Licensing & Supervision
In accordance with the provisions of the Payment Services Law, 2009-2010 (Payment Services Law, 2009 , Amendment of 2010) (hereinafter to be referred to as the «Law») which was enacted for the purposes of harmonisation with the act of the European Community entitled “Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007” on payment services in the internal market, payment services in the Republic of Cyprus may only be provided by a payment institution which has been granted an authorisation by the Central Bank of Cyprus («CBC»).
An authorisation for the operation of a payment institution is only granted to legal persons which have been incorporated and have their head office in the Republic. For the purpose of obtaining an authorisation as a payment institution, interested persons must submit an application to the CBC accompanied by the information and documents prescribed in paragraph 3 of the Payment Institutions and Access to the Payment Systems Directive of 2009 (P.I.395/2009) issued by the CBC by virtue of the powers vested in it under the Law. In the aforementioned Directive the CBC also defines, inter alia, the following:
- The amount of the initial capital as well as the amount of own funds that payment institutions are required to maintain
- The methods for safeguarding the funds received by payment institutions
- The delegation of operational functions to third parties
- The exercise of the freedom of establishment and the freedom to provide services in another EU member state
- The criteria which an agent of a payment institution must fulfil in order to be listed in the public register maintained by the Central Bank of Cyprus.
Notwithstanding the provisions of the Law concerning authorisations, the following persons may provide payment services in the Republic of Cyprus without obtaining the prior approval of the CBC:
- Banks licensed by the CBC or by a competent supervisory authority of another EU member state
- Cooperative societies which have been licensed by the Authority for the Supervision and Development of Cooperative Societies or by the competent supervisory authorities of other EU member states.
- Electronic money institutions which have been licensed by the CBC or by competent supervisory authorities of other E.U. member states
- Post office giro institutions which are entitled under national legislation to provide payment services
- The European Central Bank and national central banks when not acting in their capacity as monetary or other public authorities
- Member states or regional or local authorities when not acting in their capacity as public authorities
- Payment institutions that have been granted and maintain a valid authorisation to operate by the competent supervisory authorities of other EU member states. These institutions may either exercise the right of establishment or the right to provide services on a cross - border basis, provided that the competent authorities of the home member state submit to the CBC a notification in the manner prescribed by Directive 2009/64/EC.
In view of the need to safeguard the sound and prudent management of a payment institution, the CBC will grant an authorisation provided that it has been satisfied that the payment institution maintains an adequate organisational framework for its payment services business. This includes a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective procedures to identify, manage, monitor and report the risks to which it is or might be exposed, as well as adequate internal control mechanisms, including sound administrative and accounting procedures. Therefore, applicants must ensure that the arrangements, procedures and mechanisms described in their business plan are comprehensive and proportionate to the nature, scale and complexity of the payment services applied for.
For the sake of speed and convenience, legal persons interested in obtaining an authorisation for providing payment services, must complete and submit to the CBC the form «Application for authorisation as a Payment Institution” (PSD/Q1). To this end, applicants are urged to ensure that all required data and documents are included in their application before submitting it to the CBC, as incomplete applications will be returned.
Direct and indirect corporate controllers of an applicant as well as the members of the board of directors and the persons who will be responsible for the management of the applicant are required to complete and submit to the CBC one of the following questionnaires, as applicable:
Questionnaire PSD/Q2 should be completed by legal persons:
(a) which have/propose to have direct or indirect control in the applicant (the term «control» has the meaning ascribed to it by section 2 of the Banking Law, 1997 as subsequently amended), or
(b) which are partners in an applicant partnership within the meaning of the General and Limited Partnerships and Business Names Law.
Questionnaire PSD/Q3 should be completed by natural persons:
(a) who have/propose to have directly or indirectly control in the applicant,
(b) who are partners in an applicant partnership, within the meaning of the General and Limited Partnerships and Business Names Law and
(c) who are directors/proposed directors of the applicant as well as persons who will be responsible for the management of the applicant.
A payment institution established in the Republic of Cyprus, intending to provide payment services through an agent and/or to exercise the right of establishment or freedom to provide services in another EU member state and/or to have its operation authorisation extended to cover additional payment services, must complete and submit to the CBC one of the following documents, as applicable:
Application PSD/Q4 for the registration of an agent in the public register referred to in section 8 of the Law.
Notification PSD/Q5 for exercising the right of establishment in another EU member state in accordance with the provisions of article 23 of the Law.
Notification PSD/Q6 for exercising the right of freedom to provide services in another E.U. member state in accordance with the provisions of article 23 of the Law.
Application PSD/Q7 for variation of operation authorisation to cover additional payment services.
Finally, natural and legal persons who/which have been appointed to operate as agents in Cyprus of payment institutions licensed in other EU member states, must complete the following questionnaires as appropriate.
Questionnaire PSD/Q8 to be completed by natural persons appointed as agents in Cyprus of payment institutions licensed in other EU member states.
Questionnaire PSD/Q9 to be completed by legal persons appointed as agents in Cyprus of payment institutions licensed in other EU member states. The Appendix of this questionnaire must be completed by natural persons who are directors in the legal person and/or holders of 10% or more of its share capital.
Register of payment institutions
The CBC, acting in accordance with the provisions of the article 8 of the Law, maintains a public register which includes:
- the names of the payment institutions to which it has granted authorisation to offer payment services, the addresses of their branches as well as the names and addresses of their agents
- the names and addresses of the payment institutions which have been authorised in other EU member states and which have exercised the right of establishment or the right of freedom to provide services in the Republic of Cyprus, under the provisions of article 23 of the Law.
The CBC is responsible for the supervision and compliance with the provisions of the Law of all payment institutions which have been authorised by it. In addition, the CBC is responsible for the supervision of certain operational functions of banks, payment institutions and electronic money institutions which have been authorised in other EU member states and offer payment services in the Republic of Cyprus under the freedom of establishment or through an agent.