1

DIRECTIVE ISSUED TO AUTHORISED CREDIT INSTITUTIONS ON LOAN ORIGINATION

PROCESSES AND PROCESSES OF REVIEWING EXISTING LOANS

BUSINESS OF CREDIT INSTITUTIONS LAWS OF 1997 to (No 4) 2013

[66(I)/1997, 74(I)/1999, 94(Ι)/2000, 119(Ι)/2003, 4(Ι)/2004, 151(Ι)/2004, 231(Ι)/2004, 235(Ι)/ 2004,

20(Ι)/2005, 80(Ι)/2008, 100(I)/2009, 123(I)/2009, 27(I)/2011, 104(I)/2011, 107(I)/2012, 14(I)/2013,

87(I)/2013, 102(I)/2013, 141(I)/2013]

Directive based on article 41

The Central Bank of Cyprus, by virtue of the powers vested on it by section 41 of the Business of

Credit Institutions Laws of 1997 to (No 4) 2013, issues this Directive to Authorised Credit

Institutions and credit institutions that operate in the Republic under Section 10A of the above Law.

2

PART I - TITLE, SCOPE OF APPLICATION, PURPOSE AND INTERPRETATIONS

1. This Directive will be referred to as the Directive on Loan Origination Processes and Processes

of Reviewing Existing Loans of 2013.

2. The provisions of this Directive are applicable to all Authorised Credit Institutions (ACIs) and

credit institutions that operate in the Republic under Section 10A of the Business of Credit

Institutions Laws of 1997 to (No 4) 2013.

This Directive does not replace the detailed credit policies and procedures that ACIs are obliged

to have in place as these are prescribed in the Central Bank of Cyprus circular dated 25 July

2008 with title “Guidelines on the management of credit risk”.

The Central Bank of Cyprus may require from a specific ACI to apply stricter criteria where

significant weaknesses exist in its management controls.

3.(1) The Scope and purpose of the Directive is:

a. To prescribe minimum practices to be followed by the ACIs during the process of

assessing and granting / reviewing Credit Facilities.

b. To specify minimum documentation ACIs must obtain in the process of assessing and

granting / reviewing Credit Facilities.

c. To demand the immediate incorporation of the above practices in ACIs’ internal

guidance, policies and procedures.

It is noted that the ACI’s Governing Body shall ensure that these internal guidance,

policies and procedures are communicated to the relevant staff in a transparent and clear

manner and that staff involved in the Loan origination and credit review process is

adequately trained and experienced so as to apply the provisions of this Directive. ACI’s

Governing Body shall ensure that the Loan origination and reviewing of existing loans

policy is subject to the audit of the internal audit department of the ACI and is part of the

regular audit programme of the internal audit department. Furthermore, it shall ensure that

the implementation of the provisions of this Directive is part of the regular audit

programme of the external auditors of the ACI.

3

3.(2) ACIs may opt to apply stricter policies from those prescribed in the present Directive and

may request any other document they consider necessary for assessing and reviewing a

Credit Facility.

3.(3) The basic principle when assessing or reviewing a Loan is that the value of collateral is not

a decisive factor in the ACI’s assessment of a Loan application. Collateral could only

serve as a secondary source of repayment, and as such it shall be assessed.

3.(4) ACIs shall proceed with all necessary changes and improvements in their IT systems and

staff training so as to facilitate the implementation of this Directive, as well as to re-train all

personnel involved in Loan appraisal and reviewing of existing Loans, with special

emphasis on how to assess repayment ability. Furthermore, ACIs shall provide on regular

basis training to the staff involved in the implementation of the provisions of this Directive.

3.(5) Subject to the provision of the Central Bank of Cyprus circular dated 25 July 2008 with title

“Guidelines on the management of credit risk”, ACIs shall put in place adequate policies

and procedures to monitor exposures in a manner proportionate to the level of exposure

undertaken.

4.(1) Without prejudice to the definitions included in the Business of Credit Institutions Laws of

1997 to (No 4) 2013, for the purposes of the present Directive the following definitions are

applicable:

- “Borrower” means existing or potential borrower.

- “Connected Persons” has the meaning of “a group of connected clients” as this is

defined in the Central Bank of Cyprus Directive for the Calculation of Capital Adequacy

and Large Exposures of 2006 to (No 2) 2011.

- “Credit Facility” or “Loan” means any funded or non-funded facility.

- “Guarantor” means existing or potential guarantor.

4.(2) When referring to an ACI in this Directive, the term includes credit institutions that operate

in the Republic under Section 10A of the Business of Credit Institutions Laws of 1997 to

(No 4) 2013.

4.(3) Terms not defined in this Directive have the meaning attributed to them in the Business of

Credit Institutions Laws of 1997 to (No 4) 2013, unless it is otherwise specified in the

Directive.

4

PART II - INFORMATION PROVIDED AND COLLECTED BY THE ACIs

5. ACIs shall provide a written offer to all natural persons including information, at least as listed

below, for all offered housing and consumer Loans for which natural persons are interested in,

the scope being to protect consumers and provide uniform and easily comparable information:

a. Current date and duration of the offer.

b. Short description of the product and the purpose of the Credit Facility.

c. Amount and currency of the Credit Facility.

d. Duration of Credit Facility.

e. Number and frequency of payments.

f. Nominal rate (indicate type of rate, for example Euribor, bank internal rate).

g. The duration of fixed interest rate period if any, and the interest rate the Credit Facility reverts

to at the end of the fixed interest rate period where applicable.

h. Scenarios for increase of interest rates or base rates, in order to calculate the increase in the

instalment amount and inform the Borrower on the impact on their Loan instalment. Similar

information shall be provided in relation to foreign currency fluctuation that may affect the

loan instalment of Credit Facilities in foreign currency, for example informing the Borrower of

the change in loan instalment amount due to a change in the interest rate by a hundred base

points.

i. The Annual Percentage Rate of Charge (APRC) on any kind of interest rate (fixed and or

variable) of the said product.

j. Conditions for future changes in the interest margin.

k. The amount of each instalment for the Loan repayment, including an illustrative amortisation

table. ACIs shall also provide illustrative amortisation tables for the scenarios of the interest

rates increases as (h) above. The instalment amount shall be broken down to show interest

payment and capital payment. In case of a product with both fixed interest for a

predetermined period and variable interest rate for the remaining duration, ACIs shall inform

the Borrower about the instalment amount for each period.

l. Form of security and any conditions that the ACI imposes on such security. If the security is

an immovable property, whether a valuation of the property is necessary and, if so, by whom

it has to be carried out.

m. Arrangement fee and additional non-recurring costs, where applicable.

n. Additional recurring costs.

o. Whether there is a possibility of early repayment, if so, the conditions of early repayment

5

including any penalty.

p. Whether the Borrower is obliged to open a bank account in which Borrower’s salary is to be

deposited.

q. A statement that the security may be repossessed if the customer does not comply with the

loan repayment programme.

