What this chapter covers
The Business of Credit Institutions Law, Law 66(I)/1997, governs banking in Cyprus: who may take deposits, licensing, ownership, supervision, capital and reporting. Since 4 November 2014 the ECB has decided on the licences of Cyprus-incorporated banks and supervised the significant ones directly, while the Central Bank of Cyprus supervises the others and the Cyprus branches of banks from outside the EU and EEA. The first notes cover the Law, the supervisors and how they cooperate, and how banks are reviewed and inspected.
The middle notes deal with changes in a bank's business or ownership, which need clearance in advance, and with the powers the supervisor can use when a bank breaks the rules or runs into trouble. The last note covers initial capital, the CRR ratios that now apply, and the returns and accounts a bank must submit and publish.
Much of the exam material predates the CRD IV reforms of 30 January 2015 and the single supervisory mechanism. It still teaches the CBC's own minimum capital and capital-adequacy ratio, repealed on that date, and presents the CBC as the deciding body where the ECB now decides. Each note teaches what the exam tests and then the rule that applies today; CRD VI is not yet transposed in Cyprus.
The 5 topics
Each note starts with a short answer and a table of the facts to remember.
Framework and supervision
- Who supervises Cypriot banks, and how does the CBC work with other supervisors?What the Law covers, who may take deposits and use the word 'bank', the ECB and CBC roles, and cooperation with other supervisors.8 min
- How does the CBC review and inspect banks, and what must it keep secret?EBA guidelines, access to records and premises, secrecy, how often a bank is reviewed, and the interest-rate shock tests.20%7 min
Owners and intervention
- When does a change in a bank's business or ownership need clearance?Selling or merging a bank's business, advance notice of holdings, the assessment, and the penalties for acting without clearance.10%, 20%, 30%, 50%60 working days8 min
- What can the CBC require of a bank that breaks the rules or runs into trouble?Licence conditions and remedial measures, the right to comment, capital-increase orders, recovery plans and fit-and-proper approval.At least 3 days€100,0009 min
The numbers to know
Every figure in this chapter, with the note that explains it.
| Figure | What it is | Note |
|---|---|---|
| 4 November 2014 | Start of the single supervisory mechanism: the ECB licenses Cyprus-incorporated banks and supervises the significant ones directly | Topic 1: Who supervises Cypriot banks, and how does the CBC work with other supervisors? |
| At least 3 days | Time a bank has to comment on the supervisor's report before licence conditions or remedial measures are imposed | Topic 4: What can the CBC require of a bank that breaks the rules or runs into trouble? |
| €5,000,000 | Minimum initial capital for a Cypriot credit institution to be licensed (€1,000,000 for special categories) | Topic 5: How much capital must a Cypriot bank hold, and what must it report and publish? |
| 4.5% · 6% · 8% | CET1, Tier 1 and total capital ratios under the CRR, as shares of the total risk exposure amount | Topic 5: How much capital must a Cypriot bank hold, and what must it report and publish? |
| 4 months | Deadline after year-end for sending the audited annual accounts to the CBC; a Cyprus-incorporated bank publishes them within 6 months | Topic 5: How much capital must a Cypriot bank hold, and what must it report and publish? |
| 15 days | Deadline for the certified monthly statement of assets and liabilities, unless the CBC sets another period | Topic 5: How much capital must a Cypriot bank hold, and what must it report and publish? |