considers, other documents might be required. If no problems appears during the licensing process, the Central Bank will then issue the authorization and the bank is required to start operating within 12 months after the authorization.
If you want to open a financial institution or any other type of business you can contact our law firm in Cyprus for legal assistance.