The Republic of Cyprus issued new decrees on 2 August 2013 pertaining to the relaxation of restrictive measures. Legal updates regarding these decrees, from Harneys' Cyprus Banking Group, are below.
Enforcement of Restrictive Measures on Transactions in case of Emergency Law of 2013-Decree No. 19
The Republic of Cyprus through its Minister of Finance published its 19th decree as per articles 4 and 5 of the Enforcement of Restrictive Measures on Transactions in case of Emergency Law of 2013 on Friday, 2 August 2013 (the “Decree”). The Decree further clarifies which restrictions are in place in relation to the use of credit and debit cards and other payment instruments including the amounts that can be withdrawn and/or transferred from such instruments. The Decree also contains a number of prohibitory measures relating to the termination of fixed term deposits which will not be analysed in this note. The Decree is in force for twenty eight days commencing on its publication date.
We set out below a summary of the restrictive measures and exceptions thereto.
The maximum amount of cash withdrawal should not exceed the daily allowance of €300 per natural person or €500 per legal person or an equivalent amount in foreign currency, per person in each credit institution. All cash withdrawals are calculated per person consolidating all accounts held by the said person in each credit institution.
Cashing of Cheques
The cashing of cheques is prohibited.
Cashless Payments and Transfers of Deposits/Funds
The following are permitted:
(a) The cashless payment or transfer of deposits/funds to accounts held in other credit institutions within Cyprus up to €15.000 per month per natural person in each credit institution regardless of the purpose;
(b) The cashless payment or transfer of deposits/funds to accounts held in other credit institutions within Cyprus up to €75.000 per month per legal person in each credit institution regardless of the purpose;
(c) A cashless payment or transfer of deposits/funds to accounts held in other credit institutions within Cyprus for the purchase of goods and or services up to €300.000, per transaction provided that the payment is not made from one credit institution to another into the person’s own account. The credit institution is authorised to request a justification for the contemplated transaction; and
(d) The cashless payment or transfer of deposits/funds to an account held in another credit institution within Cyprus for the purchase of goods and or services for an amount over €300.000 per transaction upon presentation of documents that justify such a transaction.
The Decree provides that cashless payments and/or transfers of deposits/funds to accounts held abroad are prohibited. This is however not an absolute prohibition so that the following exemptions apply:
(a) for transactions that fall within the normal business activity of the customer who may be required to provide documents justifying such transactions:
(i) payment and/or transfer of deposits/funds of up to €500.000 per transaction, is not subject to the Committee’s approval provided that the particular credit institution authorizing such a transaction has reviewed the necessary documents and reached a conclusion based on such documents that the transaction is justified;
(ii) payment and/or transfer of deposits/funds from €500.001 to €1.000.000 per transaction, is subject to the approval of the Committee. A request for payment or transfer will be made via electronic form by the credit institution based on the information provided by the customer. The Committee aims to make its decision within 24 hours and will take into account the liquidity position of the credit institution;
(iii) payment and/or transfer of deposits/funds above €1.000.000 per transaction, is subject to the Committee’s approval. The credit institution or payment institution is required to submit all of the relevant documents as well as the name of the involved credit institution and in providing its approval the Committee will take into account the liquidity position of the credit institution;
(b) payments made for salaries of employees upon the presentation of relevant supporting documents;
(c) living expenses of up to €5.000 per quarter as well as tuition fees, of a person who is studying abroad and is a first degree relative of a Cyprus resident. Supporting documents will need to be provided and the tuition fees must be paid only to the beneficiary educational institution. The credit institution will be required to maintain a record of all such transactions and to monitor these for any irregularities.
(d) transfers of deposits/funds outside of Cyprus not exceeding €5.000 per month, per person for each credit institution and/or payment institution regardless of the purpose.
Export of Euro Notes/Foreign Currency
The Decree provides some welcome relaxation of the amount of money in cash that can be taken out of Cyprus, in particular, exports of euro notes and/or foreign currency notes are prohibited in excess of €3.000 (the previous amount being €1.000 when the restrictive measures first came into force), or the equivalent in foreign currency, per natural person per journey abroad.
