EN ECB-PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 1 February 2016 
on the recovery and resolution of credit institutions and investment firms  
(CON/2016/5) 
 
Introduction and legal basis 
On 22 December 2015, the European Central Bank (ECB) received a request from the Cypriot Ministry of 
Finance for an opinion on three draft laws. The first relates to the resolution of credit institutions and 
investment firms (hereinafter the ‘draft Law on resolution’). The second concerns a draft law on the business of credit and other institutions (hereinafter the ‘draft Law on credit institutions’) and the third 
relates to a draft law on a deposit guarantee scheme and the resolution of credit and other institutions 
(the ‘draft Law on a deposit guarantee scheme’) (hereinafter collectively referred to as the ‘draft laws’).  
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 the third and sixth indents of Article 2(1) of Council 
Decision 98/415/EC
1, as the draft laws relate to the Central Bank of Cyprus (CBC) and rules applicable to 
financial institutions insofar as they materially influe nce the stability of financial institutions and markets. 
In accordance with the first sentence 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 
1.1 The purpose of the draft laws is to implement  Directive 2014/59/EU of the European Parliament 
and of the Council2 and some provisions of Directive 2014/ 49/EU of the European Parliament and 
of the Council3 into Cypriot law, which will provide a new framework for the recovery and resolution 
of certain types of entities active in financial market s, including credit institutions, investment firms, 
and financial holding companies established in Cy prus. Such an implementation will ensure that 
Cypriot law is consistent with existing Union legislation in this field. The draft laws regulate the 
procedures to be applied by the authorities in relation to the recovery and resolution of credit and 
financial institutions at both individual and group level.  
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
2  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, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).  
3  Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes 
(OJ L 173, 12.6.2014, p. 149). 
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2 1.2 Cyprus had already established a comprehensive framework of this type in 2013, on which 
framework and its subsequent amendments the ECB had been consulted4 prior to 
Directive 2014/59/EU and Directive 2014/49/EU being adopted. After Directive 2014/59/EU was 
adopted as the new European framework for the recovery and resolution of credit institutions and investment firms, it became necessary to replac e some of the existing Cypriot legislation with a 
new framework that uniformly addresses all the issues associated with the potential failure of 
entities in the financial sector. Therefore, the draft laws propose to repeal two existing laws in this 
field, i.e. the Law on the resolution of credit and other institutions of 2013 and 2014
5 and the Law 
on the establishment and operation of a deposit protection and resolution of credit and other 
institutions scheme6. According to the draft Law on resolution, all the resolution measures that are 
still in force, which were taken on the basis of  the Law on the resolution  of credit and other 
institutions of 2013 and 2014, will be considered as measures adopted on the basis of the draft 
Law on resolution upon its adoption, and will continue to be in force until they are completed, repealed or cancelled
7.  
1.3 The CBC is the competent authority for the super vision of credit institutions in Cyprus and was 
designated as the national resolution authority fo r those institutions under the above legislative 
framework. Pursuant to the draft Law on re solution the CBC will be also designated as the 
resolution authority for investment firms, which are supervised by the Cyprus Securities and Exchange Commission. 
1.4 The tools available to the CBC include preparatory measures, early intervention measures and the 
possibility to write down or convert capital instruments. The resolution tools may be applied, 
mutatis mutandis , to both credit institutions and investment firms. 
 Preparatory measures include recovery plans and group financial support agreements. 
Credit and financial institutions are required to draw up recovery plans, which are then 
reviewed and assessed by the CBC. The CBC may also require these recovery plans to be updated
8. The resolution authority for each institution that is not part of a group subject to 
consolidated supervision is responsible for drawing up resolution plans for these institutions. 
These institutions, as well as the groups  themselves, are subject to resolvability 
assessments by the resolution authority. 
 Early intervention measures include updating and implementing recovery plans, requesting 
that management be removed and special administration.  
 Capital write-down measures concern the power to write down or convert to equity the 
capital instruments of a distressed institution that would otherwise be non-viable, either 
outside of or as part of a resolution. These powers are vested in the CBC9. 
                                                 
