CYPRUS Law and Practice Contributed by: Marcos Georgiades, Dominique Pelides and Panayiota Elia, Georgiades & Pelides
When calculating the amount of compensa - tion payable to a depositor, the deposits are set off with all kinds of counterclaims the bank has against the depositor, provided and to the extent that these have become due before or on the date on which the deposits became unavail - able, and provided further that such set-off is permitted in accordance with the statutory and contractual provisions that govern the contract between the bank and the depositor. Funding of the DGS Membership in the DGS is obligatory for all banks licensed in Cyprus, including branches of Cypriot banks that operate in other Member States. The Committee may, in its discretion and subject to the provisions of the Deposit Guar - antee Regulations, exclude from membership in the DGS a branch of a Cypriot bank that oper - ates in a country other than a Member State and a branch of a bank that operates in Cyprus but whose head office is outside the European Union. The DGS is primarily funded from contributions from its members. Every bank that receives a licence in Cyprus must pay an initial contribu - tion to the Deposit Guarantee Fund (currently amounting to EUR50,000) and then an annual contribution (calculated based on the covered deposits and the risk profile of each member). In cases where the available financial means of the DGS are insufficient to repay depositors when deposits become unavailable, the mem - bers are also required to pay extraordinary con - tributions not exceeding 0.5% of their covered deposits per calendar year. Higher contributions may be required in exceptional circumstances. The DGS is also allowed to obtain financing from loans or other means of support from third par -
ties, and from the liquidation of assets or invest - ments.
7. Prudential Regime 7.1 Capital, Liquidity and Related Risk Control Requirements Implementation of Basel III The Basel III standards developed by the Basel Committee on Banking Supervision have been implemented by the CRR (which is directly applicable in Cyprus) and Directive 2013/36/EU of the European Parliament and of the Coun - cil of 26 June 2013 on access to the activity of credit institutions and the prudential supervi - sion of credit institutions and investment firms (as amended) (“CRD”), which has been imple - mented in Cyprus by statute. Risk Management Rules The Banking Law requires each bank to have effective processes to identify, manage, moni - tor and report the risks to which it is or may be exposed and adequate internal control mech - anisms, including sound administration and accounting procedures and remuneration poli - cies and practices, that are consistent with and promote sound and effective risk management. Banks incorporated in Cyprus are also required to have sound, effective and comprehensive strategies and processes to assess and maintain on a continuous basis the amounts, composi - tion and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or may be exposed. The Governance Directives set out the following risk management rules for banks, among others:
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