EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 19 June 2013  
on a s pecial t ax on credit i nstitutions  
(CON/20 13/44) 
 
Introduction and legal basis  
On 14 May 2013, the European Central Bank (ECB) received a request  from the President of the House 
of Representatives of the Republic of Cyprus for an opinion on a proposed amendment to the Law on the  
imposition of  a special t ax on credit i nstitution s1 (hereinafter the ‘ draft  law’).  
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Tr eaty on the 
Functioning of the European Union and the sixth  indent 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  law relates to rules applicable to financial institutions insofar as they 
materially influence 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  law 
The draft  law aims to c reate  an incentive  for credit institutions to lower the interest rates offered on 
certain  deposits . The amendments to S ection  4 of the Law on the imposit ion of a special tax on credit 
institutions  provide for the following:  
1.1 An increase in the total special levy on deposits from 0.15% to an aggregate of 0.75%, by 
providing for a n additional special levy of 0.6% on deposits held in e uro by credit institutions in 
Cyprus . 
1.2 The additional special levy will be payable only in relation to new deposits made or renewed after 
1 July 2013, provided such deposits earn annual interest which exceeds the rate of interest of the 
marginal l ending f acility as determined by the ECB, increased by  a margin of 1. 5%. 
1.3 The additional special levy w ill be payable by the credit institutions to the Inland Revenue of the 
Republic of Cyprus  within 30 days after the end of each quarter starting from 31 October 2013.  
Within the same time period , each credit institution should submit a declaration with respect to all 
deposits made or renewed with interest which exceeds the maximum interest as specified above.  
                                                 
1  Law 84(I)/2011.   
2  OJ L 189, 3.7.1998, p.  42. 
ECB -PUBLIC  
2  
2. General comments  
2.1 As the ECB has stated in earlier opinions3, taxes on financial  institutions should be considered in 
relation to the dual objective of ensuring a more equitable distribution of the costs arising from 
their potential failure between taxpayers and the financial sector and of addressing the ri sks that 
they pose.  
2.2 The ECB notes that the purpose of the draft law differs from th at of the law being amended, which  
was initially enacted for the purpose of: (a) contributing to the Government’s short -term budgetary 
targets;  and (b) financing the Independent Financial Stability Fund within the bank resolution 
framework as part of a fiscal buffer for banking sector risks. Since  the draft law  creates an 
incentive for credit institutions to lower the interest rates offered on deposits, t he ECB recommends 
a comprehensive impact assessment of the proposed measure, to ensure that the public benefit from 
its imposition will outweigh any potential negative implications for banks, their customers and the 
economy, particularly in view of  the circumstances specific to Cyprus following the resol ution 
measures employed recently in the country’s banking sector.  
2.3 As the ECB has previously pointed out4, in line with  the European Council’s conclusions5, 
Member States should introduce systems of levies and taxes on financial institutions to ensure fair -
burden sharing and to set incentives to contain systemic risks.  
 
This opinion will be published on the ECB’s website.  
  
Done at Frankfurt am Main, 19 June 2013.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
3  See Opinions  CON/2010/62, paragraph 3.2 and CON/2011/29, paragraph 2.1.  All ECB opinions are published on the 
ECB’s website at www.ecb.europa.eu.  
4  See Opinion CON/2011/29, paragraph 3.1.  
5  See conclusions of the European Council of 17 June 2010, p. 6, pa ragraph 16.