4  See Opinions CON/2013/10 and CON/2014/60. All ECB opinions are published on the ECB’s website at 
www.ecb.europa.eu.  
5  Law on the resolution of credit and other institutions 2013 and 2014 (L.17( Ι)/2013, L.38( Ι)/2013, L.97( Ι)/2013 and 
L.90(I)/2014). 
6  Law on the establishment and operation of a deposit protection and resolution of credit and other institutions scheme 
(L.16(I) 2013). 
7    Article 115(1) of the draft Law on resolution. 
8  See Article 23A of the draft Law on credit institutions. 
9  Article 30(1) of the draft Law on resolution and Article 32D of the draft Law on credit institutions. 
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3  Regarding resolution measures, institutions that are failing or likely to fail and meet the other 
resolution conditions are put into resolution whereby: (a) their shares, ownership instruments, assets, rights or liabilities may be transferred to a purchaser; (b) their shares or 
other ownership instruments may be transferred to a bridge institution; (c) their assets, rights, or liabilities may be transferred to an asset management vehicle company; and/or (d) 
they may be subject to bail-in
10. Subject to Regulation ( ΕU) No 806/2014 of the European 
Parliament and of the Council11 the CBC’s decision to place an institution into resolution or 
take other resolution action is subject to the prior approval of the Minister for Finance in 
cases where the decision has a direct fiscal impact or systemic implications12. The CBC may 
require institutions to pay all operating expenditures and costs incurred during the 
performance of its responsibilities and powers, such as administrative and operating expenditures, the costs of legal and consultancy services and any outsourcing costs
13. 
1.5 A resolution fund will be available in order to ac hieve resolution objectives. Under the draft Law on 
a deposit guarantee scheme, there will be a fund fo r the resolution of credit and other institutions 
(hereinafter the ‘resolution fund’), which is one of the funds managed under the scheme for deposit 
guarantee and resolution of credit and other institutions operating in Cyprus (hereinafter the 
‘DGS’)14. From 1 January 2016, the contributions that credit institutions established in Cyprus make 
to the resolution fund have been transferred to the Union’s single resolution fund in accordance with the provisions of the Agreement on transfer  and mutualisation of contributions to the single 
resolution fund
15. The DGS, which is a separate legal entity, administers the resolution fund, the 
deposit guarantee fund for credit institutions and th e deposit guarantee fund for credit cooperatives. 
The funds are managed by an independent commission of five members that includes the CBC 
Governor, who chairs the Commission, two CBC employees and two employees from the Ministry of Finance
16. The funds are financed by: (a) ordinary ex ante and extraordinary ex post 
contributions levied on institutions licensed in Cyprus; (b) loans or other types of financial support from credit institutions, financial institutions or  other third parties, in the event that the amounts 
collected are not sufficient to cover losses and resolution costs; and (c) proceeds from sanctions 
and the liquidation of assets. 
                                                 
10  Article 42 of the draft Law on resolution. 
11  Regulation ( ΕU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform 
rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 
225, 30.7.2014, p. 1). 
12  Article 4 of the draft Law on resolution. 
13  Article 8 of the draft Law on resolution. 
14  Pursuant to Article 4(1)(b) of the draft Law on a deposit guarantee scheme, one of the DGS’ objectives is ‘financing 
through the Resolution Fund, the adoption of resolution measures as provided in this Law and the Law on resolution of credit and other institutions’. The Cypriot DGS was set up under the Law on the establishment and operation of a deposit protection and resolution of credit and other institutions scheme (L.16(I)/2013) and other related laws and regulations. For a summary description of the DGS see paragraph 1.4 of Opinion CON/2013/10. The draft Law on a 
deposit guarantee scheme aims to amend that legal framework in order to implement Directive 2014/59/EU and 
Directive 2014/49/EU in Cyprus. 
15  Article 11(2) of the draft Law on a deposit guarantee scheme. The Agreement can be found on the Council’s website 
at www.consilium.europa.eu. 
16  Article 6(2) and Part III of the draft Law on a deposit guarantee scheme.  
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4 1.6 In accordance with the ‘no creditor worse off’ principle, shareholders or creditors that have incurred 
greater losses in a resolution than they would have incurred in a winding-up under normal insolvency proceedings are entitled to the payment of the difference from the resolution fund
17. The 
CBC is required to undertake a separate independent assessment for this purpose as soon as possible after the resolution action is taken
18. 
1.7 Procedural requirements ensure that resolution measures are properly notified and that the 
authorities involved in resolution and their staff are subject to a confidentiality regime. The CBC, as 
resolution authority, and other competent authorit ies are required to cooperate with each other. 
Additionally, all competent authorities involved in a resolution are required to provide one another, upon request, with all the relevant information to carry out their tasks. The CBC is authorised to 
impose administrative measures and administrative sanctions for violation of the draft Law on resolution and measures taken thereunder
19. 
1.8 The liability of the CBC Governor, the Minister  of Finance, the members of the CBC Board of 
Directors and CBC staff is limited to actions conducted in bad faith, gross negligence and wilful 
misconduct20. The liability of the Board of Directors memb ers and senior managers of entities that 
results from the application of resolution tools,  e.g. a bridge institution or asset management 
company, as well as the liability of any other person authorised to act for the CBC under the draft 
Law on resolution, is also limited to gross negligence, bad faith and wilful misconduct21. 
 
