Introduction The purpose of this note is to provide an update on the current position regarding the capital controls and restrictions as currently applicable in Cyprus. Following the bail-in of the two major Cypriot banking institutions and pursuant to articles 4 and 5 of the Enforcement of Temporary Restrictive Measures on Transactions in case of Emergency Law of 2013 (the “Restrictive Measures Law”) the Minister of Finance has issued two new decrees in the long line of decrees that have been issued since March 2013, namely the Enforcement of Temporary Restrictive Measures on Transactions in case of Emergency Twenty Seventh Decree (the “Domestic Banks Decree”) and the Enforcement of Temporary Restrictive Measures on Transactions of Foreign Banks in case of Emergency Eighteenth Decree (the “Foreign Banks Decree”). Domestic and foreign banks are not treated in the same manner as it was not deemed necessary to impose the same restrictions on all credit institutions. Both decrees came into force on the 24th February 2014 and will apply for a thirty five day period. Below is a summary of the main provisions of the respective decrees. 1. The Domestic Banks Decree Cash Withdrawals The maximum amount of daily cash withdrawals in each credit institution, irrespective of the number of accounts held with the said credit institution is set at EUR300 per natural person and EUR500 per legal person. Cheques The cashing of cheques is prohibited. Cashless Payments and Transfers of Deposits/Funds a. To accounts held in Cyprus The maximum monthly allowance of cashless payments and transfers of deposits/funds to accounts held in other credit institutions within Cyprus is up to EUR20, 000 in each credit institution for natural persons and up to EUR100,000 per legal person regardless of the purpose. Additionally cashless payments and transfers of deposits/funds for the purchase of goods and or services is also permitted regardless of the amount, upon presentation of justifying documents and provided that such payment is not for a person’s own account.
b. To accounts held abroad Cashless payments and transfers of deposits/funds to accounts held abroad are prohibited subject to the following exceptions: (i) transactions that falls within the normal business activity of the customer upon presentation of justifying documents. Payment and or transfer of deposits/funds of up to €1.000.000 per transaction, is not subject to the Committee’s approval. For payment and or transfer of deposits/funds above €1.000.000 per transaction, the relevant credit institution must submit to the Committee a request as well as the necessary justifying documents. (ii) payments for salaries of employees upon presentation of supporting documents. (iii) living expenses up to €5.000 per quarter as well as tuition fees, of a person who is studying abroad and is a first degree relative of a Cyprus resident, on the basis of supporting documents. (iv) transfers of deposits/funds outside the Republic up to €5.000 per month, per person for each credit institution and or payment institution regardless of the purpose. Export of Euro Notes/Foreign Currency Exports of euro notes and/or foreign currency notes are prohibited in excess of €3.000 or the equivalent in foreign currency, per natural person per journey abroad. Opening of New Bank Accounts in Cyprus A new bank account for any customer who is not an existing customer of the particular credit institution on the date of issue of the 6th Decree which entered into force on 11 April 2013, is prohibited unless: (i) the account will only be credited with funds transferred from abroad; or (ii) the prior approval of the Committee is obtained; or (iii) the account is a new fixed term deposit created with funds from cash, the amount to be deposited exceeds €5.000, the term of the new fixed term deposit is at least 3 months, and the new fixed term deposit cannot be terminated prior to its maturity; or (iv) the account relates to a new loan granted after the 2 August 2013 provided that: a) the account is used exclusively for the servicing of the loan; and b) all deposits into the account are used exclusively for the servicing of the loan and may not be used for any other transactions.
