Law on the Issue of Covered Bonds and Covered Bond Public Supervision and Related Matters of 2021

1506 E.E. Par. I(I) N. 166(I)/2021 No. 4857, 5.11.2021 LAW PROVIDING FOR THE ISSUE OF COVERED BONDS AND PUBLIC SUPERVISION OF COVERED BONDS AND FOR RELATED MATTERS ARRANGEMENT OF SECTIONS Preamble ARTICLE PART INTRODUCTORY PROVISIONS

1. Short title.
2. Interpretation.
3. Subject matter and scope. PART II STRUCTURAL CHARACTERISTICS OF COVERED BONDS Chapter 1: Dual recourse and protection against insolvency risk
4. Dual recourse.
5. Protection of covered bonds against insolvency risk.
6. Securing claims and rights in the winding-up process.
7. Rights of covered bond investors and other cover pool creditors in the event of disposal of cover assets and cover pools.
8. Priority of cover assets over underlying security. Chapter 2: Cover pools and cover Part A: Eligible assets
9. Eligible cover assets.
10. Security assets located outside the European Union.
11. Intra-group covered bond pooling structures.
12. Joint financing.
13. Composition of cover pools, introduction and removal of assets from cover pools.
14. Categories of primary assets.
15. Derivative contracts in cover pools.
16. Segregation of cover assets.
17. Obligation to maintain a cover pool register.
18. Register of security assets for derivative contracts.
19. Registration of an asset and derivative contract in the cover pool register.
20. Prohibition of creating encumbrances on cover assets and derivative contracts included in cover pools.

1507 21. Obligations of CIs with covered bond liabilities in case of breach of cover pool adequacy criteria. 22. Appointment of a cover pool and covered bond monitor. 23. Power of the Central Bank to appoint a cover pool and covered bond monitor in certain cases. 24. Duties and obligations of the cover pool and covered bond monitor. 25. Obligation of the cover pool and covered bond monitor to provide information and submit reports to the Central Bank. 26. Powers of the cover pool and covered bond monitor. 27. Obligation of CIs with covered bond liabilities to provide documents and information to the cover pool and covered bond monitor. 28. Powers of the Central Bank. 29. Dismissal of the cover pool and covered bond monitor. 30. Resignation of the cover pool and covered bond monitor. 31. Liability of the cover pool and covered bond monitor. 32. Issuance of a directive regarding the cover pool and covered bond monitor. 33. Independence of the cover pool and covered bond monitor. 34. Information to covered bond investors. Part B: Cover and liquidity requirements. 35. Cover requirements. 36. Requirement for a liquidity safety buffer for cover pools. 37. Conditions for extendible maturity structures. 38. Obligation to maintain a reserve in relation to cover assets subject to set-off. PART III PUBLIC SUPERVISION OF COVERED BONDS 39. Public supervision of covered bonds. 40. Right to inspect the cover pool register. 41. Supervision of covered bond activities. 42. License for covered bond programs. 43. Competences of the Central Bank regarding the approval of CIs. 44. Register of approved CIs. 45. Application for registration as an approved CI. 46. Conditions and decision of the Central Bank for the registration of a CI in the register as an approved CI. 47. Right to issue covered bonds by a CI registered in the register of approved CIs. 48. Modification of the terms of registration of an approved CI. 49. Deletion from the register of approved CIs. 50. Consequences of deletion of a CI from the register of approved CIs. 51. Prohibition of issuing covered bonds by an approved CI. 52. Register of covered bonds. 53. Application for registration in the register of covered bonds. 54. Decision of the Central Bank on an application for registration in the register of covered bonds.

1508 55. Recording of information in the register of covered bonds for registration, deletion, and issuance of bonds. 56. Result of the registration of bond issuance in the register of covered bonds. 57. Deletion of covered bond issuance from the register of covered bonds. PART IV WINDING-UP PROCEDURE OF CIs WITH COVERED BOND LIABILITIES 58. Results of the winding-up process on covered bond activities. 59. Disposal of cover pools. 60. Return of surplus to the CI from the proceeds of the disposal of cover pools. 61. Provisions regarding CIs with more than one covered bond issuance or covered bond programs. 62. Public supervision of covered bonds in the event of insolvency or resolution. 63. Power of the Central Bank to appoint a special manager. 64. Remuneration of the special manager. 65. Obligations of the special manager. 66. Competences of the special manager. 67. Vacation of office and dismissal of the special manager. 68. Appointment of a new special manager. 69. Replacement of the special manager. 70. Liability of the special manager and other relevant persons. 71. Termination of the appointment of the special manager. 72. Exemption from certain provisions of the Companies Law and the Bankruptcy Law. PART V REORGANIZATION OF CIs WITH COVERED BOND LIABILITIES 73. Reorganization of CIs with covered bond liabilities. PART VI ASSUMPTION OF COVERED BOND LIABILITIES AND COVER POOLS BY ANOTHER APPROVED CI 74. Possibility of assuming cover pools and covered bond liabilities by another approved CI. 75. Assumption procedure. 76. Submission of reports to the Central Bank. 77. Powers of the Central Bank for the purposes of public supervision of covered bonds. 78. Administrative sanctions and other measures. 79. Right to appeal. 80. Publication of administrative sanctions and other measures. 81. Obligation of cooperation of the Central Bank. 82. Publication of information by the Central Bank.