2. General observations 
2.1 The ECB welcomes the draft laws, as they strengthen the tools and procedures available to the 
CBC to carry out effective preventive measures, early intervention and effective resolution in line 
with the common framework of intervention powers, rules and procedures laid down in Directive 2014/59/EU. 
2.2 The ECB stresses, however, that it does not opi ne on whether the draft laws effectively implement 
Directive 2014/59/EU and Directive 2014/49/EU into Cypriot law. The ECB focuses instead on 
those provisions that may impact on the roles and tasks of the CBC as a central bank and as a 
member of the European System of Central Banks (ESCB), as well as those provisions that may 
impact the specific tasks conferred on the ECB by Council Regulation ( ΕU) No 1024/2013
22. 
2.3 The ECB underlines that it has developed guidance, set out in paragraphs 2.5.1 to 2.5.3, on the 
basis of which it may decide whether a new task conferred on an ESCB national central bank 
(NCB) is to be considered a central banking task or a governmental task for the purposes of assessing such a conferral against the prohibition of monetary financing under Article 123 of the 
                                                 
17  Article 77 of the draft Law on resolution. 
18  Article 76(1) (a) of the draft Law on resolution. 
19  Article 108 of the draft Law on resolution. 
20  Article 111 of the draft Law on resolution. 
21  Article 112 of the draft Law on resolution. This limitation of liability continues to apply after the end of such an 
appointment or the accomplishment of such a task. 
22  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
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5 Treaty23. This guidance applies to genuinely new tasks that either did not exist in the past or did not 
form an integral part of the central banking tasks previously assigned to the NCB. The tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but 
may be reassessed if they are subject to substantive legislative amendments.  
2.4 In this regard, the EC B notes that the CBC has had extensive powers to take specific resolution 
measures in relation to credit institutions since 2013
24. The ECB also notes that the draft Law on a 
deposit guarantee scheme does not confer new tasks on CBC in connection with the operation of 
the deposit guarantee fund for credit institut ions and the deposit guarantee fund for credit 
cooperatives. The draft Law on resolution extends the existing powers and responsibilities of the CBC as the resolution authority for credit institutions, and complements the CBC’s responsibilities 
by also designating it as the resolution authorit y for investment firms. Whilst the CBC has powerful 
tools to intervene in distressed financial institutions, such as credit institutions and credit 
cooperatives, which pose a risk to financial st ability, principally in the form of a special 
administration regime, the draft Law on resolution extends the resolution tools, such as the bail-in, 
bridge institution and asset management vehicle tools, to investment firms. The draft Law on 
resolution should therefore be assessed in the light of the prohibition of monetary financing.  
2.5 The concrete assessment of whether the CB C’s task of acting as a resolution authority for 
investment firms is to be considered a central banking task or a governmental task is then undertaken in paragraph 3.4 of this opinion. 
2.5.1   General considerations  
First, the principle of financial independence requires that the Member States may not put their 
NCBs in a position where they have insufficient fi nancial resources to carry out their ESCB- or 
Eurosystem-related tasks.  
Second , central banking tasks comprise in particular those tasks that are related to the tasks listed 
in Article 127(2), (5) and (6) of the Treaty. 
Third,  new tasks conferred on an NCB that are atypical of an NCB’s tasks, or which are clearly 
discharged on behalf of and in the exclusive interest of the government or of other public entities, 
should be considered as governmental tasks. In that context, a distinction should be drawn 
between the liquidity- and solvency-related tasks of NCBs. Whereas for the purposes of the 
prohibition of monetary financing, solvency support is a governmental task; liquidity-related tasks that have the ultimate objective of financing the economy are central banking tasks. 
2.5.2   Specific considerations 
Resolution tasks can be considered central banking tasks, provided that they do not undermine an 
NCB’s independence in accordance with Article 130 of the Treaty. However, the discharge of these 
tasks by central banks may not extend to the financing of resolution funds or other resolution financial arrangements as these are governmental tasks
25. This is without prejudice to the 
possibility that: (a) central banks may provide short-term financing to deposit guarantee schemes 
                                                 
