CYPRUS Law and Practice Contributed by: Thanasis Korfiotis, Loizos Papacharalambous, Eleni Korfiotis and Georgia Charalambous, Koushos Korfiotis Papacharalambous LLC
question the conditions for authorisation of the servicer or govern the activities of the servicer; (b) affect the continuous and proper func - tioning of the SSPE; and/or (c) lead to refusal to certify the accounts, or to the expression of reservations or qualified or adverse opinion in his or her report for the servicer – the auditor carries out such notification simultaneously with the management body of the SPE and the servicer, as long as there are no compel - ling reasons to the contrary. 4.9 Banks Securitising Financial Assets There are no principal laws or regulations that regulate the securitisation of financial assets by banks, other than the laws identified in 1.3 Appli- cable Laws and Regulations . Importantly, and irrespective of a bank’s support in a securitisa - tion, banks shall continue to comply with their obligations under the Business of Credit Institu - tion Law (the “BCI Law”), which is the domestic law that transposes Regulation (EU) 575/2013 (the “Capital Requirements Regulation” (CRR)) and Directive (EU) 2013/36 (the “Capital Require - ments Directive” (CRD)) into Cypriot law. In that respect, under the BCI Law: • the CBC (as defined in 4.1 Specific Disclo - sure Laws or Regulations ) determines the level of liquidity requirements necessary to capture liquidity risks to which a bank is, or might be, exposed on the basis of, among other things, a review and evaluation carried out in accordance with Annex III, which cov - ers the extent to which the funds held by the bank in respect of assets that it has securi - tised are adequate in regard to the economic substance of the transaction, including the degree of risk transfer achieved – further -
more, if a bank is found to have provided implicit support to a securitisation on more than one occasion, the CBC shall take appro - priate measures reflective of the increased expectation that it will provide future support to the securitisation, thus failing to achieve a significant transfer of risk; and • the CBC may impose sanctions where a bank is exposed to the credit risk of a securitisa - tion position without satisfying the conditions set out in Article 405 of Regulation (EU) No 575/2013 (noting that the requirements on risk retention that were laid down in Article 405 of Regulation (EU) No 575/2013 are now laid down in Article 6 of Regulation (EU) 2017/2402, as explained in the Commission Delegated Regulation (EU) 2023/2175). 4.10 SPEs or Other Entities An entity that is entitled to lawfully act as a secu - ritisation special purpose entity (SPE; as defined in 6.1 Insolvency Laws ) in compliance with the Securitisation Law is a person who: • is established as a limited liability company, trust or other legal entity for the purpose of taking on one or more securitisations; and • has activities limited to those necessary for the achievement of this purpose, and a structure or contractual provisions that are intended to separate the obligations of the SPE from those of the originator (the SPE does not include the originator). 4.11 Activities Avoided by SPEs or Other Securitisation Entities Concerning whether there any activities that SPEs or other securitisation entities try to avoid in order not to be regulated in certain ways, please refer to 4.10 SPEs or Other Entities .
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