The European Union Dimension

In view of the accession of Cyprus into the European Union (EU) the Cyprus Co-operative Movement submitted their harmonisation position in 2000 fully accepting the relevant acquis on Credit Institutions (CIs).  According to the said position all Co-operative Credit Societies (CCSs) shareholder-members of the CCB would be deemed CIs coming within the ambit of the Banking Directives (BDs). A five-year transitional period as from 1.1.2003 was also requested within which all CCIs would be in conformity with the  regulatory provisions of the EU Banking Directive.

The above mentioned position gives the capability to every Co-operative Credit Society (CCS) to try to satisfy the criteria of Banking Directives on its own, which if successful will give it the right to operate independently.  Those CCS which will not be able to satisfy the criteria on its own will have the alternative to become affiliate of the Central Body, which is being defined to the Co-operative Central Bank and to satisfy the criteria on a consolidated basis.  Option to become affiliate of the Central Body will also have those CCS which, through meeting the criteria, wish to become affiliated.     

Paragraphs 5 snd 6 of Article 2 of the relevant EU Banking Directive 200/12/EC contain all the defining provisions concerning the permanent affiliation of CIs with a "central body" the main elements of which are summarised below :

• The arrangements refer to CIs situated in the same member-state and "permanently affiliated" to a  "central body" which supervises them and which is established in that same member-state.

• The national law of the member state must provide that:

1. The commitments of the "central body" and of the "affiliated CIs" are "joint and several" liabilities or the commitments of the affiliated institutions are "entirely guaranteed" by the "central body".

2. The solvency and liquidity of the "central body" and of all the affiliated institutions are monitored on the basis of consolidated accounts.

3. The management of the "central body" is empowered to issue instructions to the management of the affiliated institutions.

According to the aforementioned position and the proposed harmonisation arrangements, the CCB's role will become two-fold.  CCBs will at the same time be a "central body" for the affiliated CCS and continue being the banker to all the co-operatives including the "independently complying" CCSs.

CCB, being the "central body", has committed itself to complete all the necessary preparations and to have in place the legislative framework, rules and regulations for the formation of a "group" of affiliated institutions and receive the first CCSs by the end of 2004.  Those non-conforming CCSs by this date will proceed with its efforts to meet the criteria and when ready will be joining the permanent affiliation arrangements at the end of the  year.