23  See paragraph 2.3 of Opinion CON/2015/22.  
24  See Opinion CON/2013/10.  
25  See paragraph 2.3.2 of Opinion CON/2015/22. 
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6 under certain conditions; and (b) NCBs may provide emergency liquidity assistance to solvent 
credit institutions. 
An important criterion for qualifying a new task as a governmental task is therefore the impact of 
the task on the institutional, financial and personal  independence of the NCB. In particular, the 
following should be taken into account. 
First, it should be assessed whether the performance of the new task creates inadequately 
addressed conflicts of interests with existing central banking tasks, and does not necessarily 
complement those existing central banking tasks. If a conflict of interest arises between existing 
and new tasks, there should be sufficient mitigation in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be 
interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. Complementarity should also be examined from the point of view of the financing of those tasks. 
Second,  it should be assessed whether without new financial resources the performance of the 
new task is disproportionate to the financial or organisational capacity of the NCB and may negatively impact on its capacity to properly perform existing central banking tasks. 
Third,  it should be assessed whether the performance of the new task fits into the institutional set-
up of the NCB in the light of central bank independence and accountability considerations. 
Fourth,  it should be assessed whether the performance of the new task harbours substantial 
financial risks. 
Fifth, it should be assessed whether the performance of the new task exposes the members of the 
NCB’s decision-making bodies to political risks wh ich are disproportionate and may also impact on 
their personal independence and, in particular , the guarantee of the term of office under 
Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank. 
2.5.3 Any final assessment on the qualification of a task given to an NCB as either falling within the 
scope of a central banking task or a governmental task will be guided by the objective of ensuring the consistent application of the prohibition of monetary financing within the Eurosystem and the 
ESCB to the extent that it applies to its members. 
 
3. Specific Observations  
3.1  Role of Minister for Finance in decision making on resolution  
The draft Law on resolution provides that subject to Regulation ( ΕU) No 806/2014, the CBC’s 
decision to place an institution into resolution or take other resolution action is subject to the prior approval of the Minister for Finance in cases where the decision has a direct fiscal impact or 
systemic implications
26. The draft Law on resolution also stipulates that the CBC Board of Directors 
shall have the authority to exercise the responsib ilities and powers of the resolution authority in 
                                                 