It is noted that the above information shall be provided by the ACI in a written standardised

format, and it shall be used by all units dealing with such Credit Facilities.

ACIs shall provide Borrowers the above information, without prejudice to their obligations

emanating from the Consumer Credit Act of 2010 to (No 2) of 2013.

6.(1) ACIs shall collect adequate information and documents, as per the provisions of this

Directive, in order to properly assess the risks undertaken, the Borrower’s ability to repay

the Credit Facility within the set time limit, and the adequacy of collateral. Moreover ACIs

shall verify the purpose of the Credit Facility by obtaining adequate evidence.

ACIs shall ensure compliance with the provisions of the Prevention and Suppression of

Money Laundering Activities Law of 2007 to 2013 and the Directive to Banks for the

Prevention of Money Laundering and Terrorist Financing of April 2008 and its

amendments up to 2010.

The provisions of this subparagraph are applicable when assessing Credit Facilities to

natural persons and legal entities.

6.(2) The decisive / overriding criterion for granting a Credit Facility is the Borrower’s ability to

repay the Credit Facility within the approved time limit. It is noted that when assessing the

Borrower’s repayment ability, any recourse to collateral or to Guarantors’ income shall not

be taken into account, except for the cases under subparagraph 7.(4) concerning cash

collateral lending.

The information and or documents to be obtained by ACIs with regard to Borrower’s

income / future cash flows differs among natural persons and legal entities as prescribed

in this Directive.

6

Any inconsistencies between the different sources of income identification shall not be

accepted. Major inconsistencies shall render the Borrower ineligible for further

assessment and the Loan application shall be rejected outright. Minor inconsistencies in

the documentation shall be followed upon, explained and, if possible, corrected.

6.(2)(a) In case the Borrower is a natural person, ACIs shall request the documents

described in subparagraphs 6.(2)(a)(i) and 6.(2)(a)(ii) below for credit

assessment purposes.

Existing depositors may be excluded from the provisions of subparagraphs

6.(2)(a)(i) and 6.(2)(a)(ii), in cases they apply for Credit Facilities up to the

amount of five thousand euro (€5.000), provided that the turnover of their deposit

accounts indicates ability to repay the requested Credit Facility (for example a

depositor with monthly payments in deposit accounts at least equal to the

instalment of the Credit Facility requested).

6.(2)(a)(i) In the case of employees, either of private or public sector, ACIs shall request

the following documents regarding their income:

1. Declaration of current employment. The declaration shall be signed by the

Borrower and shall state among other the current salary amount and date

of employment and probable duration of employment (if applicable).

2. Original salary slips for the last three (3) months.

3. Original bank statement for the last six (6) months to verify salary (if salary

is deposited in bank account).

4. Copy of income tax return submitted for the last two (2) years.

5. Original income tax assessment of the last two years (2) available.

6. Original latest annual social insurance statement.

7. Documents supporting any other type of income, for example alimony

income, interest income, income from immovable property, income from

welfare benefits.

6.(2)(a)(ii) In the case of self-employed and freelancers, ACIs shall request the following

documents regarding their income:

1. Confirmation of income by the Borrower’s accountant if available.

7

2. History of income or 3rd party verification of Borrower’s income or evidence

of seasonal or irregular sources of income.

3. Proof of payment to income tax.

4. Copy of social insurance statement for the last two (2) years.

5. Copy of income tax return submitted for the last two (2) years.

6. Original income tax assessment of the last two (2) years available.

7. Copy of Value Added Tax (VAT) statements submitted since last balance

sheet date, if available/applicable.

8. VAT return form (in case they are registered with VAT department).

9. Documents supporting any other type of income, for example alimony

income, interest income, income from immovable property, income from

welfare benefits.

6.(2)(b) In case the Borrower is a legal entity, ACIs shall request the following documents:

1. Audited financial accounts for the last three (3) financial years. In case the

Borrower has no audited financial accounts for the last financial year, then

unaudited financial accounts shall be provided for that year.

2. All quarterly financial accounts for the current year for listed legal entities.

3. All management accounts since last financial accounts for non-listed legal

entities.

4. Copy of income tax return submitted for the last three (3) years.

5. Original of income tax clearance for the last three years (3) available.

6. Copy of Value Added Tax (VAT) statements submitted since last balance

sheet date, if available / applicable.

7. VAT return form (in case they are registered with VAT department).

8. Budgeted cash flows at least for the next two (2) years.

9. Details of projected income to be generated by the use of the requested Loan,

supporting that this Loan will add to the profitability and enhance cash flow of

the business, for example, if additional borrowing will be used for a new site or

buying a new piece of equipment or additional raw materials.

In case of newly incorporated or start-up legal entities, ACIs shall request all of

the above documents for the number of years available, and in these cases more

emphasis should be given on the business plan and the budgeted cash flows of

the Borrower.

8

6.(3) For the assessment of Borrowers and Guarantors, ACIs shall also obtain, where

applicable, the following:

a. Statement of immovable property from the land registry.

b. The purchase contract of a property registered with the land registry, in case a

separate title deed does not exist.

c. Statements of deposits of the Borrower or the Guarantor with other ACIs.

d. Certificates and or statements, depending of the case, of any other asset for example

shares and or other investments.

ACIs shall request the above information even if these assets will not be pledged as

collateral, for the Loan requested.

6.(4) In case the Borrower has any Credit Facility and or has guaranteed Credit Facilities with

any other ACI, then the ACI from which the Credit Facility is requested shall request from

the Borrower to provide a written statement issued by the ACI that granted the existing

Credit Facilities, providing the following information relating to the above mentioned Credit

Facilities:

a. Original Credit Facility amount or Credit Facility limit.

b. Current balance.

c. Duration and maturity of the Credit Facility.

d. Interest rate.

e. Instalment amount, instalment payment frequency and grace period (if any).

f. Amount in arrears.

g. Days in arrears.

The above information shall also be collected for proposed Guarantors regarding the

Credit Facilities they enjoy and or guarantee in any other ACI.

