Official Gazette No. 122

23.11.01

THE LAW

THE CENTRAL BANK OF THE

TURKISH REPUBLIC OF NORTHERN CYPRUS

Assembly of the Turkish Republic of Northern Cyprus enacts the following law:

Law No:41/2001

Short Name

1. This Law is shortly named as the Law on the Central Bank of the Turkish Republic of Northern Cyprus.

Interpretation

2. Unless required otherwise in the text of the law:

“The Council of Ministers” shall mean the Council of Ministers of the Turkish Republic of Northern Cyprus.

“The Prime Minister” shall mean the Prime Minister of the Turkish Republic of Northern Cyprus.

“The Ministry”, shall mean the Ministry In Charge of the Economic Affairs.

“ The Central Bank” shall mean the Central Bank of the Turkish Republic of Northern Cyprus.

“The Banks” shall mean those banks that operate within the framework of the provisions of the Banks Law.

“The Governor” shall mean the Governor of the Central Bank.

“The Vice-Governor” shall mean each of the vice-governors of the Central Bank.

“The Member” shall mean the members of the Board, apart from the Governor and the Vice-Governors.

“The Board” shall mean the Board of Directors established under Article 10 of the present law.

Establishmet

And Title

Objective

3. A Bank has been established under the title of " the Central Bank of the Turkish Republic of Northern Cyprus” with a legal personality, possessing those powers and duties as set out in the present Law.

4. The objective of the Central Bank is to implement the monetary-credit policies that can facilitate the economic development, and regulate and supervise the banking system, in line with the development plans and annual programmes.

Powers and Duties of the Central Bank

(1)

Duties of the Central Bank are as follows:

(A)

To attain the primary objective indicated in Article 4 of the present Law, carry out all the transactions required for the regulation and supervision of the monetary and banking system of the Turkish Republic of Northern Cyprus;

(B)

To carry out the transactions that have to be normally made by Central Banks, by taking the economic conditions into consideration;

(C)

To supervise the banks and other institutions established for granting credits;

(Ç)

To take measures that would ensure stability in the financial system and take regulatory measures with respect to monetary and foreign exchange markets;

(D)

To monitor the financial markets; and

(E)

To establish payment agreement systems, make regulations that would ensure the uninterrupted working and supervision of the existing or future systems, and determine the methods to be employed, including the electronic media.

(2)

Without any prejudice to the generality of the provisions of paragraph (1) above, the powers of the Central Bank are as follows:

(A)

To regulate the volume of money and credits;

(B)

To regulate and administer the international reserves of the Turkish Republic of Northern Cyprus;

(C)

To act as the financial and economic advisor of the State, by way of stating its views on those issues of monetary and credits policy, on which the Council of Ministers requires scrutiny;

(Ç)

To act as the financial agent of the State with respect to the international financial and economic relations;

(D)

To act as the banker of the State and to act as the banker of those banks that require this and become their financial agency;

(E)

To grant advances to the Insurance Fund of Savings Deposits in line with procedures and principles it shall determine, in cases of emergency and in the event that resources of the Fund fails to meet the needs;

(F)

To seek information and collect statistical data from the banks and other financial organizations and other establishments and organizations that are in charge of regulating and supervising these, with the aim of monitoring the financial markets;

(G)

To prevent all sorts of transactions and applications that might jeopardize the rights of the depositors and the orderly and secure operating of the banks, and that might create significant damages to the economy, also, to take and implement all the necessary decisions and measures designed to ensure the effective operating of the credit system;

(H)

To administer the gold and foreign exchange reserves of the country; and

(I)

To grant credits to the banks as the final authority for credits.

(3)

The Central Bank is the financial and economic advisor, the financial agent and the treasurer of the Government. The relation of the Bank with the Government shall be maintained through the Minister in charge of Treasury.

(4)

The Central Bank shall be commissioned and empowered: to make and implement regulations with respect to the duties and powers entrusted to it by the present Law and legislations, and to supervise, with the establishments and organizations that are subject to the said regulations, whether or not there exists compliance with all these regulations and whether or not the information supplied to it are accurate.

(5)

The Central Bank carries out and exercises the duties and powers entrusted to it by the present law under its own responsibility and in an independent manner. The Bank shall participate in the Liquidation Council in its capacity as the privileged creditor for the amount owed to it, together with its interest, in the event of the bankruptcy of a bank, person or an institution with whom the Central Bank undergoes a transaction whilst carrying out and exercising its duties and powers under the present Law.

Head Office and Agencies

(1)

The head office and the head branch of the Central Bank are in Nicosia.

(2)

The Central Bank may appoint correspondents or agencies abroad or may cancel such an appointment.