26    See footnote 12. 
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7 accordance with this Law and Regulation ( ΕU) No 806/201427. The ECB understands therefore that 
the Minister’s prior approval may only be required before the resolution authority takes a resolution action which has a direct fiscal impact or systemic implications and not when the Single Resolution 
Board takes a resolution decision in accordance with Regulation ( ΕU) No 806/2014. Accordingly, 
national ministerial approval should in no event delay or hinder effective resolution action by the 
Single Resolution Board.  
3.2  Topping up  the funds managed under the DGS  
The draft Law on a deposit guarantee scheme provides that the funds can be financed through 
loans and other forms of financial support in the event that ordinary ex ante and extraordinary ex post contributions are not immediately accessible or sufficient
28. However, the draft Law on a 
deposit guarantee scheme does not further specify: (a) the financial institutions or the third parties that are allowed to provide financial support; (b) the nature of eligible financial support 
arrangements; or (c) the terms and conditions  of any such arrangements. As the ECB has 
repeatedly stated in the past, in line with the prohibition of monetary financing, an NCB may not finance any resolution fund. Where an NCB acts as resolution authority, it should in no event 
assume or finance any obligation of either a bridge institution or asset management vehicle
29. In 
the same vein, any national legislation that provides for a deposit guarantee scheme to be financed 
by an ESCB NCB would only be compatible with the prohibition of monetary financing under Article 
123 of the Treaty where certain restrictive conditions  are met, i.e. such financing is short-term, it 
addresses urgent situations, systemic  stability issues are at stake and decisions are made at the 
NCB’s discretion30. The ECB expects these conditions to be fulfilled with regard to any potential 
involvement by the CBC in the alternative funding arrangements of the DGS. 
3.3 Structural arrangements within the CBC to ensu re operational independence and avoid conflicts of 
interests  
In observance of the principle of organisational autonomy, the CBC is expected to implement 
measures to ensure operational independence between the tasks related to crisis management 
and its other tasks as well as to establish mechanisms for cooperation and coordination between 
the different structures and authorities involved. 
3.4  Conferral of new resolution tasks on the CBC  
In addition to expanding the CBC’s existing resolution  powers in respect of credit institutions in line 
with Directive 2014/59/EU, the draft Law on resolution designates the CBC as the resolution 
authority for investment firms, broadening its existing responsibilities so as to include the power to 
propose placing investment firms into resolution and to take resolution measures in respect of such entities. In the light of the guidance set out in paragraphs 2.5.1 to 2.5.3, it must be assessed 
                                                 
27    Article 4(1) of the draft Law on resolution. 
28  See Article 15(b) of the draft Law on a deposit guarantee scheme. In the case of a group resolution, Article 13(2) of 
that draft law provides that the  DGS may enter into loan agreements, or receive other forms of support from 
institutions or other third parties, or guarantee any loans entered into through financial arrangements at group level.  
29    See the ECB’s 2014 Convergence Report, p. 30. 
30 
 See the ECB’s 2014 Convergence Report, p. 30. See also paragraph 3.2 of Opinion CON/2015/40; paragraph 4.1 of 
Opinion CON/2015/17; paragraph 2.2 of Opinion CON/2014/86; and paragraph 3.1.3 of Opinion CON/2011/76. 
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8 whether the CBC’s new tasks and responsibilities in  this field could constitute a breach of the 
prohibition of monetary financing.  
3.4.1   Principle of financial independence  
The principle of financial independence requires NCBs to have sufficient means to carry out not 
only their ESCB-related tasks from an operational an d financial point of view, but also their national 
tasks31. In this respect the ECB notes that the provisions of the draft laws authorise the CBC in its 
capacity as a resolution authority to require institutions to pay all the operating expenditures and 
costs incurred during the performance of its responsibilities and powers in order to safeguard the 
CBC’s financial independence32.  
3.4.2   Links to tasks listed in Article 127(2), (5) and (6) of the Treaty  
Administrative resolution tasks are considered tasks related to those referred to in Article 127(5) of 
the Treaty, based on the understanding that administrative resolution tasks and supervisory tasks 
complement each other. In the case of the extension of CBC’s responsibility to resolution tasks in 
respect of investment firms, such new tasks may also be considered related to tasks under Article 127(5) of the Treaty by analogy with the complementarity of the CBC’s resolution tasks in 
respect of credit institutions and credit cooperative in stitutions with that of its existing supervisory 
and financial stability tasks. 
3.4.3   Atypical tasks  
A number of Member States have conferred on their NCBs a significant role in the resolution of 
credit and financial institutions, whether as the re solution authority or as a competent authority, in 
the decision-making process for resolution. The ECB has generally welcomed the allocation of such tasks to NCBs provided they do not inte rfere financially and operationally with the 
performance of the NCB’s ESCB-related tasks
33. The new resolution tasks of the CBC in respect of 
investment firms can therefore be regarded as  being tasks not atypical of a central bank, 
particularly if, as in the case of the CBC, it already had tools to intervene in distressed financial 
institutions that pose a risk to financial stability. 
3.4.4 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public 
entities  
Whilst the CBC is designated as the sole resolution authority and takes resolution measures acting 
as an administrative authority in the exercise of public functions in its own name, and not on behalf 
of any other authority, it is required, before placin g a credit or financial institution into resolution or 
taking other resolution action to obtain the prior approval of the Minister for Finance where the 
decision has a direct fiscal impact or systemic implications. This provision implements Article 3(6) of Directive 2014/59/EU and ensures that the CBC has ultimate control over any decision related to 
a resolution matter that could affect the CBC’s financial independence. There is no indication that 
                                                 
