Banking Law

INTRODUCTION – HISTORICAL HIGHLIGHTS

The first modern local banking institution was established in Cyprus as early as 1899, as a savings institution. From 1901 onwards, other saving banks followed suit.

During the colonial period, there was no detailed legislative or regulatory arrangement in the institutional financial set up of Cyprus, for the monetary and banking system. The monetary system was based on the sterling exchange standard and the issue of Cyprus notes was made upon the authority of the Commissioner of Currency, who was also the Accountant General. Until 1939, the only law affecting banking operations was the Company Law of 1922 which was a landmark in the development of the local banks because it allowed them to acquire limited liability status. In 1939, the Banking Business (Temporary Restriction) Law was passed, under which a controller of banks was appointed and a licence was required in order to carry on banking business. Despite the existence of this law, there was no banking legislation in relation to minimum capital requirements, adequate publicity of formalities and retail operations, government's right of supervision and the banks were not subject to any credit control.

APPLICABLE LAW

Following independence, the banking sector in Cyprus recorded a very rapid development and the initial legislation affecting banks underwent various changes. In 1963, the Central Bank of Cyprus was established, under the Central Bank of Cyprus Law, empowered with authorities and responsibilities customarily assigned to all central banks. One of the primary objectives of the Central Bank was and is to ensure a safe and stable financial system that would preserve public confidence and foster monetary stability and growth. In order to satisfy this object, the Central Bank maintains an effective mechanism of bank regulation and supervision. In this regard, the recommendations of the Basle Committee on banking supervision and the EU directives on banking regulations provide guidance to the Central Bank.

The recommendations of the Basle Committee on banking supervision and the EU directives on banking regulations provide guidance to the Central Bank.

The legislation in relation to banking supervision in Cyprus are the following:

  • The Banking Laws of 1997 to 2005
  • Prevention and Suppression of Money Laundering Activities Law of 1996
  • The Investment Firms Laws of 2002 to 2005
  • The liberalisation of the Interest Rate and Related Matters Law No 60(I)/1999

Various other enactments exist that affect the operations of and the offering of services by the banks in Cyprus, such as the consumer credit law and the law in relation to guarantors.

WORK UNDERTAKEN BY OUR OFFICE

Decades of experience in banking litigation in relation to debts. We also offer advice on banking matters, such as drafting and advising on account opening documentation, loan agreements and security documentation, including charges over assets and undertakings of companies, pledge of shares, debentures, assignments, indemnities and guarantees, letters of guarantee, registration of charges, stamp duty issues, as well as on matters relating to electronic banking and institutions of electronic money.

Over recent years, our services in this area have expanded, and we now also provide legal opinions and carry out legal due diligence exercises on behalf of overseas banks, which either provide facilities or obtain securities from Cyprus registered companies.

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