Plans to provide small businesses in Cyprus access to basic payment accounts are set for parliamentary discussion, despite ongoing objections from various stakeholders. The House commerce committee concluded discussions on two legislative proposals aimed at extending banking access to very small businesses after nearly three years of deliberation.
- She referenced a note submitted to the committee in January 2025, which raised questions about the compatibility of extending the consumer definition with the underlying European directive.
- Additionally, the consumer protection service indicated that it is still awaiting the legal service's completion of an initial legislative review of the proposed bills.
- With the parliamentary vote approaching, the future of these legislative initiatives will be closely watched by those invested in the banking and business sectors.
Key Proposals on the Table
The first proposal seeks to integrate very small enterprises into the existing framework for basic payment accounts. This legislation aims to enhance the transparency and comparability of bank charges associated with these accounts.
The second proposal would prevent banks from denying a consumer’s application for a basic payment account on the grounds that the individual already holds such an account with another financial institution.
A Long-Standing Initiative
Costas Costas, one of the MPs behind the proposals, noted that the initiative to redefine “consumer” to include very small businesses dates back to 2020. This effort coincided with discussions regarding amendments for the transposition of a European directive into Cypriot law.
At that time, the initiative was postponed following warnings from the then commerce minister about impending legal action from the European Union due to delays in implementing the directive. Lawmakers were informed that a government bill would address the matter, but as of now, no such legislation has been presented.
Concerns from Government Bodies
Despite the proposals moving forward, they have encountered significant resistance from various state bodies. Avgi Chrysostomou-Lapathiotis, representing the finance ministry, expressed concerns that the changes would impose broader obligations on banks that are already addressed by existing legislation, much of which is related to EU harmonisation.
She referenced a note submitted to the committee in January 2025, which raised questions about the compatibility of extending the consumer definition with the underlying European directive.
Additionally, the consumer protection service indicated that it is still awaiting the legal service’s completion of an initial legislative review of the proposed bills.
Central Bank’s Stance
The Central Bank of Cyprus (CBC) has also questioned the necessity of these proposed changes. CBC spokesperson Artemis Nicolaou remarked that it remains unclear how many businesses would actually opt for such basic payment accounts.
During the committee meeting, she highlighted that complaints received thus far have not substantiated a pressing need for the regulation. Furthermore, she cautioned that any measures assigning additional responsibilities to the CBC should first be discussed with the European Central Bank (ECB).
Banking Sector’s Opposition
The banking sector’s opposition has been particularly vocal. Michalis Kronides, a senior director from the banks association, stated that the proposals would undermine banks’ autonomy in deciding whom they engage with as clients.
Kronides warned that lenders could be compelled to open accounts for businesses deemed high-risk, citing cryptocurrency firms as a potential example of this risk. He underscored that under the current framework, basic payment accounts are designed specifically for consumers, meeting their routine banking needs.
Understanding Basic Payment Accounts
According to the consumer protection service, a payment account with basic features allows for essential banking services, including deposits, withdrawals, direct debits, card payments, online transactions, and credit transfers. It also facilitates the opening, operation, and closure of the account itself.
Next Steps for Legislation
As the proposals move to the parliamentary plenary, it remains to be seen how lawmakers will address the concerns raised by various stakeholders. The ongoing dialogue reflects a broader discussion on how to best support very small businesses in Cyprus while balancing the interests and obligations of banks and regulatory bodies.
With the parliamentary vote approaching, the future of these legislative initiatives will be closely watched by those invested in the banking and business sectors.
