Offshore Banking Units (OBUs)
	A wide range of activities are eligible for the benefits, including deposits of non-residents, lending, trade related services and other foreign currency transactions. OBUs may only transact business with non-residents of the TRNC and in foreign currencies. Like other offshore entities, all their shareholders are also non-residents. As an exception to the rule, OBUs are allowed to do business with offshore entities operating from the TRNC and their foreign employees. Also, with specific permission, they may provide certain banking services in the TRNC in connection with development projects. OBUs may not, however, offer banking services to foreign embassies and their staff. OBUs are expected to set as their primary objective the improvement, expansion or diversification of banking and financial services to non-residents of the TRNC, with the aim of assissting in the creation of an international offshore financial centre. New banking business may be generated from customers abroad, or by diverting existing business of the bank from another location to the TRNC OBU, or from the growing number of offshore entities operating from the TRNC.
	Organisation
	The establishment of an OBU is governed by the Companies Law and by the statutes and regulations pertaining to the establishment and operation of banks, namely the Banking Law, the Central Bank Law, and the Exchange Control Law and regulations. An OBU may take the form of either a branch or a local subsidiary of a foreign bank. Apart from the legal differences between the two forms of OBUs, the screening of applications for a licence and the supervision exercised by the Central Bank on the operations of a branch may be less stringent than in the case of a subsidiary. Also, a minimum share capital and a minimum capital to risk asset ratio is required for a locally incorporated subsidiary.
	Regulations
	The rules governing the operation of OBUs are designed to enable these to operate with maximum freedom compatible with sound banking principles. All OBUs are required to be licensed under the provisions of the Offshore Banking Services Law. The guidelines and conditions for obtaining a licence are the following: as a rule, only branches and subsidiaries of banks enjoying a good reputation and which are licensed in countries which exercise proper licensing and banking supervision will be considered eligible for a licence. The Central Bank will obtain the written consent of the applicant bank's home licensing and supervisory authority, which exercises consolidated supervision over its global activities. where an OBU is a subsidiary of a foreign bank, the parent is expected to provide an appropriate letter of comfort. OBUs are required to maintain their accounting systems and records, as well as all correspondance regarding to their banking business in the Turkish language. OBUs must operate as fully staffed units and not merely as "brass plate" or "managed bank" type operations. OBUs are not permitted to accept deposits from residents and non-resident persons of Cypriot origin. OBUs are required to pay the Central Bank an annual fee of US$ 10,000 as reimbursement of the cost of its supervisory function. in all documents, name plated and advertisements, OBUs must use after or immediately below their name, the expression "Offshore Banking Unit".
	Procedure for Obtaining an Offshore Banking Licence
	The authority to grant a licence vests in the Minister of Finance, in his capacity as the Controller of Banks. Applications must be submitted to the Central Bank of the TRNC. The information normally required includes the following: background information about the applicant bank, including its short, middle and long-term goals and details of major/ controlling shareholders. auditedd financial statements for the last three years a copy of applicant's Charter or Memorandum and Articles of Association and those of the proposed subsidiary company, where appropriate. type of proposed offshore banking unit operations experience and qualifications of proposed local management. The Central Bank considers each application on its own merits and, in the case of established international banks, the required information may be considerably reduced.
	Reporting Requirements
	OBUs are required to prepare annual financial statements for submission to the Central Bank within three months from the end of each financial year. OBUs operating as branches of foreign banks are required to prepare financial statements as if they were a separate legal entity. These financial statements must be audited by independent accountants.
	Exemptions and Benefits
	OBUs enjoy all the advantages and benefits available to offshore business entities. Offshore banking units shall not be obliged to comply with requirements regarding liquidity, capital ratio against risk and similar reserves envisaged in the Central Bank Law of the TRNC. However, they shall be bound to give information concerning their activities upon demand of the Central Bank. OBUs are classified as non-resident for exchange-control purposes and, as such, can cooperate freely without any exchange control restrictions. However, they are required to open a current account in a foreign currency with a local bank for making payments to residents in respect of their current and administrative expenses. OBUs are granted full banking secrecy.
	Representative Offices
	Foreign banks may also establish a branch in the TRNC to operateas a Representative Office. The Representative Office may facilitate contacts between the bank and customers by: gathering financial and commercial information soliciting banking business among non-residents following up transactions initiated and discharged outside the TRNC. A Representative Office may not engage in any form of banking business or other direct financial transactions. Applications to establish a Representative Office are submitted to the Central Bank of the TRNC. The particulars are to be submitted are similar to those required for the establishment of an OBU, except that no feasibility study is required. As with OBUs, Representative Offices are subject to supervision and inspection by the Central Bank of the TRNC and are required to pay an annual control fee of US$ 10,000 to the Central Bank as reimbursement for the cost of its supervisory function. Representative Office are also required to prepare and submit to the Central Bank annual audited financial statements, as if they were a separate legal entity.
	References
	North Cyprus Business Guide, 1994; Published by D.K. Deniz & Co. Chartered Accountants, 15 Memduh Asaf St., Nicosia - North Cyprus, via Mersin 10, Turkey Tel. 00-90-392-228 6708 Fax: 00-90-392-228 6709