Following on to an extensive and fruitful consultation process, which lasted over a year and involved the Central Bank of Cyprus (CBC), the Ministry of Finance, the Cooperative Societies Supervision and Development Authority and the banking industry, Cyprus has been the latest entrant to the covered bond universe in December 2010. The primary legislation governing the issuance of covered bonds (Kalimmena Axiografa) is the Covered Bond Law of 2010, (130 (I)/2010), which came into force on December 23, 2010 (the “Law”). On the same day, the CBC issued a directive (526/2010) under the provisions of the Law, which constitutes the regulatory framework for the issue of covered bonds (the “Directive”). The Law and the Directive (the “Cypriot Legal Framework”) are further supplemented by other laws (e.g. the Bankruptcy Law, the Banking Business Law, the Companies Law etc.) as referenced by the Law.

Under the Cypriot Legal Framework, Credit Institutions which have been approved by the Competent Authority (i.e. the CBC or the CSSDA), are only allowed to issue covered bonds using the direct issuance route. Credit Institutions are defined, under the Law, to be: > Banks (as defined in the Banking Laws); > Cooperative Credit Institutions (as defined in the Cooperative Societies Law); and > The Housing Finance Corporation (established under the Housing Finance Corporation Laws). In accordance with Parts II and III of the Law, only Approved Institutions are eligible to issue covered bonds. Approved Institutions, are those Cypriot Credit Institutions which have been registered in the Register of Approved Institutions, (publicly available at the following link: http://www.centralbank.gov.cy/media/ xls/ENG_2_Register_of_Approved_Inst.xls) following a relevant application to the Competent Authority. Approval of such application is granted within 1 month from submission, and only after the Credit Institution has successfully demonstrated its ability to carry out the legal obligations of an Approved Institution, and that it fulfills the criteria and conditions determined by the Competent Authority.