When does a change in a bank's business or ownership need clearance?

An ACI incorporated in Cyprus may not sell or otherwise dispose of all or part of its business, by merger or in any other way, without the CBC's prior written approval, which may carry conditions. This applies to any merger, wherever the other party is based. As the exam material says, the Law applies the same rule to the Cyprus business of an ACI incorporated abroad. Such an ACI can only be a third-country bank's branch, so an EU bank's branch is not caught.

Closing a branch needs notice, not approval. A third-country bank closing its Cyprus branch, or a Cypriot ACI closing a branch abroad, gives the CBC three months' prior written notice, or less if the CBC allows. An EU bank's branch is not an ACI, and the Law does not require the CBC's approval for it to close.

A person who has decided, alone or in concert with others, to acquire a qualifying holding in an ACI incorporated in Cyprus, directly or indirectly, or to increase one so that it reaches or passes 20%, 30% or 50%, or makes the ACI its subsidiary, must first notify the CBC in writing, giving the size of the intended holding and the information on the CBC's published list. The acquisition may go ahead only if it is not opposed.

The exam material lists the acquirer's associates, such as a spouse, first-degree relatives, partners, controlled companies and, for a company, its directors and subsidiaries. Since 30 January 2015, when that list was repealed, the Law has asked instead whether the acquirer acts alone or in concert.

The exam material also presents the CBC as the authority that approves or opposes. Since 4 November 2014, under the SSM, the ECB decides on every acquisition of a qualifying holding in a euro-area bank. The CBC receives the notification, informs the ECB, assesses the proposal and sends a draft decision. The ECB hears the acquirer before opposing or attaching conditions.

The criteria are the acquirer's reputation and financial soundness; the reputation, knowledge, skills and experience of anyone who will direct the ACI; whether the ACI will keep meeting prudential requirements and can be supervised effectively within its group; and whether there are reasonable grounds to suspect money laundering or terrorist financing (What is money laundering?). Opposition must rest on these criteria or on incomplete information, and no economic-needs test is allowed.

The CBC acknowledges the notification in writing within 2 working days and says when the assessment period ends, at most 60 working days after it acknowledges a complete notification. Until the 50th working day, it may ask in writing for more information. The first request suspends the period until the reply arrives, for at most 20 working days; later requests do not. The suspension may be extended to 30 working days if the acquirer is situated or regulated in a third country, or is not supervised under the EU rules for banks, insurers, investment firms or UCITS. The exam material requires both conditions, as the Law did from July 2009. Since 30 January 2015, either one has been enough.

An opposition is sent in writing, with reasons, within 2 working days of completing the assessment and before the period ends, and the reasons may be published. If the acquisition is not opposed within the assessment period, it is deemed approved.

Disposing of a qualifying holding, or reducing it below the thresholds, also needs advance written notice to the CBC. The ACI reports threshold crossings it learns of, and a listed ACI reports its qualifying shareholders and their holdings at least yearly.

Acquiring without notice or despite opposition can lead to a fine of up to €1,000,000 per breach, plus €200 to €100,000 a day while it continues. Other measures include a public statement; an order to stop; voiding any sale or transfer of the shares; bans on acquiring shares by gift or through purchase rights, and on payments arising from the shares except in a winding up; fines of up to 10% of a legal person's annual net turnover, €5,000,000 for an individual or twice the gain; and suspension of voting rights. For a company acquirer, fines can reach the board members and managers at fault. Liquidating the ACI is not among the measures.