The Central Bank of Cyprus has drafted a bill containing provisions for the harmonization of the Cyprus banking system with that of the EU, and the establishment of a unified framework for the effective operation of banking transactions. It is expected that the bill will be passed by the Cyprus parliament in early 1997.
The draft bill includes provisions for the definition of what constitutes 'banking business' (a term never before defined in any existing banking legislation in Cyprus) and regulates common banking practices such as investment funds, credit facilities, minimum participation in the share capital of banking institutions, maintenance of minimum capital, ratios of insolvency and minimum liquidity, and depositors' guarantees.
Particular attention has been paid in the provisions of the draft bill to banking privilege, which prohibits any banking official (either during or on termination of his employment with the bank) from disclosing and/or using any information in respect of the bank's clients' accounts, except where:
- the client has provided express authorization;
- the client is bankrupt or, if the client is a company, has gone into liquidation;
- legal proceedings have been issued by the bank against the client;
- the information is required to be disclosed to the police in accordance with any laws now in force; and
- the bank is served with a court order relating to the funds held in the clients' accounts.
It is a generally held view that the banking institutions must bear the responsibility for implementing the provisions of the new Bill, once enacted, and continue their efforts towards the modernization and upgrading of the Cyprus banking system to accord with EU standards.