CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Anna Borovska and Constantinos Kazamias, Scordis, Papapetrou & Co LLC
Moreover, CySEC has reinstated its mission to nurture compliance with sustainable finance standards. As a result, the discussion around ESG in Cyprus has increased significantly, with the financial regulators, financial services organisations, banks and invest- ment funds preparing to conform with the above EU directives, in addition to applying effective proce- dures, but such interest is primarily limited to larger (mostly listed) companies and banks. As an example, one of the larger local banks has already received an “A” rating from the Morgan Stan- ley Capital International (MSCI), the global benchmark on ESG. The industries/sectors which are moving faster towards sustainability appear to be the ones which comprise of regulated entities such as banking, insur- ance companies and funds. In recent times, however, privately held companies have joined the movement towards ESG performance. 2. Authorisation 2.1 Providing Financing to a Company Under the Business of Credit Institutions Law of 1997 (66 (I)/1997), as amended (the “Credit Business Law”), banks require a licence to conduct banking services. The application for obtaining a banking licence should be made in writing by or on behalf of the applicant to the CBC and no application fee is payable. Such application form must be accompanied by a business plan describing the types of activities envisioned and the organisational framework intended. In addition, relevant questionnaires which are issued by the CBC for the licensing of banks in the Republic of Cyprus need to be appropriately completed and in general the CBC can request additional details prior to deciding whether to approve the application. In order to be granted a banking business licence, the applicant must be either a legal person set up in Cyprus under the Companies Law, Chapter 113 (the “Companies Law”) as amended, or a credit institu- tion established and approved in its relevant country.
If the applicant is not an existing EU credit institu- tion, it must have initial capital of at least EUR5 mil- lion (meeting the capital requirements as set out in EU Regulation 575/2013 on prudential requirements for credit institutions and investment firms), although there may be specific situations where the CBC will consider allowing for a smaller initial capital). Although the process is managed by the CBC, the ultimate decision-making powers on whether to grant The aforementioned criteria do not apply to EU credit institutions wishing to establish a branch in Cyprus, since credit institutions licensed by competent authorities of another EU member state may, under the provisions of Section 10A of the Credit Business Law, establish a branch in Cyprus without the need to obtain a banking business licence from the CBC. With regard to non-banks, the Investment Services and the Exercise of Investment Activities, the opera- tion of Regulated Markets Law and other related mat- ters (87 (I)/2017), as amended, provides guidance as to the corporations and institutions capable of pro- viding financial services. Such non-banks include any licensed Cyprus Investment Firms (CIFs), which require the prior approval and authorisation of CySEC. The requirements for a CIF depend on the specific type of investment and financial services provided by such company. An investment firm originating from another member state or a third country is able to provide such services in Cyprus through its branch, provided it is authorised and overseen by a competent authority in that mem- ber state or third country and it complies with all the disclosure requirements of CySEC. relevant authorisation vest with the ECB. EU Credit Institutions and Non-Banks Finally, it is noted that private lending (eg, peer-to-peer or similar) or cross-border lending does not fall within the above framework, but under general principles of commercial law.
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