EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 23 March 2011 
on legislation related to covered bonds 
(CON/2011/27) 
 Introduction and legal basis
 
On 2 February 2011, the European Central Bank (ECB ) received a request from the Cypriot Ministry of 
Finance for an opinion on certain draft laws (hereinafter  the ‘draft laws’) related to the Law on the issue 
of covered bonds from approved inst itutions and the business of covered bonds by institutions with 
covered bonds obligations (hereina fter the ‘Law on covered bonds’)1. 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and on the fifth and sixth indents of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions2, as the draft laws relate to payment and settlement systems and to 
rules applicable to financial institutions insofar as they materially influence the stability of financial 
institutions and markets. In accordance with the first sen tence of Article 17.5 of the Rules of Procedure of 
the European Central Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the draft laws The draft laws supplement the Law on covere d bonds on which the ECB was consulted earlier
3. 
Specifically, they amend: (i) the Law on banking4; (ii) the Law on the transfer of banking activities5; 
(iii) the Law on Department of Lands and Surveys (fees and charges)6; (iv) the Law on immovable 
property (transfer and mortgage)7; (v) the Law on companies8; and (vi) the Law on cooperative societies9 
(hereinafter collectively referred to as the ‘basic la ws’). The purpose of the proposed amendments is to 
                                                 
1  Law 130(I)/2010, Episimi Efimerida tis Dimokratias,  Annex I(I), No 4266, 23.12.2010. 
2  OJ L 189, 3.7.1998, p. 42. 
3  See Opinion CON/2010/73; all ECB Opinions are pub lished on the ECB’s website  at www.ecb.europa.eu. 
4  Law 66(I)/1997, Episimi Efimerida tis Dimokratias,  Annex I(I), No 3168, 18.7.1997. 
5  Law 64(I)/1997, Episimi Efimerida tis Dimokratias,  Annex I(I), No 3168, 18.7.1997. 
6  Cap 219. 
7  Law 9(I)/1965, Episimi Efimerida tis Dimokratias,  Annex I(I), No 393, 15.3.1965. 
8  Cap 113. 
9  Law 22(I)/1985, Episimi Efimerida tis Dimokratias,  Annex I(I), No 2043, 29.3.1985. 
2 bring the basic laws into line with the provisions of the Law on covered bonds, so as to facilitate the 
application of its provisions.  
 2.  General remarks  In Opinion CON/2010/73, the ECB had expressly drawn th e consulting authority’s attention to the need 
for the competent Cypriot authorities to consult the ECB on the draft laws as a prerequisite for a thorough assessment of the parameters relevant to the app lication of the Law on covered bonds, as well as for a 
comprehensive evaluation by the ECB of its interplay with other relevant Cypriot legislation that may 
have an impact on the rights of bondholders, in particul ar vis-à-vis of the issuers of Cypriot law-governed 
covered bonds
10. The ECB understands that the draft laws c over the amendments to be made to all 
relevant Cypriot legislation having a bearing on the i ssuance of covered bonds in Cyprus. It also notes 
that it was consulted, at an earlier stage, on a Dir ective of the Central Bank of Cyprus intended to 
complement the Law on covered bonds, and which has since been adopted11. The ECB welcomes the 
present consultation request, which follows up on the a dvice conveyed in its earlier opinion. The ECB is 
satisfied that, subject to its specific comments, the draft laws supplement the Law on covered bonds in a 
manner consistent with the protection of the intere sts of bond holders and the protection of financial 
stability. 
 3.  Specific remarks 3.1  Article 48 of the  Law on cooperative societies and the new Article 33N of the Law on banking are 
to be amended and introduced, respectively, so that cooperative credit societies and banks with 
covered bond liabilities cannot be dissolved, despite  the fact that their business has been fully 
wound up, before the cooperative credit societies’ Commissioner or the Central Bank of Cyprus have ‘terminated’ (‘ τερματίσει ’) the appointment of the covered bonds administrator, in accordance 
with Article 67 of the Law on covered bonds. The ECB understands that the reference in the draft 
law to the ‘termination’ of the appointment of  the covered bonds administrator is intended as a 
reference to the completion of the process leadin g up to the termination of the administrator’s 
appointment, rather than to the ‘termination’ of the administrator’s mandate. The consulting 
authority may wish to consider a less equi vocal formulation for both provisions.  
3.2  A new Article 298A is to be introduced into the Law on companies, to the e ffect that claims based 
on covered bonds cannot be filed by  their holders individually, in their capacity as the issuer’s 
creditors, but rather by the covered bonds administ rator, who shall file such claims collectively 
with the liquidator. The ECB understands that th e purpose of this new provision is to facilitate, 
procedurally, the verification of claims where an  institution with covere d bonds obligations is 
                                                 
10  See Opinion CON/2010/73, paragraph 2.3. 
11  Central Bank of Cyprus Directive on the Issuance of Covered Bonds of 2010, Episimi Efimerida tis Dimokratias,  
Annex III(I), No 4468, of 23.12.2010. 
3 wound-up. The ECB also understands that the propo sed restriction of individual claims is not 
intended to restrict the assertion, by bondholders , of their claims against the bonds’ issuer, where 
the latter is in the process of being wound-up, but rather to contribute to the orderly exercise of 
such claims.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 23 March 2011. 
 
[signed] 
 
The Vice-President of the ECB 
Vítor CONSTÂNCIO