1509 PART VII LABELLING 83. Labelling. 84. Criminal offences. PART VIII FINAL AND TRANSITIONAL PROVISIONS 85. Transitional provisions. 86. Power of the Central Bank to issue directives. 87. Fees. 88. Civil liability. 89. Disclosure of information to authorized recipients. 90. Sending of notices. 91. Repeal. 92. Continuation of the validity of directives and individual administrative acts. 93. Commencement of the validity of this Law.

1510 N. 166(I)/2021 on the Issue and Public Supervision of Covered Bonds and for Related Matters Law of 2021 is enacted by publication in the Official Gazette of the Republic of Cyprus in accordance with Article 52 of the Constitution. Number 166(I) of 2021 LAW PROVIDING FOR THE ISSUE AND PUBLIC SUPERVISION OF COVERED BONDS AND FOR RELATED MATTERS Preamble. Official Gazette of the E.E.: L 328, 18.12.2019, p. 29. For the purposes of (a) harmonization with Titles I, II, III, IV, and VI of the act of the European Union titled "Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on covered bonds and public supervision of covered bonds and amending Directives 2009/65/EC and 2014/59/EU"; and (b) establishing further arrangements for the preservation and protection of the rights of investors in covered bonds, the House of Representatives votes as follows: PART I INTRODUCTORY PROVISIONS Short title. Interpretation. Official Gazette of the E.E.: L 176, 27.06.2013, p. 1; L 204, 26.6.2020, p. 4.

1. This Law shall be cited as the Law on the Issue and Public Supervision of Covered Bonds and for Related Matters of 2021. 2.-(1) In this Law, unless the context otherwise requires- "fair value", in relation to immovable property, means fair value as defined in Article 4, paragraph 1, point 76) of Regulation (EU) No. 575/2013; 66(I) 74(I) 94(I) 119(I) 4(I) 151(I) 231(I) 235(I) 20(I) 80(I) 100(I) 123(I) 27(I) 104(I) 107(I) 14(Ι) 87(Ι) of 1997 of 1999 of 2000 of 2003 of 2004 of 2004 of 2004 of 2004 of 2005 of 2008 of 2009 of 2009 of 2011 of 2011 of 2012 of 2013 of 2013 "mortgage value", in relation to immovable property, means mortgage value as defined in Article 4, paragraph 1, point 74) of Regulation (EU) No. 575/2013; "claim against the public" means an exposure secured by the guarantee of the Government of the Republic, a regional government, another state, the Central Bank of Cyprus, a central bank of another state, public sector entities, local authorities of the Republic or another state, international supranational organizations, including multilateral development banks, as determined by decision of the Central Bank. "CI" has the meaning attributed to this term by Article 2 of the Credit Institutions Law;

1511 102(I) of 2013 141(I) of 2013 5(I) of 2015 26(Ι) of 2015 35(I) of 2015 71(Ι) of 2015 93(I) of 2015 109(I) of 2015 152(I) of 2015 168(I) of 2015 21(Ι) of 2016 5(I) of 2017 38(I) of 2017 169(Ι) of 2017 28(I) of 2018 89(I) of 2018 153(Ι) of 2018 80 (Ι) of 2019 149(I) of 2019 21(Ι) of 2020 73(I) of 2020 28(I) of 2021 94(Ι) of 2021 95(Ι) of 2021. "CI with covered bond liabilities" means an approved CI that has issued covered bonds which remain in force, or a CI that has been deleted from the register of approved CIs, which, at the time it was an approved CI, had issued covered bonds which remain in force; "competent authority" means the Central Bank; 22(Ι) of 2016 "resolution authority" has the meaning attributed to this term by Article 2 of the Credit Institutions and Investment Firms Resolution Law; 96(Ι) of 2021. "par value authority" has the meaning attributed to this term by paragraph (8) of Article 35; "CI with covered bond liabilities" means an approved CI that has issued covered bonds which remain in force, or a CI that has been deleted from the register of approved CIs, which, at the time it was an approved CI, had issued covered bonds which remain in force; "automatic acceleration" means the case in which, upon the insolvency or resolution of the issuer, a covered bond becomes automatically immediately due and payable, and in which an investor in the covered bond has an enforceable claim for payment at a time prior to the original maturity date; Official "public undertaking" has the meaning attributed to this term by Regulation 2 of the Control of State Aid (Transparency of Financial Relations between the Gazette, State and Public Undertakings) Regulations of 2007; Annex III (I): 23.2.2007. "public supervision of covered bonds" means supervision of covered bond programs with which compliance with the requirements applicable to the issuance of covered bonds is ensured and these requirements are enforced; "winding-up process" means- (a) in relation to a CI with covered bond liabilities- Cap. 113. 9 of 1968 76 of 1977 17 of 1979 105 of 1985 198 of 1986 19 of 1990 (i) winding-up in accordance with Part V of the Companies Law, including the appointment of a provisional liquidator in accordance with Article 227 of the same Law;