Memberships and Participations

7. The Central Bank may become a member of international financial, economic and professional organizations in which the Central Banks participate and may participate in such organizations as a shareholder.

Capital

8. The nominal capital of the Central Bank shall be TL 20.000.000.000.000. -TL (Twenty Trillion Turkish Lira), which completely belongs to the Turkish Republic of Northern Cyprus. This capital may be increased upon the proposal of the Board of the Central Bank and upon the decision of the Council of Ministers.

Organization and Organs

9. Organs of the Central Bank are as follows:

(1) Board (of Directors);

(2) Governor;

(3) Vice-Governor.

(4) Administrative Organization of the Head Office and the Head Branch.

Establishment of the Board

10.

(1)

(2)

The Board consists of a Chairman and four members to be appointed as required by the present Law. The Board shall designate an Acting Chairman to act for the Chairman in his absence.

The Vice-Governors may attend the Board meetings without any right to vote.

Powers and Duties of the Board

11.

The duties and powers of the Board shall be as follows:

(1) To determine the rates of rediscount, discount and interest, as well as the fees and commissions it will impose for the own transactions of the Central Bank,

(2) To take regulatory measures over the investments of the Central Bank in terms of kind and amount, and arrange the overall credit volume, as well as the distribution of the credit types within the overall credit volume in terms of sectors and subjects,

(3) To determine the principles and conditions for the credits to be opened, as well as the rediscount and advance limits,

(4) To determine the issues indicated in Article 23 with regard to the reserve requirements,

(5) To determine the issues indicated in Article 24 with regard to the interest rates,

(6) To scrutinize the balance sheet, profits-losses account of the Central Bank and decide upon them,

(7) To make regulations with regard to the administration, organization and services of the Central Bank,

(8) To purchase or lease immovable property as part of meeting a need of the Central Bank and sell the immovable property owned by the Central Bank, when deemed necessary,

(9) To decide for an amicable settlement or cancellation from the records, concerning the amounts and values that exceed the acceptable limits,

(10) To approve the annual budget and activity report of the Central Bank,

(11) To appoint the personnel of the Central Bank and determine the power of signature for the personnel who would place the Bank under liability,

(12) To determine other banking transactions and services to be carried out by the Central Bank,

(13) To take decisions on those issues to be submitted to the examination and approval of the Chairman (Governor),

(14) To determine the principles and conditions for the issuance and acceptance of the credit cards,

(15) As required by the Banks Law, to take the necessary measures for the supervision of the banks, determine the necessary principles and procedures that they have to comply with, with a view to preventing the weakening of their financial structures and to determine and enforce those points concerning the ratios and other rates to be applied,

(16) To take decisions within the framework of the powers delineated by the Banks Law.

Meetings of the Board

12.

(1)

The Board shall be summoned to meet, by the Chairman or by the Vice-Chairman, commissioned to act for the Chairman in the temporary absence of the Chairman or in case of a temporary failure to carry out his duties.

(2)

The Board meetings are held as many times as the execution of duties requires, but at least once a month.

(3)

The agenda of the Board meetings is determined by the Chairman or by the Vice-Chairman, commissioned to act for the Chairman, in the temporary absence of the Chairman or in case of a temporary failure to carry out his duties.

However, those points that the other members may wish to be discussed off the agenda are also included in the agenda and discussed at the same meeting. Otherwise, it shall be decided that they be included in the agenda of the next meeting.

(4)

The Board meets with the participation of at least three members and takes decisions with the same kind of votes of at least three members.

(5)

None of the actions or procedures of the Board shall be considered null and void because of the absence of any of the Board members.

(6)

Chairman, Vice-Chairman and members cannot participate in the Board meetings that involve issues about the persons with whom they have got relationships (spouse, child, mother, father, sister-brother, grandchild, his spouse’s relatives of the same degree involving blood and marriage relationship).

(7)

All the speeches made and decisions taken at the Board meetings shall be recorded in the minutes and signed by those who have participated in that particular meeting. Unless decided by the Board otherwise, these minutes are confidential.

Appointment, Term of Office and Qualifications of the Governor

13.

(1)

The Governor shall be appointed by the Prime Minister, with the approval of the Council of Ministers, for a term of five years. It is possible to re-appointed at the end of this term.

(2)

The person to be appointed as the Governor must have had a higher education and must have had an experience in the fields of banking, economy, finance and accounting for at least ten years, at least five years of which being in the area of management.

(3)

Unless based on a special law, the Governor cannot deal with any legislative, official or private job outside the Central Bank. Moreover, the Governor cannot deal with trade and commerce, nor can he become a shareholder in the banks, cooperative banks and companies. Duties at the charity associations and the trusts dealing with charity, social and educational affairs, as well as non-profit cooperative partnerships shall be outside the scope of this article.

