Business of Credit Institutions
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Know the numbers? Now learn the why.Read the Business of Credit Institutions study notes: short answers, key numbers and the law behind each rule.
- Who supervises Cypriot banks, and how does the CBC work with other supervisors?
- How does the CBC review and inspect banks, and what must it keep secret?
- When does a change in a bank's business or ownership need clearance?
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Supervision
- Which authority prudentially supervises authorised credit institutions (ACIs) in Cyprus?
- Exam material: the Central Bank of Cyprus (CBC); CySEC supervises investment firms (CIFs). Since 4 November 2014: under the Single Supervisory Mechanism, the ECB decides on licences and qualifying holdings for all Cyprus-incorporated banks and directly supervises the significant ones; the CBC, still the national competent authority, supervises the others and the Cyprus branches of third-country banks.
- How does the CBC determine the intensity of its supervisory reviews, and how often?
- By the ACI's size and systemic importance and the nature, scale and complexity of its activities (proportionality); the review covers interest-rate risk outside the trading book (the banking book). Exam material: reviews at least annually. Since 30 January 2015: a yearly update only for ACIs in the CBC's supervisory examination programme; otherwise frequency follows risk.
- What information is off-limits to the CBC during an ACI inspection?
- The personal correspondence of employees and associates. The CBC's broad rights cover business books, records, accounts and documents — but not private communications.
Acquisitions & mergers
- What must an ACI do before disposing of its business by sale or merger?
- Obtain prior written approval from the CBC. Shareholder votes or public announcements do not substitute for this regulatory approval.
- Which shareholding thresholds trigger a mandatory CBC notification for acquiring an interest in an ACI?
- Exam material: written notice to the CBC, and its approval, before an increase that reaches or passes 20%, 30% or 50% or makes the ACI a subsidiary. The Law also requires notice before a first qualifying holding (10% or more of the capital or voting rights, or significant influence); a rise that crosses none of these needs no notice. Since 4 November 2014: the ECB decides on the CBC's draft, and an acquisition not opposed within the assessment period is deemed approved.
- How long is the CBC's assessment period for a proposed ACI acquisition, and how may it pause?
- At most 60 working days from the CBC's written acknowledgement of a complete notification, which it gives within 2 working days. Until the 50th working day the CBC may ask in writing for more information; the first request suspends the period for up to 20 working days. Exam material: 30 only for an acquirer that is both outside the EU and unsupervised. Since 30 January 2015: either ground is enough: situated or regulated in a third country, or not supervised under the EU rules for banks, insurers, investment firms or UCITS.
- What happens if the CBC does not act on a proposed ACI acquisition within the assessment period?
- Silence equals consent — the acquisition is deemed approved. If the CBC opposes, it must inform the acquirer within two working days of the decision and before the period ends.
Capital & reporting
- What is the minimum capital of an ACI incorporated in Cyprus?
- Exam material: €5 million, which the CBC may raise. Since 30 January 2015: €5,000,000 is the initial capital needed for a licence (€1,000,000 for special categories). After that the CRR applies: CET1 4.5%, Tier 1 6% and total capital 8% of the total risk exposure amount, and a 3% leverage ratio since 28 June 2021, plus any additional own funds set after the supervisory review (by the ECB for a significant bank) and justified in writing.
- What are the ACI deadlines for filing audited accounts with the CBC versus publishing them?
- Audited annual accounts must be submitted to the CBC within four months of year end; the balance sheet, P&L and auditor's report must be published within six months.
- How often must an ACI report its assets and liabilities to the CBC?
- A certified statement of assets and liabilities must be submitted within 15 days of each month end, giving the CBC near-real-time visibility.
Intervention powers
- What must happen when the CBC demands that an ACI increase its share capital?
- Exam material: the ACI submits a recovery plan with a timetable, convenes an extraordinary general meeting (EGM) and informs the Registrar of Companies. Since 22 March 2013 (the Law): the first step comes within 3 days of the decision: the ACI tells the CBC the measures it will take and files a timetable for approval (a statement of measures, not a recovery plan). The board then convenes the EGM at a time the CBC decides, with notice to shareholders within 3 days, and the Registrar is notified within 7 days of the resolution. Each board member who fails to convene the EGM or notify the Registrar faces a fine of up to €100,000.
- What triggers system-wide CBC special measures, and what governance action can the CBC take on solvency doubts?
- Exam material: one ACI's economic value falling by more than 20% of own capital after a sudden rate change brings special measures for all ACIs. The Law (since 25 July 2008): nothing is system-wide; the CBC takes measures for the ACI whose value falls, after a shock of a size it sets for all ACIs. Since 7 May 2021: the EU outlier tests also apply: economic value of equity down more than 15% of Tier 1, or net interest income down more than 5% of Tier 1 (a figure set from 14 May 2024). Where an ACI may be unable to meet its obligations promptly, the CBC (the ECB for a significant bank) may require the removal of any board member (the chair included), the managing director or any manager; replacements need prior approval.