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Memorandum of Understanding between the Central Bank of Cyprus and the National Bank of Slovakia in the field of banking supervision

The Central Bank of Cyprus (“CBC”) and the National Bank of Slovakia (“NBS”), hereinafter referred to as the “authorities”, expressing their mutual interest and willingness in establishing and promoting bilateral ties in banking supervision and wishing to achieve a common understanding on issues related to the sharing of supervisory information and banking regulation in order to facilitate co-operation for effective consolidated supervision of cross-border establishments and performance of their respective duties for the safe and sound functioning of credit institutions in their respective countries, have agreed as follows:

Intention

  1. This Memorandum of Understanding sets forth a statement of intent of the authorities to establish a general framework for mutual assistance and the exchange of information in the field of supervision and regulation of credit institutions in order to enforce and secure compliance with any laws, regulations or rules relating to the supervisory and regulatory functions and duties of the authorities in their respective jurisdictions. The main functions, competencies and objects of the authorities are summarised in “Appendix A”.
  2. This Memorandum is not considered to be an international agreement in the meaning of Cyprus and Slovak laws. It neither establishes any legally binding obligations nor supersedes any laws and regulations in force either in Cyprus or Slovakia.

Definitions

  1. For the purposes of this Memorandum:
  “countries” are Cyprus and Slovakia;
  “authorities” are the Central Bank of Cyprus and the National Bank of Slovakia;
a “credit institution”
(a bank)		 is an entity which carries on banking business (general or specialised) and whose activities are subject to licensing and banking supervision under the laws of the countries;
“supervisory information” is the information received or obtained in the process of fulfilling its supervisory functions as well as through the exchange of information or through the conduct of on-site inspections in accordance with this Memorandum, by either of the authorities. Supervisory information shall not include information about transactions, accounts and deposits of customers;
“cross-border establishment” is defined to include a branch, a subsidiary or a representative office or any other structure within the jurisdiction which, by common consent, gives rise to the need for consolidated supervision;
a “branch” of a credit institution is an operating entity which does not have a separate legal status and is, thus, an integral part of a credit institution incorporated in one of the countries;
a “subsidiary credit institution” (a subsidiary bank) is a legally independent institution, wholly-owned or majority-owned by a credit institution which is incorporated in the country other than that of the subsidiary;
a “representative office” is an office through which the interests of a credit organisation are promoted or assisted but at which no banking business is carried on;
“home country” is the country of incorporation of a credit institution which has set up a branch or a subsidiary bank or a representative office in the other country (“host country”).
 

Sharing of information

  1. To maintain the reliability and efficiency of their national banking systems, the authorities shall co-operate in banking supervision over the activities of credit institutions on the basis of the provisions of this Memorandum, subject to the national legislation and the international obligations of each authority.
  2. The authorities express their readiness to, regularly, exchange information on the state of each other’s banking / regulatory system and the development thereof.
  3. The authorities shall regularly provide, on a reciprocal basis, information on the applicable national banking legislation, banking supervision standards and requirements and any major changes thereto.
  4. Co-operation within the framework of this Memorandum shall be implemented at the initiative or on the basis of requests for assistance in banking supervision from either authority.
  5. A request for assistance shall be made in writing. Contemporary means of telecommunication may be used to transmit a request.
  6. Information within the framework of this Memorandum shall be provided to the extent reasonable and subject to national statutory provisions including those restricting disclosure. A request for assistance may be, thus, denied wholly or partially, if the requested authority believes that the fulfillment of the request will run counter to its national legislation or that it may harm important national interests or on grounds of public interest or when disclosure would interfere with an ongoing investigation. In such case, the requesting authority shall be notified about the denial and given the reasons for it in writing.
  7. The authorities shall take all necessary measures in order to provide a prompt and as full a reply as possible. They shall also notify one another about the circumstances preventing or delaying the fulfillment of a request for assistance.
  8. Each party shall independently bear the expenses involved in the implementation of this Memorandum, unless a different procedure is agreed upon.