General Exemptions The general exemptions to the restrictive measures are as follows: (a) all new funds transferred to the Republic from abroad provided that any re-transfers to a second credit institution in the Republic will only be exempt if the first credit institution that the new funds were transferred to states that the funds are already exempt; (b) withdrawal of cash using credit and/or debit and/or prepaid cards issued by foreign institutions on accounts abroad; (c) the cashing of cheques issued on accounts held with foreign institutions abroad; (d) cash withdrawals from accounts of credit institutions with the Central Bank; (e) payments and receipts of the Republic of Cyprus; (f) payments and receipts of the Central Bank; (g) the foreign diplomatic missions and the UN missions in Cyprus based on the exemptions specified in the Vienna Convention for Diplomatic Relations and the Agreements between the Republic and the United Nations and other international Agreements which have precedence over national legislation; (h) the payments via a debit and or credit and or prepaid card; and (i) transactions or payments that have been authorized by the Committee. 2. The Foreign Banks Decree Eligibility The Central Bank of Cyprus (the “CBC”) following application from the relevant credit institution, has compiled a catalogue of the credit institutions that are subject to the below restrictions. In order for a bank to be included in the catalogue the following conditions must be met: a. The credit institution is a branch or a more than 50 per cent subsidiary of a foreign bank. b. The credit institution internally splits into two operations, one dealing with international customers and the other with domestic customers.
An international customer is a customer who is (a) a non – resident of Cyprus or; (b) a corporation, trust, partnership or legal entity, whereby 100 per cent of the ultimate beneficial owners thereof are non-resident natural persons or a company listed on a recognised exchange, outside of Cyprus and provided that any such company is not listed in the Cyprus Stock Exchange or; (c) a corporation, trust, partnership or legal entity, whereby more than 90 per cent of the ultimate beneficial owners thereof are non-resident natural persons and the rest 10 per cent of the ultimate beneficial owners that are resident natural persons are not citizens of Cyprus. A list of the international customers is submitted to the CBC in a standardized electronic template with written confirmation from the credit institution that all the persons included in the list of international customers are international customers as defined above. The CBC, if it deems necessary, may request the External Auditors of the credit institution to confirm in writing that the credit institution meets all the conditions of this section. Permitted Transactions The following transactions are not subject to any restrictive measure imposed under any other decree issued under the Restrictive Measures Law: (i) All cashless payments or transfers of deposits/funds from a credit institution that is included in the catalogue, for its own account or by the order of an international customer. (ii) All transactions between a credit institution that is included in the catalogue and an international customer. (iii) All transactions between international customers. (iv) All transactions between a credit institution that is included in the catalogue, by the order of an international customer or for their own account, and an entity outside of Cyprus. Restrictive Measures (i) All cashless payments or transfers of deposits/funds from a credit institution that is not included in the catalogue to an international customer of a credit institution included in the catalogue or to such a credit institution’s own account are considered as cashless payments or transfers of deposits/funds to accounts held abroad and are subject to the provisions of any other decree issued under the Law. (ii) All cashless payments or transfers of deposits/funds from a domestic customer to an international customer of a credit institution included in the catalogue or to such a credit institution’s own account are considered as cashless payments or transfers of deposits/funds to accounts held abroad and are subject to the provisions of any other Decree issued under the Restrictive Measures Law. (iii) Credit institutions that are included in the catalogue are prohibited from servicing domestic customers that maintain accounts with their Head Office or soliciting and obtaining new business from domestic customers or opening new accounts for domestic customers who were not existing customers of the said credit institutions on 25 April 2013; unless the new account relates to a new loan, which is not financed by clients’ deposits, granted after 20 September 2013 provided that: a) the account is used exclusively for the servicing of the loan; and b) all deposits into the account are used exclusively for the servicing of the loan and may not be used for any other transactions. (iv) All domestic customers are also subject to the restrictive measures imposed by any other Decree issued under the Law. Any accounts held by international customers that have been credited with funds from accounts of domestic customers and with funds from domestic banks since the entry into force of the Enforcement of Temporary Restrictive Measures on Transactions in case of Emergency First Decree, i.e. 27 March 2013, until the date that the relevant credit institution is included in the catalogue, are be subject to the restrictive measures contained in any other decree issued under the Restrictive Measures Law. The capital controls and restrictive measures are constantly under review and it is expected that as time elapses the controls and restrictions will be eased with the intention that they shall be completely removed by the end of 2014.