In June the new Banking Law of Cyprus was passed by the House of Representatives. Its main aim is to harmonize the island's legislation with that of the EU, to regulate the banking system and give protection to depositors.
While the new law gives the Cyprus central bank wide-ranging powers, it also expressly provides that the bank, in exercising these powers, should consider the best interests of the depositors as well as the efficiency of the banking system in general.
Among the new provisions are the following:
- bank confidentiality becomes a matter of law;
- all banking operations will be regulated by the central bank, especially accepting deposits and providing loans;
- all banking activity will require the prior approval and permission of the central bank;
- banks established in Cyprus need the express approval of the central bank to establish foreign operations;
- the central bank will have the authority both to specify the types of services institutions will be allowed to offer and impose liquidity requirements at its discretion;
- the central bank is empowered to take action against parties violating the law;
- the central bank is empowered to draw up an investment protection scheme in the future through the enactment of specific laws for this purpose;
- banks are prohibited from carrying out a number of activities, including the purchase of immovable property, the purchase of more than 10% of the share capital of any company, and trading of any kind.
All licences granted to banks before the enactment of the new law will be considered licences granted under its provisions. Any bank carrying out activities before the new law comes into force, and which is in breach of the new provisions of the law, has a duty to inform the central bank of the situation and comply with any time limits imposed by the latter for rectifying this situation.