1512 46(Ι) of 1992 96(Ι) of 1992 41 (Ι) of 1994 15(Ι) of 1995 21(Ι) of 1997 82 of 1999 149(Ι) of 1999 2(Ι) of 2000 135(Ι) of 2000 151 (Ι) of 2000 76(Ι) of 2001 70 of 2003 167(Ι) of 2003 92 of 2004 24(I) of 2005 129(I) of 2005 130(I) of 2005 98(I) of 2006 124(I) of 2006 70(I) of 2007 71(I) of 2007 131(I) of 2007 186(I) of 2007 87(I) of 2008 41 (I) of 2009 49(I) of 2009 99(I) of 2009 42(I) of 2010 60(I) of 2010 88(I) of 2010 53(I) of 2011 117(I) of 2011 145(Ι) of 2011 157(I) of 2011 198(Ι) of 2011 64(Ι) of 2012 98(Ι) of 2012 190(I) of 2012 203(I) of 2012 6(Ι) of 2013 90(Ι) of 2013 74(I) of 2014 75(I) of 2014 18(Ι) of 2015 62(Ι) of 2015 63(Ι) of 2015 89(I) of 2015 120(Ι) of 2015 40(Ι) of 2016 90(Ι) of 2016 97(Ι) of 2016 17(Ι) of 2017 33(Ι) of 2017 51(Ι) of 2017 37(I) of 2018 83(Ι) of 2018 149(Ι) of 2018 163(I) of 2019 38(Ι) of 2020 43(I) of 2020 191(Ι) of 2020 192(Ι) of 2020 43(Ι) of 2021 117(Ι) of 2021 (ii) appointment of a receiver-manager, within the meaning of Part VI of the Companies Law; (iii) any of the cases referred to in paragraphs (2), (4), (6), (9) and (11) of Article 73;

1513 Official Gazette of the E.E.: L 331, 15.12.2010, p. 84; L 334, 27.12.2019, p.1. Official Gazette of the E.E.: L 331, 15.12.2010, p. 12; L 334, 27.12.2019, p.1. (iv) approval of a compromise or arrangement between the CI and its creditors of any class of creditors, in accordance with paragraph (2) of Article 198 of the Companies Law, excluding the taking of reorganization measures, in accordance with Article 33 of the Credit Institutions Law; (v) other procedure relating to the inability of the CI to pay its debts, procedure relating to winding-up, possible winding-up of the CI; (b) in the case where the CI with covered bond liabilities is a Housing Finance Organization- (i) dissolution by law; (ii) inability to pay debts by analogy application of Articles 202A(3), 209, 210 212 of the Companies Law; (iii) an event that, if it occurred in relation to a CI with covered bond liabilities, would constitute a winding-up process; "demergers" means corporate reorganizations provided for in paragraph (c) of paragraph (1) of Article 201A of the Companies Law, including corporate reorganizations that would fall under the said Article, if the disappearing company were a public company, within the meaning of Article 2 of the same Law; "cross-border merger" has the meaning attributed to the term "cross-border merger of capital companies" by Article 201H of the Companies Law; "segregation" means actions carried out by a CI issuing covered bonds in order to identify the cover assets and to legally delimit them, so that they cannot be accessed by other creditors other than covered bond investors, other cover pool creditors and counterparties to derivative contracts; "extendible maturity structure" means a mechanism that provides for the possibility of extending the scheduled maturity of covered bonds, for a predetermined period of time and in the event of occurrence of a specific triggering event; "ESMA" means the European Securities and Markets Authority established by the act of the European Union titled "Regulation (EU) No. 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Decision 2009/77/EC", as last amended by Regulation (EU) No. 2019/2175 of the European Parliament and of the Council of 18 December 2019; "EBA" means the European Banking Authority established by the act of the European Union titled "Regulation (EU) No. 1093/2010 of the European Parliament and of the Council, of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC", as last amended by Regulation (EU) No. 2019/2175 of the European Parliament and of the Council of 18 December 2019; "special manager" means a person or entity appointed to manage a covered bond program, in the event of insolvency of a CI issuing covered bonds under that program, when it has been established that such CI is in a state of insolvency or may be in a state of insolvency, in accordance with paragraph (1) of Article 42 of the Credit Institutions and Investment Firms Resolution Law, or, in exceptional circumstances, if the relevant competent authority establishes that the orderly functioning of such CI is seriously threatened; "approved CI" means a CI that is registered in the register of approved CIs in accordance with the provisions of Part III;

