EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 12 November  2015  
on the regulation of companies acquiring credit 
(CON/2015/ 45) 
 
Introduction and legal basis  
On 5 November 2015 the European Central Bank  (ECB) received a request from the Cypriot Minist er for 
Finance  for an opinion on a draft law regulating the activities of companies acquiring credit  (hereinafter 
the ‘draft law’ ).  
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 (the ‘Treaty’) and the third and sixth indents  of Article 2(1) of Council 
Decision  98/415/EC1, as the draft law  relates to the Central Bank of Cyprus (CBC) and to the rules 
applicable to financial institutions insofar as they materially influence the finan cial 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  
1.1 The purpos e of the draft law is to give  the CBC the power to authorise, regulate and supervise the 
business activity of acquiring credit facilities  that have been granted by a credit institution either : 
(1) incorporated in Cyprus  and authorised under Cypriot law ; or (2) operating through a branch in 
Cyprus2. These powers will allow the CBC  to ensure that the activity  of acquiring and managing 
credit facilities  is carried out properly , and will also safeguard financial stability in Cyprus3. For this 
purpose, t he draft law includes , in the definition of credit facilities , those  that have been granted 
either to:  (a) natural persons where the total balance of the credit facilities , at the time of the 
transfer , does not exceed one million euro;  or (b) micro and small enter prises as defined under  
Union law where the total balance of the credit facilities to that enterprise or group of connected 
enterprises , at the time of the transfer , does not exceed one million euro4. Loans that do not meet 
these criteria can be sold to an y legal entity without the CBC’s approval.  
1.2 The draft law provides that only certain specified legal entities are permitted to acquire credit 
facilities : (a) a credit -acquiring company incorporated in Cyprus and authorised by the CBC under 
                                                 
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  In other words , a branch of a credit institution authorised and supervised in accordance with the law of a Union or 
European Economic Area (EEA)  Member State.  
3  See Artic le 3(1) of the draft law.  
4  See Article 3(2) of the draft law. However, c ertain provisions under the draft law, e.g. those relating to obligations of 
selling institutions towards borrowers will apply to credit facilities exceeding those limits.  
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2 the draft law ; (b) a credit institution  incorporated in Cyprus and authorised under Cypriot law ; (c) a 
credit institution authorised and supervised by the competent authority of  another Union/EEA 
Member State that has the right to provide services or esta blish a branch in Cyprus ; and ( d) a 
financial institution that is a subsidiary of a credit institution incorporated in a Union /EEA  Member 
State and that provides its services in Cyprus or operates in Cyprus through a branch, under the 
relevant provisions of Cypriot law.5. The draft law further stipulates that these  legal entities may 
subsequently sell the acquired credit facilities to either other legal entities referred to above or to 
other entities that obtain the CBC’s  prior written approval.  
1.3 The draft law  sets ou t the application procedure that a company must go through in order to obtain  
authorisation from a credit -acquiring company incorporated in Cyprus , including the documentation 
that the applicant company must submit to the CBC, and stipulates that the CBC s hall only grant  an 
authorisation if  a number of conditions are met. The CBC  must be satisfied that the company : (a) is 
in a position to fully comply with the draft law ; (b) has shareholders and directors of good repute 
and with sufficient expertise to carr y out their responsibilities ; (c) has the organisational structure to  
enable it to provide its services in accordance with the draft law ; (d) operat es in such a manner that 
there are no concerns as to whether it s activities  may adversely impact financial s tability in Cyprus ; 
and (e) has no cl ose links through professional or other relationships with any other entity or 
individual that , in the CBC‘s opinion,  may prevent the CBC from carrying out effective supervision6. 
There are also provisions requiring per sons to notify the CBC of changes to their qualifying 
holdings in a credit -acquiring company7. 
1.4 The draft law also sets out the CBC’s supervisory powers over credit -acquiring companies under 
the draft law, and other supervisory requirements relating to minimum capital requirements, the 
assessment of the company’s management body and key function holders, reporting to the CBC, 
the CBC’s access to the c ompany’s books and records, the CBC’s confidentiality duties  and the 
imposition of supervisory measures and sanctions8. 
1.5 Without prejudice to the CBC’s duty to keep information obtained under the draft law confidential, 
the draft law authorises  the CBC to  use any of the information provided to it under the draft law for 
the publication  of anonymous , aggregated statistical data, which the CBC may publish9. 
1.6 The draft law empowers  the CBC , pursuant to its own directives or guidelines , to regulate, inter 
alia: (a) the procedures for granting, suspending and revoking authorisation;  (b) the criteria for the 
fitness and probity of shareholders, directors and key function holders ; (c) the internal organisation 
and go vernance of the credit -acquiring company ; (d) outsourcing;  and (e) the process f or 
review ing, manag ing and restructuring non- performing loans10. 
                                                 