These statements shall be issued without any charge.

As soon as the System or Mechanism for the Exchange, Collection and Provision of Data,

as per the provisions of Business of Credit Institutions Laws of 1997 to (No 4) 2013, is

under full operation, then the above information may be collected from this Mechanism.

9

6.(5) Depending on the type of the Credit Facility, ACIs shall request the following:

6.(5)(a) In case of personal Loans, overdraft accounts for individuals, credit cards:

Loan / overdraft / credit card application fully completed and signed by all

involved persons / entities, in the presence of staff of the ACI who shall sign as

witnesses to the signature.

6.(5)(b) In case of consumer Loans:

(i) Loan application fully completed and signed by all involved persons /

entities, in the presence of staff of the ACI who shall sign as witnesses to

the signature.

(ii) Documents substantiating the Loan purpose, for example written offer to

purchase a product / service, private contract for purchasing of product /

service, proforma invoices.

6.(5)(c) In case of housing Loans:

(i) Loan application fully completed and signed by all involved persons /

entities, in the presence of staff of the ACI who shall sign as witnesses to

the signature.

(ii) Purchase agreement contract (if applicable).

(iii) Evidence of the advance payment (if applicable).

(iv) For the property to be financed and the property to be mortgaged the

following documents are required:

1. Title deed of current owner.

2. Building permit.

3. Planning permit.

4. Topographical charts.

5. Building plans.

(v) In case of construction / renovation / completion of immovable property, a

detailed budget and detailed cost analysis signed by a professional quantity

surveyor.

10

6.(5)(d) In case of Loans to legal entities:

(i) Loan application, fully completed and signed by the legal entities authorised

signatories, in the presence of staff of the ACI who shall sign as witnesses

to the signature.

(ii) Documents substantiating the Loan purpose, for example written offer to

purchase a product / service, private contract for purchasing a product /

service, proforma invoices, bills of lading. The above documents are not

required in case the legal entity applies for working capital Credit Facilities

(overdraft account). The working capital needed shall be evidenced by the

budgeted cash flow of the legal entity.

(iii) Evidence of advance payment and or purchase agreement contract (if

applicable).

(iv) In case of project finance the Borrower shall provide a feasibility study of

the project which shall include as a minimum:

1. A complete profitability study of the project.

2. Cost analysis.

3. Business plan.

4. Future forecast.

5. Sensitivity / worst case scenario analysis.

(v) In case of purchasing or construction / renovation / completion of

immovable property the Borrower shall provide for the property to be

financed and the property to be mortgaged the following documents :

1. Title deed of current owner.

2. Building permit.

3. Planning permit.

4. Topographical charts.

5. Building plans.

6. A detailed budget and detailed cost analysis signed by a professional

quantity surveyor (if applicable).

6.(5)(e) The relationship officers shall provide, to the Loan approving authority of the

ACI, as much information as possible about the Borrower, that cannot be

determined from the accompanying documents. Loan applications, as per

subparagraphs 6(5)(a), 6(5)(b), 6(5)(c) and 6(5)(d), submitted to the Loan

approving authorities shall be accompanied by additional information including:

11

(i) Information regarding Borrower’s relationship with the ACI, Borrower’s

repayment history for existing Borrowers.

(ii) The reasons the Borrower has selected the specific ACI.

(iii) Any information, regarding the Borrower, from the local market.

(iv) Information gathered from the Central Information Register for the Issuers

of Dishonoured Cheques (CIR).

(v) Information gathered from any other source that could be useful in

assessing the Borrower’s application.

(vi) Data about the Borrower and the Guarantor that may be collected from the

System or Mechanism for the Exchange, Collection and Provision of Data,

as per the provisions of Business of Credit Institutions Laws of 1997 to (No

4) 2013, when this Mechanism is under full operation.

PART ΙΙΙ - APPRAISAL OF CREDIT FACILITIES APPLICATION

7.(1) The Loan appraising / approving authority has the responsibility to approve or reject a

Credit Facility. Before reaching a decision the Loan appraising / approving authority shall

take into consideration the provisions of the ACI’s credit policy and especially the ACI’s

risk appetite, concentration limits and diversification efforts, and the various directives and

circulars issued by the Central Bank of Cyprus and are in force.

The Loan appraising / approving authority, when assessing a Loan application shall

consider:

a. First and foremost the Borrower’s income / future cash flows, and source of repayment

and eventually Borrower’s ability to repay. In case the Borrower is a member of a group

of Connected Persons, the assessment shall be carried out at group level. Extra care

shall be exercised when a new Loan is granted and reliance for its repayment is placed

on cash flows emanating from other connected parties in order to avoid the situation in

which a viable group becomes a non-viable group.

b. The Borrower’s and Guarantors’ scoring / rating.

c. Other qualitative elements such as the prevailing market conditions, the industry

segment of the Borrower, Borrower’s financial position including Borrower’s leverage,

the Borrower’s governance including financial control.

12

The Loan appraising authority in its recommendation report shall include a full analysis of

the Borrower’s repayment ability and in case of a positive recommendation this shall be

fully justified.

In case the Loan approving authority approves a Loan they must fully justify their decision.

In case of approval of an additional Credit Facility or when reviewing an existing Credit

Facility ACIs shall, among other, carry out a full assessment of the Borrower’s repayment

capacity, its scoring / rating and - where applicable - the LTV ratio as this is defined in

subparagraph 7.(5)(a)(i) below.

Furthermore the Loan appraising / approving authority shall consider the following:

7.(2) The true Loan purpose , whether this is relevant to Borrower’s business and whether the

purpose of the Loan is not prohibited by the ACI’s credit policy.

The Loan appraising / approving authority, when approving a Credit Facility, shall set as a

condition that Credit Facility funds shall not be directed to the Borrower, but to the

provider of the service / good financed, for example in case of purchasing a car, the Credit

Facility funds shall be transferred directly to the seller, either by wire transfer or bank draft.

In case of financing the purchase of an asset, the duration of the Credit Facility shall be in

line with the useful life of the financed asset, and the scope of the Credit Facility.

7.(3) In case of financing the purchase / construction / renovation / completion of an

immovable property, Borrower’s own contribution shall be in accordance with the

provisions of subparagraph 7.(5)(a)(i).

Borrower’s own contribution shall not be made after facility’s full disbursement. It shall

either be made at the same time and in proportion to the ACI’s contribution, or before

any facility disbursement. In case where Borrower's own contribution for a housing Loan

is in the form of a grant to be received from the Republic of Cyprus, then Borrower’s own

contribution can be made when received, provided that the ACI can substantiate that

such grant is forthcoming.