Supervision of cross-border establishments

Licensing

  1. If a credit institution incorporated in one of the countries (home country) applies to the authority in the other country (host country) for a licence (permission) to open a branch, a subsidiary bank or a representative office (cross-border establishment), the host country authority shall consider such application within the time limits and in accordance with the procedures established by its national banking legislation or regulations;
  2. The host country authority receiving an application, as referred to in 12 above, shall notify the home country authority of the details of such an application and obtain the latter authority’s outward authorisation as provided by the rules established by the Basle Committee on Banking Supervision.
  3. Upon request the home country authority shall inform the host country authority whether the applicant bank is in substantial compliance with banking laws and regulations and whether the bank may be expected, given its administrative structure and internal controls, to manage the cross-border establishment in an orderly manner.
  4. The home country authority will inform the host country authority about the nature and extent to which it will conduct consolidated supervision over the applicant bank.
  5. To the extent reasonable and permitted by their respective laws, the authorities will share information on the capability, integrity or experience of the prospective managers of a cross-border establishment.
  6. The host country authority shall notify the home country authority in writing about its decision with regard to the granting of a licence (permission) to a credit institution to open a cross-border establishment, which has applied to it, as provided in 12 above.

Off-site Supervision

In exercising on going off-site supervision through collecting information and examining and analysing financial and statistical reports submitted by cross-border establishments set up in one country by credit institutions incorporated in the other country the authorities agree that:

  1. the banking supervision authority of the host country shall exercise prudential supervision over the activities of cross border establishments in accordance with the national banking legislation or regulations;
  2. the banking supervision authority of the host country shall not prevent the entities mentioned in 18 above from submitting information and other reports to their Head Offices or parent banks necessary to compile consolidated reports in accordance with the forms established in the home country, provided that such information shall not include the names of depositors;
  3. Both authorities undertake to use their best endeavours to provide relevant information to their counter part regarding material developments or material supervisory concerns in respect of the operations of a cross border establishment as well as of any material administrative penalties or other formal enforcement action taken against a cross-border credit establishment.

On-site inspection

  1. The banking supervision authorities of the home country shall notify in advance the banking supervision authorities of the host country about their intention to inspect a cross-border establishment indicating the purpose and scope of the inspection, its expected duration and names of examiners. The banking supervision authorities of the host country shall express readiness to provide, at the request of the other authority, any available supervisory information related to the conduct of on-site inspections. The NBS should be allowed to carry out inspections of subsidiaries and branches of Slovak credit institutions (authorised in Slovakia) in Cyprus. The CBC should be allowed to carry out inspections of subsidiaries and branches of Cyprus credit institutions (authorised in Cyprus) in Slovakia;
  2. the banking supervision authorities of the host country shall not prevent the banking supervision authorities of the home country from carrying out on-site inspections, as referred to in 21 above, and shall give the banking supervision authorities of the home country access to supervisory information, as defined in paragraph 3 above, which they may need in order to conduct banking supervision;
  3. representatives of the banking supervision authorities of the host country have the right to be present during the on-site inspections conducted by the representatives of the banking supervision authorities of the home country. Following the inspection, an exchange of views may take place between the examination team and the home banking supervisory authorities.
  4. In connection with the supervision of credit institutions in one country which have cross-border establishments in the other country, the authorities agree to provide, on a reciprocal basis, supervisory information about any substantial changes pertaining to the credit institutions referred to above, such as restrictions to the range of permitted banking operations, suspension or modification or revocation of a licence, appointment of a provisional administrator and re-organisation or liquidation of any such credit institution.
 