31    See the ECB’s Convergence Report, 2014, p. 25. 
32   See Article 8 of the draft Law on resolution.  
33  See paragraphs 2.1, 2.3 and paragraph 3.2.4 of Opinion CON/2015/22, paragraph 4.1 of Opinion CON/2014/60, 
paragraph 2.1 of Opinion CON/2013/73, paragraph 2.3 of Opinion CON/2011/72, paragraph 2.2 of Opinion CON/2011/83, and paragraph 2.2 of Opinion CON/2011/39.
  
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9 in discharging its resolution function the CBC acts exclusively in the interest of another public 
entity.  
3.4.5   Extent to which conflict of interests with existing tasks are addressed  
Pursuant to existing law and the draft Law on resolution34, the CBC will adopt and publish all the 
relevant internal rules in order to ensure that there is no conflict of interest and that the operational 
and organisational independence of the department carrying out resolution functions from the 
CBC’s other tasks is respected. The ECB expects the CBC’s internal rules to adequately address 
potential conflicts of interest between the resolution function and the CBC’s other tasks, particularly 
in connection with the resolution of credit institut ions. With regard to the CBC’s resolution functions 
in respect of investment firms, conflicts of interest should be avoided when the Cyprus Securities 
and Exchange Commission is the supervisory authority for investment firms.  
3.4.6 Extent to which the performance of tasks is pr oportionate to the CBC’s financial and operational 
capacity and its ability to perform its ESCB-related tasks 
The conferral of these tasks on the CBC raises qu estions concerning the operational capacity of 
the CBC. The CBC will need to ensure that there are the necessary resources, including adequate 
staff and skills, which are essential for the perfo rmance of its new functions as the resolution 
authority for investment firms. The CBC should ensure that its capacity to perform its ESCB-related 
tasks and existing supervisory functions will not be  affected by the assumption of these new tasks.  
3.4.7 Extent to which the performance of tasks involves substantial financial risks 
The draft Law on resolution provides that the liability of the CBC’s Governor, the Minister of 
Finance, the members of the CBC Board of Directors and CBC staff is limited to actions conducted in bad faith, gross negligence and to wilful misconduct.
35 The draft Law on resolution, however, 
does not set out the CBC’s liability regime. This could result in financial risks for the CBC due to potential liability issues. The ECB considers that it would be useful to align the CBC’s liability 
regime with the liability regime relating to thes e individuals under the draft Law on resolution.  
3.4.8  Conclusion 
The ECB considers that there are grounds for regarding the CBC’s expanded resolution tasks as 
central banking tasks, in the sense that they complement the CBC’s existing supervisory and resolution functions. The fact that the CBC may require institutions to pay all the operating 
expenditures and costs incurred during the performance of its responsibilities safeguards the 
CBC’s financial independence. However, the CBC wi ll need to ensure that the extension of its 
tasks to cover the resolution of investment firms will not affect its capacity to perform its ESCB-
related and supervisory tasks and that there are adequate resources and staff for the performance of its new responsibilities. In addit ion, the CBC’s liability regime sh ould be aligned with the liability 
regime of the Governor, the Minister of Finance,  the members of the CBC Board of Directors and 
CBC staff in order to limit potential liability issues that could present financial risks for the CBC. 
                                                 