13

7.(4) Borrower’s ability to repay his Credit Facilities, giving emphasis on Borrower’s income /

future cash flows.

The ability to repay a Credit Facility is the main requirement for any funding. Therefore

the assessment of future repayment capability is the most important factor to be

considered in the assessment procedure when approving a Credit Facility. Any kind of

collateral which secures the Borrower’s Credit Facilities shall be considered as the ACI’s

second way out in case of default and not as the primary source of repayment.

Income / future cash flows shall be assessed against verifiable evidence as per

subparagraphs 6.(2)(a)(i), 6.(2)(a)(ii), 6.(2)(b) above. Verbal assurances representations

from Borrowers shall be ignored.

The following Credit Facilities are exempted from the provision of this subparagraph.

(i) Credit Facilities covered by 105% with cash collateral, if the Credit Facility and the

cash collateral is of the same currency.

(ii) Credit Facilities covered by 110% with cash collateral, if the Credit Facility currency is

different from the cash collateral currency.

ACIs shall review the Credit Facilities falling under the above exemption in order to verify

that above ratios are met. Credit Facilities denominated in the same currency as the

cash collateral shall be reviewed quarterly. Credit Facilities denominated in a different

currency than the cash collateral currency shall be reviewed monthly. For the scope of

these reviews the numerator of the fraction shall include capitalised interest and or

interest in arrears. In the case these Credit Facilities are not collateralised in accordance

with the above ratios, then a relevant provision of the pledging agreement shall be

activated, which allows the immediate set-off of the Credit Facility against the cash

collateral.

It is noted that ACIs shall include adequate clauses in the pledging agreements signed

with the Borrowers so as to allow the above set-off.

14

7.(4)(a) In assessing the repayment ability of natural persons, ACIs shall consider the

following:

7.(4)(a)(i) Borrower’s recurring / steady “Total Monthly Income” shall be estimated as per

excel worksheet titled “Section B - Income” of Appendix 2 - Part III - Personal

Financial Statement (PFS) of the Directive on Arrears Management of 2013.

For self-employed / freelancers who have no monthly salary, for the purpose

of computing total monthly income, ACIs shall use the Borrower’s annual

income divided by twelve (12).

ACIs shall verify Borrower’s recurring / steady total monthly income from the

documents stated under subparagraphs 6.(2)(a)(i) and 6.(2)(a)(ii) above.

Income such as interest income, alimony and other, may be taken into

consideration, after the ACI has confirmed that it is steady and recurring.

It shall be noted that, income emanating from overtime, bonuses and any

other exceptional income is not considered as recurring income and as such

shall not be taken into account. In case where commission is a regular part of

Borrower’s income then the ACIs may consider it as Borrower’s recurring

income provided that evidence is obtained indicating that for the last six (6)

months, commission received is at about the same level.

In case the Loan term extends past normal retirement age of the Borrower, the

Borrower needs to prove that he has sufficient income to repay the Credit

Facility and ACIs shall take into account the adequacy of the Borrower’s likely

income and repayment capacity in retirement.

7.(4)(a)(ii) Debt servicing amount is defined as the instalment amount of the Credit

Facility to be granted plus all other instalments (Loan instalment, overdraft

and credit card instalment) of existing Credit Facilities with other ACIs. In

case where Loan instalments are gradually increasing then ACIs shall take

into account the highest instalment.

Overdraft instalment amount is calculated as follows: limit multiplied by the

interest rate charged divided by twelve (12).

15

Credit card instalment amount is calculated as follows: limit multiplied by the

percentage of minimum monthly payment.

The debt servicing amount shall also be adjusted by using the long term

average relevant interest rates for variable interest Loans so that repayment

assessment can hold true even if interest rates fluctuate.

Debt servicing amount shall be limited either:

1. to 35% of Borrower’s total monthly income as defined in subparagraph

7.(4)(a)(i) above, or

2. the difference between the “Total Monthly Income” and the “Total Monthly

Expenditure” (column Average Monthly Charge) as this is computed in

excel worksheet titled “Section C - Expenditure” of Appendix 2 - Part III -

Personal Financial Statement (PFS) of the Directive on Arrears

Management of 2013,

whichever is the lower.

ACIs shall complete the excel worksheet “Section C - Expenditure”, in

accuracy and use it as a tool in calculating the available income of the

Borrower which will be the basis of ascertaining the Loan instalment amount.

For high income Borrowers the debt servicing amount may exceed the above

set limit of 35%. Any excess, however, shall be fully justified from the

Borrower’s total income, provided that ACIs’ credit policy allow for the

approval of excess to that limit and includes specific rules and conditions for

such approvals.

This limit shall not in any case exceed the lower either of:

1. the 60% of Borrower’s total monthly income or

2. the difference between the “Total Monthly Income” and the “Total

Monthly Expenditure” (column Average Monthly Charge) as defined

above.

16

Guarantors’ income shall not be included in Borrower’s income when

calculating the debt to income ratio.

7.(4)(b) In assessing the repayment ability of legal entities, ACIs shall consider the

financial data from the documents stated in subparagraph 6.(2)(b) above.

During the assessment procedure, ACIs shall carefully examine, challenge and

substantiate the sources of repayment as these are submitted by the Borrower.

After critical assessment, ACIs must be satisfied with the reasonableness of

cash flow estimates.

Projected cash flows shall be compared with data from previous periods as

depicted in Borrower’s audited financial accounts. In cases where Borrower’s

predictions for future cash flows deviate substantially from the actual figures to

date, then these predictions must be supported by reasonable evidence and

realistic assumptions.

7.(4)(b)(i) ACIs, having followed the provisions of subparagraph 7.(4)(b) above, are

required to compute the debt servicing amount of the Borrower and ensure

that the Borrower will be in position to service his debt.

Debt servicing amount is defined as the instalment amount of the Credit

Facility to be granted plus all other instalments (Loan instalment, overdraft

and credit card instalment) of existing Credit Facilities with other ACIs. In

case where Loan instalments are gradually increasing then ACIs shall take

into account the highest instalment.

Guarantees for Loan repayment given by developers in favour of buyers for

the purchase of a house / flat, increases the developers’ exposure. In case

such Loans present arrears more than sixty (60) days then the debt servicing

amount of these Loans shall be added to the debt servicing amount of the

developers’ Credit Facilities so as to define the total debt servicing amount of

the developers.