Professional secrecy

  1. To the extent permitted by its national laws, each authority shall always ensure the confidentiality of supervisory information and documents received from the other authority as a result of the execution of supervisory functions, if such information and documents are not to be made public or if the authority that has provided them does not want them to be made public. The extent of the confidentiality of supervisory information and documents shall be determined by the authority that provides the information and documents. In this regard, employees of both authorities shall generally be bound to hold confidential all information obtained in the course of their duties.
  2. Supervisory information received shall not be used without the prior consent of the authority that provided it for any purposes, other than lawful supervisory purposes and/or for those purposes for which it was requested and provided.
  3. Unless disclosure is legally compelled, no supervisory information received by either authority in accordance with this Memorandum shall be passed to a third party without the prior consultation and consent of the authority that provided this information. In the event that the authority that received such information is legally compelled to disclose it, this authority shall consult with the authority that originated the information indicating what information it is compelled to release and, if so required by the latter authority, will use its best endeavours to preserve the confidentiality of the information to the extent permitted by its national laws.

General provisions

  1. In order to enhance the quality of cooperation, representatives of the authorities may convene to discuss issues concerning credit institution(s) which maintain cross-border establishments within their respective jurisdiction(s). During these meetings they will also review the effectiveness of these arrangements. The authorities intend to promote their cooperation by visits for information purposes and by short exchanges of staff for practical internships.
  2. For the purpose of this Memorandum, the authorities shall use the lists of licensed credit institutions within their jurisdictions published on their respective internet websites. The Central Bank of Cyprus’s website address is www.centralbank.gov.cy. The National Bank of Slovakia’s website address is www.nbs.sk. The authorities shall advise each other upon request on any aspect of their regulatory systems and notify each other about any major changes in their banking rules and regulations within their jurisdictions, in particular about those changes which have a significant bearing on the activities of cross-border establishments. To facilitate a practical co-operation the authorities shall in 20 days after this Memorandum enters into force, exchange lists of the contact persons authorised to provide and request information on behalf of the Central Bank of Cyprus and on behalf of the National Bank of Slovakia pursuant to this Memorandum. The list shall contain the following data: name and surname, position, e-mail address and telephone and fax numbers of the authorised persons.
  3. This Memorandum of Understanding shall remain in existence until either party notifies the other in writing of its wish to revise, amend or withdraw from the Memorandum of Understanding. One month’s notice of any such action will be given.
  4. Co-operation and assistance in accordance with this Memorandum of Understanding will continue until the expiration of 30 days after either authority gives written notice to the other authority of its intention to discontinue co-operation and assistance. If either authority gives such notice, co-operation and assistance in accordance with this Memorandum will continue with respect to all requests for assistance that were made before the effective date of notification until the requesting authority withdraws the matter for which assistance was requested.
  5. This agreement is written in the English language in four copies, all copies being original.

On behalf of the National Bank
of Slovakia

Marian Jusko
Governor

Date: ……………………………

  

On behalf of the Central Bank
of Cyprus

Christodoulos Christodoulou
Governor

Date: ……………………………

APPENDIX A

SUMMARY OF MAIN FUNCTIONS, COMPETENCIES
AND OBJECTS OF AUTHORITIES

NATIONAL BANK OF SLOVAKIA

According to the National Bank of Slovakia Act and to the Banking Act the National Bank of Slovakia is responsible for the conduct of supervision over the safe functioning of the banking systems and banks, the Deposit Protection Fund, other entities and groups of entities where required by the Banking Act. Banking Supervision is carried out over individual banks, foreign bank’s branches or other entities and also over consolidated groups and sub-consolidated groups of which banks are members.

CENTRAL BANK OF CYPRUS

The Central Bank of Cyprus (“CBC”) was established in 1963. The main object of the CBC is to foster monetary stability and such credit and balance of payments conditions as are conducive to the orderly development of the economy of the Republic of Cyprus. For the achievement of its main object the CBC performs various functions, which inter-alia include the supervision of the banking system and the administration of the Exchange Control legislation. Also under the provisions of the 1997 Banking Law, all banks in Cyprus are licensed and supervised by the CBC, by means of off-site monitoring and on-site examinations.

Under the International Collective Investment Schemes Law, the CBC is also the regulatory and supervisory authority for International Collective Investment Schemes (“ICIS”), their Managers and Trustees. ICIS are schemes whose units (shares or interest) are owned by persons who are not permanent residents of the Republic of Cyprus.