Cyprus faces EU penalties over banking directives

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Cyprus could be slammed with hefty fines from EU institutions for failing to adopt regulations and directives to reduce risks to the banking system or the need to resort to state intervention.

On Monday, the House Finance Committee urgently discussed a package of seven harmonization bills that should have been passed last year, introducing two EU directives and two regulations amending existing directives.

Cyprus, which has failed to comply with the relevant legislation in time, has received a warning letter from Brussels while facing an infringement process for failing to adopt two of the directives in question.

According to the Ministry of Finance officials appearing before the committee, the bills provide for banking and investment institutions to be better capitalized.

That is to ensure they have more funds than loans and not to have excessively leveraged balance sheets.

The bills reduce the risk of failure of the institutions and, thus, the state’s need to step in.

Cyprus was obliged to adopt the directives by 28 December last year and had received an official warning letter on 3 February.

Two of the directives should have been adopted by 10 January 2020, with the EU already launching an infringement process and has already reached a reasoned opinion.

The House Finance Committee asked the Ministry for a clearer presentation of the specific bills’ provisions to continue their examination.

As the two bills are considered urgent, they will be promoted separately as a matter of priority.