Opening of New Bank Accounts in Cyprus
The Decree does not lift the restrictions on opening of new bank accounts in Cyprus and provides that a new bank account for any customer who is not an existing customer of the particular credit institution on the date of issue of the 6th Decree which entered into force on 11 April 2013, may only be able to open a new bank account if:
(a) the account is only credited with funds transferred from abroad into Cyprus; or
(b) the prior approval of the Committee is obtained; or
(c) the account relates to a new fixed term deposit created with funds from cash provided that:
(i) the amount to be deposited exceeds €5.000;
(ii) the term of the new fixed term deposit is at least 3 months; and
(iii) the new fixed term deposit may not be terminated prior to its maturity; or
(d) the account relates to a new loan granted after the 2 August 2013 provided that:
(i) the account is used exclusively for the servicing of the loan; and
(ii) all deposits into the account are used exclusively for the servicing of the loan and may not be used for any other transactions.
The Decree does provide a number of general exemptions to the restrictive measures, which are as follows:
(a) all new funds transferred to the Republic from abroad provided that any re-transfers to a second credit institution in the Republic will only be exempt if the first credit institution that the new funds were transferred to states that the funds are already exempt;
(b) withdrawal of cash using credit and/or debit and/or prepaid cards issued by foreign institutions on accounts abroad;
(c) the cashing of cheques issued on accounts held with foreign institutions abroad;
(d) cash withdrawals from accounts of credit institutions with the Central Bank;
(e) payments and receipts of the Republic of Cyprus;
(f) payments and receipts of the Central Bank;
(g) the foreign diplomatic missions and the UN missions in Cyprus based on the exemptions specified in the Vienna Convention for Diplomatic Relations and the Agreements between the Republic and the United Nations and other international Agreements which have precedence over national legislation;
(h) the payments via a debit and or credit and or prepaid card; and
(i) transactions or payments that have been authorized by the Committee.
The Decree generally maintains the status quo of restrictions with minor relaxations and offers some allowance to the credit institutions to self-regulate some of the payments/transfers that would have previously been subject to the Committee’s approval.
Relaxation of Restrictive Measures for Branches and Subsidiaries of Foreign Banks (Decree No 10)
The Republic of Cyprus through its Minister of Finance published its tenth decree of the Enforcement of Temporary Restrictive Measures on Transactions of Foreign Banks in case of Emergency Law of 2013 as per articles 4 and 5 of the Enforcement of Temporary Restrictive Measures on Transactions in case of Emergency Law of 2013 (the “Law”) on Friday, 2 August 2013 (the “Decree”). The Decree allows for foreign credit institutions and their customers to enjoy relaxed restrictions subject to certain conditions. Eligible credit institutions are entered into a catalogue and published in the Official Gazette of the Republic. The Decree is in force for 28 days commencing on its publication date.
We set out below a summary of the various provisions of the Decree.
In order for a credit institution to be included in the catalogue to be compiled by the Central Bank of Cyprus, it must apply to the Central Bank of Cyprus. The Governor of the Central Bank must be satisfied that all of the following conditions are met:
The credit institution is a branch or a more than 50 per cent subsidiary of a foreign bank.
The credit institution for the purpose of giving effect to this Decree internally splits into two operations: one dealing with international customers and the other with domestic customers.
An international customer is a customer who is (a) a non – resident of Cyprus or (b) a corporation, trust, partnership or legal entity, whereby 100 per cent of the ultimate beneficial owners thereof are non resident natural persons or a company listed on a recognised exchange, outside the Republic and provided that any such company is not listed in the Cyprus Stock Exchange or (c) a corporation, trust, partnership or legal entity, whereby more than 90 per cent of the ultimate beneficial owners thereof are non resident natural persons and the rest 10 per cent of the ultimate beneficial owners that are resident natural persons are not citizens of Cyprus; provided that the Committee’s approval has been obtained prior to the inclusion of such a customer in the list of international customers. A domestic customer is a customer other than an international customer.
In the case of a subsidiary of a foreign bank:
i. a letter of comfort is provided to the Central Bank of Cyprus from the parent bank of the credit institution confirming that, as long as this Decree is in force, it will always support the liquidity position of the subsidiary in the Republic so that the subsidiary in the Republic will not request Emergency Liquidity Assistance from the Central Bank of Cyprus or liquidity from Eurosystem credit operations;
ii. a standby credit facility is provided to the subsidiary by the parent bank for an amount of at least equal to 30 per cent of customer deposits;
iii. the ratio of liquid assets to total customer deposits will not be lower than 60 per cent.