34  Article 6(3)(b) of the draft Law on resolution. 
35  Article 111 of the draft Law on resolution. 
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10 3.5  Cooperation and exchange of information between the resolution authority and other relevant   
authorities, including the Cyprus Securities and Exchange Commission. 
The draft Law on resolution provides for cooperation and the exchange of information between the 
CBC and the competent supervisory authorities, including the Cyprus Securities and Exchange Commission, in order to perform their respective tasks, each keeping in mind the impact of their 
performance on the other
36. The ECB welcomes these provisions as they will enable the relevant 
authorities to perform their statutory tasks in a coordinated fashion.  
3.6 Resolution planning  
The draft Law on resolution stipulates that when the CBC evaluates resolution plans for specific 
institutions, it must not assume that extraordinary public financial support will be granted, other 
than the use of resources from the resolution f und. There shall be no assumption that general 
central bank emergency liquidity assistance or specific central bank liquidity assistance provided 
under non-standard collateralisation, tenor and interest rates terms will be granted37. While this 
appears to be in line with the requirements of Directive 2014/59/EU, the ECB emphasises that these provisions do not in any way affect the competence of central banks to decide independently 
and in their full discretion on the provision of central bank liquidity to solvent institutions, both through standard monetary policy operations and emergency liquidity assistance, within the limits 
imposed by the prohibition of monetary financing under the Treaty
38. 
3.7 Establishment of a bridge institution 
Pursuant to the draft Law on resolution, the CBC approves a bridge institution’s (or asset 
management vehicle company’s) memorandum of association and articles of association, the appointment of the members of its management and supervisory bodies, their remuneration and 
any conferral of delegations, and may impose restrictions on its activity to ensure compliance with applicable legislation on State aid. In this respect, the ECB underlines that under Regulation ( ΕU) 
No 1024/2013’s provisions on the ECB’s responsibilities with regard to the authorisation of a credit 
institution to be established in a participating Member State
39, the ECB is the only authority with the 
power to grant the banking licence necessary for the bridge institution to have access to the activity 
of credit institutions, irrespective of the context and the size of the institution which is being created. 
Additionally, if the bridge institution is not able to comply with the requirements for authorisation 
from the intended start of its operations, then the resolution authority shall request a temporary 
exemption from some or all of these requirements . As the competent authority, the ECB will assess 
the request and if it decides to grant such an auth orisation, it will indicate the period for which the 
bridge institution is waived from complying with the relevant requirements40. 
                                                 
36  See Article 84, Article 85(4) to (5) and Article 89 of the draft Law on resolution.  
37   Articles 10(3)(b) and 18(1)(a) of the draft Law on resolution. 
38  See paragraph 3.2 of Opinion CON/2012/99 and paragraph 3.3 of Opinion CON/2014/67. 
39  See Articles 4 and 14 of Regulation (EU) No 1024/2013. 
40  See Article 41(1) of Directive 2014/59/EU. 
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11 3.8 Determination of failing or likely to fail  
The draft Law on resolution stipulates that the CBC, acting as resolution authority, will have to be 
consulted on the determination of whether an institution is failing or likely to fail in the event of the 
national competent authority (NCA) making a determination in line with the first alternative listed in Article 32(1)(a) of Directive 2014/59/EU
41. Directive 2014/59/EU assigns the failing or likely to fail 
assessment, as a rule, to the respective supervisory authority, i.e. the ECB or NCAs, in line with 
the distribution of competences under Regulation ( ΕU) No 1024/2013. Additionally, pursuant to 
Article 9(1)(2), Article 4(1)(e) and Article 4(3) of Regulation (EU) No 1024/2013 and 
Article 104(1)(b) of Directive 2013/36/EU of the European Parliament and of the Council42, the ECB 
shall have all the powers of the competent and designated authorities under the applicable Union 
law to ensure compliance with these Union law requirements by significant institutions43. According 
to Article 18(1), read in conjunction with Article 7(2), (4)(b) and (5) of Regulation (EU) No 806/2014, 
it is the ECB, after consulting the Single Resolu tion Board (SRB), which shall make the failure or 
likely to fail assessment for credit institutions fa lling within the competence of the SRB for the 
adoption of a resolution scheme from 1 January 2016.  
 
This opinion will be published on the ECB’s website. 
 
 
Done at Frankfurt am Main, 1 February 2016. 
 [signed] 
 
The President of the ECB Mario DRAGHI 
                                                 
41  See Article 42(1)(a) of the draft Law on resolution. 
42  Directive 2013/36/EU of 26 June 2013 of the European Parliament and of the Council on access to the activity of 
credit institutions and the prudential supervision of credi t institutions and investment firms, amending Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 138). 
43  See paragraph 3.3 of Opinion CON/2015/19.