17

Overdraft instalment amount is calculated as follows: limit multiplied by the

interest rate charged divided by twelve (12).

Credit card instalment amount is calculated as follows: limit multiplied by the

percentage of minimum monthly payment.

7.(4)(b)(ii) ACIs shall carry out scenarios in order to assess the impact on debt servicing

in case of increase of Loan instalment due to increase of interest rate or any

other cause. Scenarios shall also be applied to future reduction in the cash

flow generating capacity of the Borrower. As a minimum scenario, ACIs shall

assume interest rates move towards their long term average level and that the

cash generating capacity of the Borrower is reduced by 20%.

These scenarios shall be outlined in detail in ACI’s credit policy. The impact of

these scenarios shall be taken into consideration by the ACIs during their

decision making process.

7.(5) Apart from the Credit Facilities that are exempted from the provisions of subparagraph

7.(4) relating to lending with cash collateral security, collateral by itself shall not under

any circumstance be a criterion for approving a Credit Facility and cannot by itself justify

the approval of any Credit Facility without compliance with the aforesaid lending criteria

as per this Directive.

ACIs shall make every effort to collateralise all Credit Facilities as a safety net in case of

future adverse deviations in the servicing ability of Borrowers. The level of collateral to

be required on different types of Credit Facilities shall be clearly specified in the ACI’s

credit policy, taking into account the minimum LTV ratios as prescribed in subparagraph

7.(5)(a)(i) below.

In case of collateral pledged to several ACIs, ACIs shall ensure that such collateral is in

line with the Laws of the Republic of Cyprus and the Directives of the Central Bank of

Cyprus applicable at the time. ACIs shall include in their credit policies adequate

guidance of how to allocate such collateral. Such policies shall ensure that the value

assigned to such collateral is prudently assessed and double counting is avoided.

18

The type of collateral depends on the scope of the Credit Facility and as a general

principle, ACIs must collateralize any assets financed. Deviations from this general

principle may be accepted in cases where the alternative collateral offered is easier to

liquidate. It is prudent that all collateral procedures are finalised and all accompanying

documents are received by the ACIs duly signed by the Borrower, the Guarantor, the

collateral owner and the ACIs’ authorised signatories, before the disbursement of the

Credit Facility.

In case the ACI grants a Credit Facility in foreign currency then the ACI, where

applicable, shall register the charge in the same currency as the Credit Facility.

7.(5)(a) If collateral is an immovable property then the ACI’s Loan appraisal / approving

authority shall:

1. Carefully and thoroughly examine the valuation report (as this is mentioned

in subparagraph 13.(2)) of the property, so that all factors affecting the value

of the property are adequately considered for credit granting purposes. In

case the collateral is a property other than the one to be financed, then a

valuation report is required for both properties. This valuation shall be carried

out by an independent valuer who must comply with the provisions of

subparagraph 13.(1).

2. Set as precondition that the property is properly insured and the insurance

contract is assigned to the ACI (this does not apply in cases where the

property is land).

3. In case of a property under construction, demand a contractor all risk

insurance, to cover the construction period of the project and that the

insurance contract is assigned to the ACI.

7.(5)(a)(i) In the case of financing the acquisition / construction / renovation / completion

of immovable property, ACIs shall apply the maximum “Loan to Value” (LTV)

ratio as given below. LTV serves to define the level of the Borrower’s own

contribution.

19

LTV is defined as the ratio of:

x100%

In determining the LTV ratio the following shall be taken into account:

1. In case of projects under construction the property value to be used for

determining LTV is equal to the value of the land plus the cost of

construction. Cost of construction shall not include transfer fees,

mortgage fees, advertising costs, administrative costs and other similar

costs which do not add to the value of the property.

2. In the case of purchasing a property under construction, the value to be

used for determining LTV is the open market value after the completion of

construction works of the project and not the open market value of the

property after the issue of title deeds.

3. In the case that ACIs allow for a grace period of interest, for example

during the construction period, then the LTV ratio shall be calculated

using the increased balance of the Loan after the capitalisation of such

interest.

4. In case the ACIs have more than one valuation report, the value to be

used for determining LTV shall be the lowest value given in the valuation

reports.

Maximum LTV can be satisfied with additional collateral (other property or

blocked funds) but in case the additional collateral is offered by a third party

other than first degree relatives and or the domestic partner of the Borrower,

the ACI shall examine the financial justification and ensure that there is no

undue influence or fraud.

LTV ratio shall not exceed:

1. 80% in case the Credit Facility is granted for financing the primary

permanent residence of the Borrower. This also applies in cases where the

primary permanent residence will be constructed on land to be provided by

20

the Republic of Cyprus even if the land cannot be mortgaged. If the

property is rented for any period during the year, then the criterion of

permanent primary residence is not fulfilled and the LTV ratio must be

limited to 70%.

2. 70% for all other property financing cases.

Central Bank of Cyprus may alter the above mentioned percentages.

From the above ratios the following are exempted:

1. Financing the acquisition / construction of own use property in industrial or

small industrial zones or free zone property provided that all other lending

criteria of the ACI are met.

2. Overdraft limits to developers up to the amount of one hundred thousand

Euro (€100.000) for working capital purposes. For any amounts above this

threshold, the maximum LTV ratio shall be observed. The limit of these

overdraft accounts shall be set according to the working capital needs and

the repayment ability of the Borrower.

7.(5)(b) In case of granting a Credit Facility to a legal entity the ACIs shall register a

floating charge on company’s assets. Assets under the floating charge must be

properly insured and the insurance contract must be assigned to the ACI.

7.(5)(c) For any other form of collateral, the Loan appraisal / approving authority shall

ensure that best practices are followed and the provisions of ACI’s credit policy

are fully adhered to.

7.(6) Relating to Guarantors, ACIs shall collect the documents mentioned in subparagraphs

6.(2)(a)(i) / 6.(2)(a)(ii) and 6.(2)(b), depending whether the Guarantor is a natural person

or legal entity.

ACIs are obliged to inform Guarantors that their responsibilities emanating under their

guarantee are exactly the same as those of the Borrower. This information shall be given

before the Guarantor signs the Credit Facility contract along with the information

21

required according to The Protection of a Specific Category of Guarantors Law of 2003

to 2006.

Guarantors’ income shall not be included in Borrower’s income when calculating the

debt to income ratio and it could only serve as a secondary source of repayment and

should never be a decisive element in the ACI’s assessment of a Loan application.