With respect to liened (blocked funds) held as collateral for credit facilities granted, the lower between the liened (blocked) funds and outstanding credit facility balance shall be excluded from the total customer deposits mentioned in (ii) and (iii).
A list of the international customers is submitted to the Central Bank of Cyprus in a standardised electronic template in a format specified by the Central Bank of Cyprus with written confirmation from the credit institution that all the persons included in the list of international customers are international customers as defined above.
The Central Bank of Cyprus, if it deems necessary, may request the External Auditors of the credit institution to confirm in writing that the credit institution meets all the conditions of this section.
The credit institution, once entered into the catalogue, must report to the Central Bank of Cyprus any change and submit electronic reports of the credit institution’s weekly transactions.
The Central Bank of Cyprus is responsible for monitoring the continuous fulfilment of the above conditions and report to the Finance Minister any change that may need to be made to the catalogue.
The following are permitted transactions in respect of credit institutions entered on the catalogue and are not subject to any restrictive measure imposed under any other Decree issued under the Law:
All cashless payments or transfers of deposits/funds from a credit institution that is included in the catalogue, for its own account or by the order of an international customer.
All transactions between a credit institution that is included in the catalogue and an international customer.
All transactions between international customers.
All transactions between a credit institution that is included in the catalogue, by the order of an international customer or for their own account, and an entity outside the Republic.
The following restrictive measures are imposed on credit institutions that have been entered into the catalogue:
All cashless payments or transfers of deposits/funds from a credit institution that is not included in the catalogue to an international customer of a credit institution included in the catalogue or to such a credit institution’s own account are considered as cashless payments or transfers of deposits/funds to accounts held abroad and are subject to the provisions of any other Decree issued under the Law.
All cashless payments or transfers of deposits/funds from a domestic customer to an international customer of a credit institution included in the catalogue or to such a credit institution’s own account are considered as cashless payments or transfers of deposits/funds to accounts held abroad and are subject to the provisions of any other Decree issued under the Law.
Credit institutions that are included in the catalogue are prohibited from servicing domestic customers that maintain accounts with their Head Office or soliciting and obtaining new business from domestic customers or opening new accounts for domestic customers who were not existing customers of the said credit institutions on 25 April 2013.
All domestic customers are also subject to the restrictive measures imposed by any other Decree issued under the Law.
Any accounts held by international customers that have been credited with funds from accounts of domestic customers and with funds from domestic banks since the entry into force of the Enforcement of Temporary Restrictive Measures on Transactions in case of Emergency First Decree, i.e. 27 March 2013, until the date that the relevant credit institution is included in the catalogue, shall be subject to the restrictive measures contained in any other Decree issued under the Law.
Abolition of ninth Decree
The ninth decree of the Enforcement of Temporary Restrictive Measures on Transactions of Foreign Banks in case of Emergency Law of 2013 is abolished.
The abolition does not:restore anything that was not in force or in existence at the time of abolition; and
affect the previous effect of the abolished Decree or anything that was concluded normally or was allowed under the said Decree; and
affect any right, privilege, obligation or responsibility, which is obtained, derived or resulting from the abolished Decree; and
affect any penalty, confiscation or punishment, which resulted in relation to a crime committed under the abolished Decree; and
affect any investigation, legal proceedings or remedy, in relation to any right, privilege, obligation, responsibility, confiscation or punishment as mentioned above
And such investigation, legal proceedings or remedy may be initiated, carried on or fulfilled, and such penalty, confiscation or punishment may be imposed as if the Decree had not been abolished.
Catalogue of Credit Institutions
1. Arab Jordan Investment Bank SA
2. Bank of Beirut SAL
3. BankMed SAL
4. Banque BEMO SAL
5. Banque SBA
6. Barclays Bank PLC
7. BBAC SAL
8. BLOM Bank SAL
9. Byblos Bank SAL
10. Credit Libanais SAL
11. Jordan Ahli Bank plc
12. Lebanon and Gulf Bank SAL
13. OJSC Promsvyazbank
14. Open joint-stock company AvtoVAZbank
15. Privatbank Commercial Bank
16. Russian Commercial Bank (Cyprus) Ltd.