The bill provides for the amendment of article 16A of the Operations of Credit Institutions Act, which has been in force since it was published in the Republic of Cyprus’ Government Gazette on January 30 this year.

The bill brings national line in line with the EU directive relating to the operations of credit institutions and the supervision of credit institutions and investment companies.

In an explanatory note, accompanying the bill, Attorney-general Costas Clerides said the provision in question seems to contravene the Treaty on the Functioning of the EU (TFEU), since it essentially restricts free movement of capital, free provision of services and free competition within the EU.

At the same time it seems to be contrary to the principle of equal treatment of other EU credit institutions and those of the Republic of Cyprus.

The same applies for other credit institutions operating in the Republic.

The provision does not take into consideration that there are international banks operating in Cyprus, which trade extensively with their parent credit institutions and other banks abroad. It includes the transfer of loans to their parent credit institutions, an act that has now become illegal.

Problems also arise for credit facilities granted by these foreign banks to their customers whose economic activities are abroad and who are not residents of Cyprus.

According to the Ministry of Finance, until a legislative document regulating the sale of credit institutions’ loan portfolios is drafted, it is necessary that the amending bill be approved to put an end to the violation of the acquis communautaire and enable foreign banks in Cyprus to continue their usual activities with their parent credit institutions and other banks abroad.

Source: Cyprus Mail