7.(7) The pricing of a Credit Facility must reflect funding cost, legal and administrative cost,

cost of capital, credit risk and any other costs of the ACI.

8. The ACI shall ensure that appropriate controls are in place to ensure that all conditions of the

Credit Facility approval are met prior to any disbursement. Furthermore, it must ensure that:

a. Loan documentation and Loan disbursement must be executed by departments of the ACI

other than those involved in the Loan approval process.

b. Loan agreement / contract is prepared in accordance with the terms of approval and is duly

signed by the Borrower, the Guarantor, the collateral owner in the presence of the ACI’s

staff which will act as witnesses and the ACI’s authorised signatories.

c. All other documents required (for example mortgage documents, property insurance, cash

collateral pledging) are received before the disbursement of the Credit Facility

d. In case of a Credit Facility with partial disbursements then the relevant provisions of

paragraph 12 shall be applied.

9.(1) The review of Credit Facilities is an important process through which the ACIs reassess

Borrower's ability to repay his Credit Facilities, as well as to evaluate the profitability

generated from the Borrower. During the review process ACIs shall obtain updated

information relating to Borrower’s demographics, financial and business information and

information of any problems encountered by the Borrower.

During the review process ACIs shall update all documents mentioned in subparagraphs

6.(2)(a)(i), 6.(2)(a)(ii), 6.(2)(b), 6.(3) and 6.(4) and all insurances relating to the Borrower /

Credit Facility. The updated data shall be at the disposal of the ACIs at least one (1)

month prior to the review date of the Credit Facilities and therefore the ACIs must

promptly inform Borrowers for the submission of the relevant documents. If the Borrower

22

does not provide these documents one (1) month prior to the review date of the Credit

Facilities, then the ACIs must evaluate the Borrower for impairment.

The requirements of this subparagraph apply to Borrowers with Credit Facilities

presenting no excesses / arrears. For Borrowers with excesses / arrears, the provisions of

the Directive on Arrears Management of 2013 apply.

The Borrower and the Guarantor must be informed about the procedure of the updating of

the information and the consequences included in the Loan agreement / contract of non

compliance with the above, at the very early stages of the approving procedure of the

Credit Facility.

9.(1)(a) In case a Borrower (either natural person or legal entity) has at least one revolving

Credit Facility, for example an overdraft account (credit cards are exempted) then

all his Credit Facilities shall be reviewed at least once every twelve (12) months.

In case the Borrower is a member of a group of Connected Persons then the

Credit Facilities of the whole group shall be reviewed.

The depth of the review should be commensurate to the type of the Borrower, the

risk level and the total amount of the Borrower’s Credit Facilities. For retail

customers with regular cash inflows to their accounts the review may be

facilitated by the use of automated processes.

9.(1)(b) In case the Borrower’s Credit Facilities are all non revolving, then Borrower’s

demographics, financial and business information and information of any

problems encountered by the Borrower shall be updated at least:

1. Every year for legal entities and their Connected Persons.

2. Every year for natural persons and their Connected Persons with gross

exposure equal or over three hundred thousand Euro (€ 300.000), and

3. Every three (3) years for natural persons and their Connected Persons with

gross exposure less than three hundred thousand Euro (€ 300.000).

The financial information obtained by the ACIs must be analysed and reflected in

Borrower’s credit rating to enable ACIs to take early action in case of

deterioration of the Borrower’s credit rating. The actions to be followed must be

23

clearly defined in ACIs’ credit policies.

For the purposes of subparagraph 9.(1)(b) “gross exposure” is defined as the

sum of Borrower’s funded and non-funded commitment.

PART IV - SPECIAL LENDING CASES

10.(1) ACIs are required to provide Borrowers with adequate information regarding the risks

involved in foreign currency lending or in case the Credit Facility granted to a Borrower

is in a currency different from the Borrower’s income currency. Such information shall

be sufficient to enable Borrowers to take well-informed and prudent decisions and shall

at least encompass the impact on instalments due to fluctuations of exchange rates or

of a severe depreciation of the currency of Borrower’s income.

In case of foreign currency lending or in case the Credit Facility granted to a Borrower

is in a currency different from the Borrower’s income currency, ACIs shall examine and

evaluate the additional risks undertaken other than credit risk. For example the ACIs

shall take into consideration, among other, the risks emerging from, the fluctuation of

the exchange rate, the interest rates increase, the country risk etc.

In case of foreign currency lending or in case of granting a Credit Facility in a currency

different from the Borrower’s income currency, it is difficult to compute, either the

percentage defined in paragraph 7.(4)(a)(ii), or the accurate instalment amount, due to

fluctuations in exchange rates. Therefore, Credit Facilities granted in foreign currency

or in a currency different from the Borrower’s income currency shall, in general, be

avoided especially in cases where the Borrowers opt for such Loans on speculative

grounds.

An ACI may grant a Credit Facility in foreign currency or in a currency different from the

Borrower’s income currency, as long as such cases are outlined in detail in ACI’s credit

policy, and in case it is not outlined in detail in the ACI’s credit policy then the consent

of the Risk Management Unit is required. In such a case the ACI must ensure that the

contract signed with the Borrower gives the right to the ACI to unilaterally change the

currency of the Credit Facility upon certain trigger events. (for example when the

exchange rate exceeds a certain threshold), the contract shall also require from the

Borrower to provide extra collateral to improve LTV ratio in case LTV ratio deteriorates

24

due to exchange rate fluctuations.

In case of lending corporate Borrowers in foreign currency or in a currency different

from the Borrower’s income currency, then ACIs shall require from such Borrowers to

hedge against currency risk.

ACIs shall ensure that all products offered in foreign currency are also offered in Euro.

10.(2) There are cases where the repayment programme of a Credit Facility includes a lump

sum payment amount so as to facilitate the scope as well as the smooth repayment of

the Credit Facility. An ACI may grant a lump payment to a Credit Facility as long as

such cases are outlined in detail in ACI’s credit policy, and in case it is not outlined in

detail in the ACI’s credit policy then the consent of the Risk Management Unit is

required.

The need of a lump sum payment shall be rigorously justified and the sources of lump

sum payment shall be prudently examined and evaluated and assumptions made shall

be realistic and based on market conditions prevailing at the time of approving the

Credit Facility.

Especially in the case of financing a project (development financing) the ACIs may set

a lump sum payment on Loan maturity, so as to facilitate the smooth repayment of the

Loan as in such cases cash flows emanating from the project are usually expected on

or after the completion of the project.