Powers and Duties of the Governor

14.

The powers and duties of the Governor are as follows

(1)

In the capacity as the highest executive officer, to manage the Central Bank.

(2)

To represent the Central Bank within the country and abroad.

(3)

To ensure the enforcement of the provisions of this Law and the decisions taken by the Board and

(4)

To take appropriate measures in order to carry out the duties entrusted to Central Bank by the present Law, and make proposals to the Board on such measures whenever he shall deem necessary.

Appointment, Term of Office and Qualifications of the Vice-Governors

15.

(1)

The Central Bank shall have two Vice-Governors who are appointed by the Prime Minister with the approval of the Council of Ministers for a term of three years. It is possible for them to be re-appointed at the end of this term.

(2)

The person to be appointed as the Vice-Governor must have had a higher education and must have had an experience in the fields of banking, economy, finance and accounting for at least ten years, at least five years of which being in the area of management.

(3)

Unless based on a special law, the Vice-Governors cannot deal with any legislative, official or private job outside the Central Bank. Moreover, the Vice-Governor cannot deal with trade and commerce, nor can he become a shareholder in the banks, cooperative banks and companies. Duties at the charity associations and the trusts dealing with charity, social and educational affairs, as well as non-profit cooperative partnerships shall be outside the scope of this article.

Powers and Duties of the Vice-Governors

16.

(1)

The Vice-Governors shall be entrusted with and responsible for duly executing their own part of duties incumbent upon them, resulting from the division of duties to be made by the Governor.

(2)

In the absence of the Governor, the Vice-Governor whom the former has commissioned to act for him in his absence exercises all the powers of the Governor.

Appointment, Term of Office and Qualifications of the Members

17.

(1)

The members shall be appointed by the Council of Ministers.

(2)

The person to be appointed as the Member must have had a higher education and must have had an experience in the fields of banking, economy, finance and accounting for at least ten years.

(3)

The members shall be appointed for a term of four years. Each year, the one-fourth of the members, apart from the Governor, shall be renewed. It is possible for the members to be re-appointed at the end of their term of office.

(4)

In the event that the membership of any person ends before the completion of his term of office, the Council of Ministers shall appoint a person possessing the qualifications set out in the paragraph (2) of the present article, for the remaining part of the term of office of such person whose Board membership ends in such manner.

Persons Who Cannot be Appointed to the Board

18.

The persons indicated in the below paragraphs cannot be appointed to the Board:

(1)

Cabinet Ministers, Members of Parliament, Mayors, Municipal Council members.

(2)

Persons who are actively serving the Security Forces, Police Organization, Department of Religious Affairs, local administrations, Ministries and organizations attached to the Ministries.

(3)

Persons who are serving as a director or employee a financial institution in the Turkish Republic of Northern Cyprus, including cooperatives, as well as those persons who possess such an amount of shares as would enable them to keep control at such institutions.

(4)

Bankrupts, those who been given prison sentence or those, even though being pardoned, who have been convicted for dishonorable offences such as bribery, theft, swindling, forgery, corruption, rape, fraudulent bankruptcy and alike.

Termination of the Board Membership

19. The Board membership shall be terminated in the following instances:

(1)

Death,

(2)

Written resignation,

(3)

In the event that the member fails to participate in three consecutive meetings of the Board, without permission or excuse.

Salaries

20.

(4)

In the event that any of the instances indicated in Article 18 of the present Law occurs.

Salaries of the Governor, Vice-Governors and members shall be determined by the Council of Ministers. In conformity with the method of their appointment and irrespective of whether or not there is a contradictory provision in any other law, these persons may be employed on a contractual basis.

Administrative Organization of the Bank

Cap 123

10/1959

34/1959

9/1960

21.

(1)

With the aim of harmonizing with financial markets in the Turkish Republic of Northern Cyprus, Turkey and European Union, the staff of the Central Bank must comply with the business hours to be determined by the Board of the Central Bank, outside the days indicated in the Bank Holidays Law.

42/1996

(2)

The staff of the Bank shall have the right to strike.

However, the staff may exercise this right upon the condition that the Board is informed with a three-day notice in advance regardless of the provisions contained in the Law of Collective Labor Contract, Strikes and Referendums, and upon the condition that the necessary measures are taken so as not to disrupt the transactions with regard to the services listed below and that an uninterrupted service be given by a core staff:

(A)

Discount and advance transactions;

(B)

Joint preservation transactions;

(C)

Deposit accounts, transactions on debentures bonds and transfers;

(Ç)

Cash desk transactions;

(D)

Transactions on supervisions of banks and other institutions formed with the aim of giving credits;

(E)

Clearinghouse transactions;

(F)

Risk Centre transactions;

(G)

Open market operations;

(H)

Transactions concerning money