The main problem faced by the Cypriot economy in recent years was the disproportionately large size of the banking sector in relation to the country's gross domestic product. The failure of the banking system led to the imposition of a bailout programme by international lenders. The country's banks have successfully recapitalised, but the main issue they faced was the number of non-performing loans that they had to deal with. Banks had difficulty managing the securitisation and sale of non-performing loan portfolios because it was a restricted and cumbersome activity. Recent changes to the law give banks the opportunity to proceed with the securitisation of non-performing loans and make them available to investors.

In particular, the Sale of Credit Facilities and Related Matters Law 2015 was recently enacted. It is now possible for a broad number of legal entities to engage in activities for acquiring credit facilities in Cyprus. This development expands the range of investment possibilities in Cyprus for credit and financial institutions as well as private companies, subject to prior authorisation from the Central Bank of Cyprus.

Scope of application

The Sale of Credit Facilities and Related Matters Law applies to credit facilities granted to natural persons and to micro and small enterprises.

The law does not cover credit facilities:

  • granted to natural persons who are not permanent residents of Cyprus or legal persons which are not registered in Cyprus;
  • in relation to operations and investments outside of Cyprus;
  • which have as principal collateral property situated outside of Cyprus; and
  • which are governed by foreign law.

Eligibility for acquiring credit facilities

The following types of legal person may acquire credit facilities:

  • a credit acquiring company, including an asset management company established by private or public funds;
  • a credit institution authorised by the Central Bank;
  • a credit institution that is authorised and supervised by the competent authority of another EU member state that has the right to provide services or establish a branch in Cyprus; or
  • a financial institution that is a subsidiary of a credit institution incorporated in a member state that has the right to provide services or establish a branch in Cyprus.

Credit acquiring companies must be licensed by the Central Bank.

The governor of the Central Bank can impose administrative fines of up to €250,000 on ineligible persons that acquire credit facilities.

Sale of credit facilities

Prior to the sale of a credit facility, the credit or financial institution must:

  • publish its intention to sell the credit facility in the Official Gazette and three additional daily newspapers; or
  • notify the borrower and its guarantor(s) of an option to purchase the credit facility themselves and submit a proposal within 45 days.

The seller of a credit facility will report the following information to the Central Bank every six months:

  • the number and amount of credit facilities sold; and
  • the number and amount of credit facilities purchased by the borrower.

A credit facility that is transferred to any of the entities listed above is deemed to be transferred to the purchaser on the date that all rights and obligations that derive from the credit facility agreement are transferred between the transferee and the borrower. All security created pursuant to the credit facility (including guarantees) is transferred to the purchaser. All rights, priority and obligations are transferred to the purchaser, as well as any documents, goods or assets in the possession of the transferor connected to the credit facility being transferred.

The transfer of the credit facility does not affect:

  • any ongoing procedure that commenced pursuant to the Insolvency Individuals (Personal Plans Repayment and Debt Waiver Order) Law or the provisions of the Companies Law (Cap 113) relating to examinership;
  • the right of the borrower to make an application under the Insolvency Individuals (Personal Plans Repayment and Debt Waiver Order) Law or to appoint an examiner under the Companies Law (Cap 113); or
  • the code of conduct attached to the Central Bank's Arrears Management Directive 2015.

The purchaser must notify the borrower within five business days of the transfer.


Eligible entities that are in breach of the provisions of the Sale of Credit Facilities and Related Matters Law or any directives issued pursuant to the same may be subject to administrative fines of up to €250,000 and/or revocation of their licence.

Any entity breaching the law or any directives issued pursuant to the same and/or an officer thereof may be criminally liable and subject to a fine of up to €250,000 each.

For further information on this topic please contact Marios Koutsios or Demetris Nicolaou at Harneys Aristodemou Loizides Yiolitis LLC by telephone (+357 2582 0020) or email ( or The Harneys website can be accessed at

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