ACI shall include appropriate terms and conditions in the Loan contract, allowing them

to partially repay the Loan, by decreasing the lump sum, with cash inflows from sales

during the construction of the project, in a ratio at least equal to the participation ratio of

the ACI in financing the project.

10.(3) There are cases where the repayment programme of a Credit Facility includes a grace

period for capital or in very exceptional cases grace period for capital and interest so

as to facilitate the scope as well as the smooth repayment of the Credit Facility. The

need of grace period shall be rigorously justified.

25

An ACI in calculating the Loan instalment of a Loan with grace period shall take into

consideration the fact that the interest accrued during the grace period is capitalised.

Grace period for capital or grace period for capital and interest, shall, in general, not

exceed twenty four (24) months, except in cases of projects with construction period

more than twenty four (24) months. In such a case, grace period shall not exceed the

construction period.

ACIs shall include appropriate terms and conditions in the Loan contract, allowing them

to partially repay the Loan, with cash inflows from sales during the construction of the

project, in a ratio at least equal to the participation ratio of the ACI in financing the

project.

10.(4) Specialised Credit Facilities such as shipping Loans, syndicated Loans, require

expertise and the right credit policy and monitoring. Such lending is of high risk and as

such, ACIs shall make sure that relevant staff has the appropriate experience,

qualifications and expertise to deal with such lending. Loan appraisal / approving

authorities shall examine and evaluate whether market conditions prevailing are

favourable for such lending. Therefore ACIs, shall not engage in such activities unless

they have adequate and experienced personnel and appropriate systems to manage

the relevant credit risk.

10.(5) In cases where Loans of foreign ACIs are booked in Cyprus subsidiaries, and are

collateralised with cash, then the Cyprus subsidiary shall obtain an external legal

vetting of the pledging agreement to ensure that no residual credit risk exists or to

measure it if it exists.

PART V - PROCEDURES OF FINANCING IMMOVABLE PROPERTY AND LAND

DEVELOPMENT

11. In order to safeguard that the proceeds of a Loan granted to a Borrower for the purchase of

immovable property, are utilised for the repayment of the Credit Facility granted to a developer

for the specific project, the procedure below shall be followed:

a. If the purchaser and the developer are Borrowers of the same ACI, then the ACI shall, after

every disbursement from purchaser’s Loan, credit an amount, at least, equal to the

26

percentage of ACI’s contribution to the project, in the Loan account of the developer from

which the specific project is financed. Confirmation of this transaction shall be kept in the

credit files of the purchaser and the developer.

b. If the purchaser and the developer are not Borrowers of the same ACI, then the ACI

granting the Loan to the purchaser shall, after every disbursement from purchaser’s Loan,

transfer the amount disbursed, to the ACI of the developer (either by wire transfer or by a

bank draft). The wire transfer / bank draft shall be in favour of the developer’s ACI and not

in favour of the developer.

In case of wire transfer, details of payment shall state the name of the purchaser, the name

of the developer and details of the project. In case a bank draft is issued, it must be

accompanied by a letter stating the name of the purchaser, the name of the developer and

details of the project.

The developer’s ACI after receiving the wire transfer / bank draft shall inform the

purchaser’s ACI by a letter confirming that an amount of at least, equal to the percentage of

ACI’s contribution to the project, has been credited to the Loan account of the developer

from which the specific project was financed. This letter shall be kept in the purchaser’s

credit file together with a copy of the wire transfer / bank draft.

12. Lending to developers or project finance is of high risk and as such, ACIs shall make sure that

relevant staff has the appropriate experience, qualifications and expertise to deal with such

lending. Loan appraisal / approving authorities shall examine and evaluate whether market

conditions prevailing are favourable for this type of development and whether market

conditions will be favourable at the time of completion of the project.

In the case of granting Credit Facilities for development or project finance then the Credit

Facility shall be gradually disbursed so that the ACI ensures that the Credit Facility proceeds

are utilised for the Credit Facility scope and be able to monitor the work in progress. This

procedure shall be followed even if the Credit Facility is secured by mortgage on a property

other than the one financed, or by any other type of collateral.

The duration of the construction shall be stated in the detailed cost analysis provided by the

Borrower. The project shall be divided into various main stages each one having a

27

construction duration stated in the detailed budget and detailed cost analysis.

The ACI’s valuer shall assess and approve:

(i) The total duration of the construction.

(ii) The construction duration of each stage.

(iii) The cost analysis of the project.

The different deadlines of these stages shall be inputted in ACI’s IT system for monitoring

purposes.

Lending to developers for construction / renovation / completion of immovable property shall

be fully settled within twelve (12) months from project’s completion date.

During the Loan drawdown period, any new disbursement shall be approved by the

appropriate approving authority as this is outlined in ACI’s credit policy. In order to approve the

new disbursement the appropriate Loan approving authority shall have in hand a work in

progress certificate from the ACI’s valuer which:

(i) Certifies Borrower’s own contribution for the previous stage,

(ii) Certifies that previous disbursement has been utilised for the project scope,

(iii) Certifies that the cost of the completed stage is the same as the budgeted cost,

(iv) Certifies that the “current open market value” (“current OMV”) of the project is of that

amount so that “current Loan to Value” (“current LTV”) is less than or equal to the LTV

ratio originally approved, where

x 100%

“Total disbursed amount” shall include the Loan amount disbursed for the project and any

other amount of Credit Facilities secured by the said property.

The ACI shall incorporate adequate controls to ensure that Loan disbursement does not cover

cost overruns in order to avoid a situation where the Loan is fully disbursed but the project is

not completed. If the Borrower needs additional financing for cost overruns, a new application

must be submitted and properly assessed before the ACI decides whether to extend additional

financing.

28

PART VI - VALUERS AND VALUATION REPORT

13.(1) ACIs shall have a properly approved panel of valuers using appropriate selection

criteria consistent with Loan portfolio risk. ACIs shall carry out an on ongoing

assessment of performance of the valuers and decide whether a valuer shall remain or

not in the panel. The panel of valuers shall include expertise in various areas of

property sector appropriate to the lending business of the ACI, among other, expertise

in development sites, hotels, golf courses.

Selection criteria of valuers (internal and external) may, among others, be suitable

experience and qualifications and valuers must have a professional indemnity

insurance. ACIs shall annually review valuer’s professional indemnity to ensure that it

is adequate and valid.