1514 22(Ι) of 2016 96(Ι) of 2021. Official Gazette of the E.E.: L 176, 27.6.2013, p.1; L 204, 26.6.2020, p. 4. Official Gazette of the E.E.: L 119, 4.5.2016, p.1. 138(Ι) of 2002 166(Ι) of 2003 34(Ι) of 2007 86(Ι) of 2013 103(Ι) of 2013 66(Ι) of 2014 139(Ι) of 2014 144(Ι) of 2014 107(I) of 2016 170(Ι) of 2017. "commercial loan" means any form of financial facility, as defined by the Central Bank, which is secured on immovable property used or intended for commercial purposes; "derivative contract security" means an asset, which is provided as security to a CI with covered bond liabilities by any counterparty to a derivative contract, provided that the terms of the provision of security provide for- (a) transfer of the asset to the CI with covered bond liabilities, or provision of the asset as a guarantee; and (b) the right of the CI with covered bond liabilities to use the asset as if it had been transferred to it; "resolution" has the meaning attributed to this term by Article 2 of the Credit Institutions and Investment Firms Resolution Law; "encumbrance" "encumbered" means mortgage, floating charge, fixed charge, pledge, right of retention, assignment and/or any security under any law; "European Commission" means the European Commission of the European Union; "net liquidity outflows" means payment outflows that become due on one day, including principal and interest payments and payments under derivative contracts of the covered bond program, minus all payment inflows that become due on the same day for claims related to cover assets; "covered bond" means a debt security issued by a CI in accordance with the provisions of this Law and secured by cover assets, on which investors in covered bonds and other cover pool creditors have the right of direct recourse as preferential creditors; "Regulation (EU) No. 575/2013" means the act of the European Union titled "Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012", as last amended by Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020; "Regulation (EU) 2016/679" means the act of the European Union titled "Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation)"; "Central Bank" means the Central Bank of Cyprus governed by the Law on the Central Bank of Cyprus and for the purposes of this Law is defined as the competent authority; "Member State" means a Member State of the European Union or another state which is a contracting party to the Agreement on the European Economic Area, which was signed in Oporto on 2 May 1992 and adjusted by the Protocol, which was signed in Brussels on 17 May 1993; "register of approved CIs" means the register maintained by the Central Bank in accordance with Article 44;

1515 Official Gazette of the E.E.: L 173, 12.06.2014, p. 190. L 328, 18.12.2019, p. 29. 43 of 1980 18 of 1982 34 of 1991 36(Ι) of 1996 17(Ι) of 1998 26(Ι) of 2000 132(Ι) of 2000 136 of 2002 81(I) of 2003 164(I) of 2004 42(I) of 2005 96(I) of 2017 113(I) of 2019 118(I) of 2021. Official Gazette of the E.E.: L 177, 30.6.2006, p. 2. "register of covered bonds" means the register maintained by the competent authority in accordance with Article 52; "cover pool register" means the register maintained by the CI with covered bond liabilities in accordance with Article 17; "shipping loan" means any form of financial facility, as defined by the Central Bank, which is secured on ships; "Directive 2014/59/EU" means the act of the European Union titled "Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, as well as Regulations of the European Parliament and of the Council (EU) No. 1093/2010 and (EU) No. 648/2012", as last amended by Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019; "Directive (EU) 2019/2162" means the act of the European Union titled "Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on covered bonds and public supervision of covered bonds and amending Directives 2009/65/EC and 2014/59/EU"; "group" has the meaning attributed to this term by Article 4, paragraph 1, point 138) of Regulation (EU) No. 575/2013; "Housing Finance Organization" means the organization established under the Housing Finance Organization Law; "asset" means an asset which constitutes acceptable security for covered bonds for the purposes of paragraph 68 of Annex VI of the act of the European Union titled "Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 on the taking up and pursuit of the business of credit institutions"; "cover pool creditor", in relation to a CI with covered bond liabilities, means- (a) a person other than the investor, who has rights in relation to the covered bonds under any legal contractual relationship with the investor; (b) a person with whom the CI with covered bond liabilities has entered into a derivative contract included in the cover pool, provided that the person has not breached the terms of the contract; (c) a person other than the CI with covered bond liabilities, who finances the payment of lawful claims of cover pool creditors; (d) the cover pool and covered bond monitor;

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