Download central bank of cyprus banking supervision and regulation division

CENTRAL BANK OF CYPRUS
BANKING SUPERVISION AND
REGULATION DIVISION
DIRECTIVE CONCERNING THE FREEDOM OF
ESTABLISHMENT AND THE FREEDOM TO PROVIDE
SERVICES OF FINANCIAL INSTITUTIONS
DIRECTIVE CONCERNING THE FREEDOM OF ESTABLISHMENT AND THE
FREEDOM TO PROVIDE SERVICES OF FINANCIAL INSTITUTIONS
1.
The Central Bank of Cyprus issues the present directive by virtue of the powers
vested to it under section 10A and subject to the provisions of section 41(2) of the
Banking Law.
The present directive applies to financial institutions incorporated in other
member states of the European Union and concerns the freedom of
establishment and the freedom to provide services of these institutions.
The present directive shall come into effect on the date of accession of the
Republic of Cyprus to the European Union.
2.
A legal person which is a subsidiary of a bank and is licensed in another member
state of the European Union to carry out functions which are integral to or closely
related to banking business as defined in subsection 13(3) of the Banking Law,
may carry on its activities within the territory of the Republic of Cyprus, in
accordance with sections 10A and 10B of the Banking Law, either by the
establishment of a branch or by way of the provision of services on a crossborder basis, provided that the memorandum and articles of association of the
subsidiary of the bank permit the carrying on of these activities and the subsidiary
fulfils each of the following conditions:
-
the holding company must be licensed as a bank in the member state by
the law of which the subsidiary is governed,
-
the activities in question must actually be carried on within the territory of
the same member state,
-
the holding company must hold 90% or more of the voting rights attaching
to shares in the capital of the subsidiary,
-
the holding company must satisfy the Central Bank regarding the prudent
management of the subsidiary and must have declared, with the consent
of competent supervisory authority of the member state which licensed the
bank (holding company), that it guarantees the commitments entered into
by the subsidiary,
1
-
the subsidiary must be effectively included, for the activities in question in
particular, in the consolidated supervision of the holding company in
accordance with the provisions of the European Union directives, in
particular for the calculation of the capital adequacy ratio, for the control of
large exposures and for purposes of limitation of holdings.
3.
Compliance with these conditions must be verified by the competent supervisory
authority which licensed the bank (holding company) and this authority must
supply the subsidiary with a certificate of compliance which must form part of the
notification referred to in section 10A of the Banking Law.
4.
The competent supervisory authority which licensed the bank (holding company)
shall ensure the supervision of the subsidiary in accordance with the provisions of
the European Union directives.
5.
The competent supervisory authority which licensed the bank (holding company)
shall also communicate to the Central Bank the capital base (own funds) of the
subsidiary and the consolidated capital adequacy ratio of the bank which is its
holding company.
6.
If the subsidiary eligible under this directive should cease to fulfil any of the
conditions imposed, the competent supervisory authority which licensed the bank
(holding company) shall notify the Central Bank and the activities carried on by
the subsidiary institution in the Republic of Cyprus become subject to the
legislation of the Republic.
2