The immovable property shall be evaluated by an independent valuer listed in ACI’s

approved panel of valuers and the ACI shall require valuers to disclose any interest

they might have in the property to be valued or whether they have or had any previous

material involvement in the property. ACIs must ensure that the valuer is not a

Connected Person to either the buyer or the seller of the property.

ACIs shall ensure that no firm of valuers has the bulk of their valuations, for example

not exceeding 20% of all valuation reports, without this constituting an absolute limit.

13.(2) The valuation report is a core document in credit risk decision and Loan approval and

review process. ACIs shall have a clear policy and valuation guidelines which shall be

reviewed and approved by the Board of Directors on an annual basis. Furthermore:

a. Valuation instructions to valuers shall be clear and written.

b. Valuation reports shall be addressed to the ACI and not to the Borrower.

c. Market valuations should be carried out in accordance with the RICS Valuation

Standards (Red Book) or European Valuation Standards (Blue Book) or

International Valuation Standards (White Book).

d. ACIs shall assess the appropriateness of the method of the valuation. This method

shall be according to the type of the property and shall be clearly stated in the

valuation report. (for example a hotel may be evaluated using the cost of

29

replacement method, or the future profitability method).

e. Valuation process shall be standardised so as to allow for consistency and accurate

analysis of the project / property.

f. There shall be clear policy and guidelines on frequency of valuations which shall be

based on Central Bank of Cyprus Directive for the Calculation of Capital Adequacy

and Large Exposures of 2006 to (No 2) of 2011, risk profile of the exposure and its

impact on ACI’s capital position.

g. In case of material change (either positive or negative) for example changes in

planning zones, planning permission, a revised valuation shall be sought.

h. ACIs shall have appropriate processes in place to flag out-dated valuations. These

processes shall enable the identification of properties which suffered a decline in

their value and therefore need a revised valuation.

i. Credit risk staff and the Loan appraisal / approving authorities shall be trained in

property valuation methods and processes used.

j. ACIs shall set criteria specifying the cases where more than one valuation shall be

obtained. Criteria shall take into consideration both the Credit Facility amount and

the property value.

k. In the case of granting Credit Facilities for development or project finance then the

valuation report shall clearly state the values and main characteristics of each unit -

especially if this unit is to be sold separately.

PART VII - BEST PRACTICES

14. The under mentioned points are considered as key aspects of sound governance for credit risk

undertaking which ACIs shall follow:

a. Applying the principle of proportionality, there shall be segregation of duties among the staff

involved in the loan origination process. Especially relationship officers shall not have any

approving authority. There shall be no sales target on loan expansion set for Loan

approving authorities.

b. Staff involved in the loan origination process shall be experienced, qualified and with

relevant expertise in the various lending categories for example real estate, project finance,

energy, shipping.

c. In case where the application relates to a transfer of relationship from one ACI to another,

the ACI which is to grant the new Credit Facilities must be extremely cautious in assessing

the real reasons why the Borrower wishes this transfer.

30

d. The staff responsible for the Credit Facility disbursement must ensure that all relevant

documents were received, are properly signed by all the involved parties and fully comply

with the Loan approval conditions. Special attention shall be given to security documents. If

the approval given includes any conditions precedent to the disbursement of the Credit

Facility, then, prior to the Loan disbursement, the responsible staff shall confirm that the

Borrower has fully complied with those conditions.

e. As a basic principle non-performing Credit Facilities of a legal entity shall not be taken over

by another legal entity, unless there are sound economic reasons for doing so and such

action improves the servicing of the Credit Facilities.

f. ACIs shall avoid approving any excess to overdraft accounts, instead, they are advised to

approve temporary limit which must be depicted in the ACIs’ computerised systems and

fully justified before approval. ACIs shall make every effort possible to eliminate any

excesses.

g. ACIs shall ensure that Borrower’s overdraft account is used for working capital

requirements and if the overdraft account presents a hardcore borrowing, this must be

converted to a loan facility and a regular repayment programme should be set.

h. Accounts that have no limit shall not have a debit balance. ACIs shall make every effort

possible to eliminate debit balances of such accounts.

PART VIII - SPECIAL PROVISIONS

15. ACIs are not allowed to:

a. Grant a Credit Facility and the Credit Facility proceeds placed in a deposit and pledged as

cash collateral. This does not include the use of escrow accounts which are used to control

the disbursement of funds in project finance cases.

b. Grant a Credit Facility for the purpose of buying shares or any capital instruments of the

ACI or any entity of the group to which the ACI belongs. This restriction does not apply to

Special Purpose Vehicle (SPV) set up by the ACI in order to facilitate the acquisition of

property in satisfaction of debts.

c. Grant Borrowers the option of suspension of any instalment per year, except in cases of

housing loans where the Loan agreement / contract provides for the option of suspension of

two (2) instalments per annum. In case the ACI approves, this option it shall make the

assumption that the Borrower takes advantage of this option every year and the ACI shall:

(i) Calculate the total duration of the loan including the months for which instalments may

31

be suspended, and thus assess whether the total duration of the Loan is in accordance

with the ACI’s credit policy.

(ii) Take into account the accrual of interest on the deferred payments in order to calculate

the debt servicing amount and to assess the repayment ability.

16. ACIs must specify in their credit policy whether it is likely to approve Credit Facilities which are

not consistent with the general credit policy of the ACI. In case the ACI adopts this approach,

then it shall include it in its credit policy and follow an “Exception to Policy” process for

example granting of a housing Loan to a Borrower without regular income, but substantial

irregular cash flows. ACIs shall establish detailed procedures for "Exception to Policy" in order

to allow such exceptions as long as they are prudent and have received explicit approval from

the appropriate approving authority, but do not introduce a loophole in the lending policy.

17. The use of automated processes for certain retail products such as credit cards, may help to

minimise operational cost and are not precluded by the provisions of this Directive. However,

ACIs must ensure that these processes lead to consistent and high quality Loan decision. In

such cases of automated processes ACIs shall put in place criteria for automated identification

of triggering of credit events to be investigated by the relevant credit officers servicing as early

warning signals.

PART IX - FINAL PROVISIONS

18. The circulars relating to financing of immovable property dated 24/11/2003, 28/4/2004,

13/6/2006, 27/7/2006, 26/3/2007, 12/7/2007, 22/8/2007 and 27/5/2008 as well as all

clarifications provided through electronic mail are hereby cancelled.

19. This Directive takes effect from the date of its publication in the Official Gazette of the Republic

of Cyprus and ACIs shall fully comply with its provision by 31 March 2014.