CYPRUS Law and Practice Contributed by: Marcos Georgiades, Dominique Pelides and Panayiota Elia, Georgiades & Pelides
The recovery and resolution regime for banks is based on: • Regulation (EU) 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit insti - tutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund (the “Resolution Regulation”); and • the Resolution of Credit Institutions and Investment Firms Law of 2016, Law No 22(I)/2016 (the “Resolution Law”), which implements the provisions of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms. The Resolution Regulation establishes the Single Resolution Board, which is responsible for draw - ing up the resolution plans and adopting all deci - sions relating to resolution for, among others, the entities referred to in Article 2 of the Resolu - tion Regulation (including banks established in Cyprus) that are not part of a group, and groups considered “significant” under Article 6(4) of Regulation (EU) 1024/2013. Resolution Regime Resolution authority In relation to other entities and groups (ie, those not listed in Article 7(2) of the Resolution Regu - lation), the CBC in its capacity as the Resolu - tion Authority is responsible for, among other matters, adopting resolution decisions and applying resolution tools in accordance with the provisions of the Resolution Law (unless the Resolution Board decides, under the Resolu - tion Regulation, to exercise the relevant pow - ers in relation to any such entity or group). The
Resolution Law applies to banks established in Cyprus and, subject to the conditions set out in the Resolution Law, to branches of banks of third countries established in Cyprus. The Resolution Authority must obtain the approv - al of the Minister of Finance before it implements decisions that have a direct financial impact or systemic consequences. Resolution action The Resolution Authority takes action for the resolution of a bank only if it considers that the following conditions are met: • the CBC considers, after consultation with the ECB, that the bank is insolvent or is likely to become insolvent; • there is no reasonable prospect that any alternative private sector measures or super - visory action taken in respect of the bank would prevent the bank’s insolvency within a reasonable timeframe; and • a resolution action is necessary for the public interest. Resolution tools The resolution tools under the Resolution Law are as follows:
• sale of business tool; • bridge institution tool; • asset separation tool; and • bail-in tool.
The Resolution Authority can apply the reso - lution tools individually or in any combination, except that the asset separation tool can only be applied together with another resolution tool.
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