The Central Bank favours applications by existing foreign incorporated banks for the establishment of branches, as opposed to locally incorporated banking subsidiaries or associated companies. Applicants are expected to enjoy a good reputation internationally and have an established track record of growth and profitable operations.
International Banking Units (IBUs) are required to operate as fully staffed units and not merely as "brass plate" or "managed bank" entities. They also have to pay an annual fee of USD15.000 to the Central Bank as reimbursement of the latter's cost of supervision. International banking licences are subject to certain conditions which depend on a number of factors, including the IBU's legal form (ie branch or subsidiary) and the applicant bank's financial standing and international reputation. In the case of branches there is no assigned capital requirement whereas for locally incorporated IBUs the Central Bank would, as a rough guide, expect a minimum paid up capital of USD5 million.
All IBUs are exempt from most of the monetary policy and credit regulations applicable to local banks, such as the minimum reserve requirement, adherence to maximum interest rates, restrictions on the holding of foreign assets or investments in shares and immovable property. Ratios such as liquidity and capital to risk assets are applicable only to locally incorporated IBUs.
Applications for the establishment of an IBU must be made in writing to the Controller of Banks ie the Governor of the Central Bank of Cyprus. Details regarding the information and documents which need to be submitted with an application can be obtained directly from the International Banking and Financial Services Section, Central Bank of Cyprus.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances from a local lawyer or accountant.