5  See Ar ticle 4(1) (a) of the draft law.  
6  See Article 5(2) of the draft law.  
7 See Article 6(1) of the draft law, which sets out the relevant qualifying thresholds.  
8 See Articles 10 to 15 and 20 to 23 of the draft law.  
9  See Article 15(2) of the draft law.  
10  See Article 17(1) and (2) of the draft law.  
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3 1.7 The draft law provides that credit -acquiring companies must pay an annual fee of three thousand 
euro to cover the costs that the CBC incurs  while  carrying out its supervisory functions11.  
1.8 Finally, the draft law requires a credit or financial institution or a credit -acquiring company that 
decides to sell or dispose its portfolio of credit facilities to inform the borrower concerned. All the 
transferor’s rights and obligations, including with respect to collateral underpinning the credit 
facility, are aut omatically transferred to the acquirer12.  
 
2. General observations  
2.1 As stressed in previous urgent ECB opinions, given the very short timeframe within which the ECB 
has been consulted on this legislation, it has not been possible to thoroughly assess all legal, policy 
and regulatory issues that the draft law raises13. This opinion is based on the text of the draft law 
that was formally sent to the ECB by the consulting authority and does not address substantive 
amendments introduced in the draft law duri ng the legislative process. If , prior to the ECB adopting 
its opinion,  amendments were made that fundamentally change the draft law in areas in which the 
ECB has a specific interest , the ECB expects the consulting authority to submit the amended draft 
legislative provision to it as soon as possible, so that the opinion can be based on the most recent 
text14. 
2.2 The ECB understands that the adoption of the draft law is essential as it will enable credit 
institutions to dispose of non- performing loans , of which there are currently a high number  in 
Cyprus  with the understanding that the loans are transferred at an appropriate price. Allowing t hese 
loans to be disposed of would be beneficial in preservin g financial stability in Cyprus , on the 
understanding that the loans are transferred at an appropriate price15. 
2.3 The ECB understands that by giving the CBC specific regulatory and supervisory authority over the 
activity of acquiring and managing credit facilities, the draft law intends to ensure that  this activi ty is 
properly carried out , and more generally t hat the stability of the financial system in Cyprus  is 
safeguarded .  
2.4 The draft law extends  the CBC ’s powers to the regulation and supervision of  credit -acquiring 
companies , thus complement ing the CBC’s  current responsibilities for supervis ing the activities of 
authorised credit institutions  and the macro prudential  supervision of the financial system to 
safeguard financial stability . The ECB underlines that, in the context of a proposed conferral of 
tasks on a central bank within the European System of Central Banks (ESCB), it is necessary to 
assess such a conferral against the prohibition of monetary financing under Article 123 of the Treaty. The ECB has developed the guidance set out in paragraphs  2.4.1 t o 2.4.3  of this opinion, in 
the form of general and specific considerations, on the basis of which it may decide whether a new 
                                                 
11  See Article 16 of the draft law.  
12  See Articles 18, 19 and 24 of the draft law.  
13  See paragraph 3.3 of Opinion CON/2010/92. All ECB opinions are published on the ECB ’s website at 
www.ecb.europa.eu.  
14  See, for example, paragraph 3 of Opinion CON/2004/16.  
15  It is noted that the draft law would be applicable to both performing and non- performing loans.  
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4 task conferred on an ESCB national central bank (NCB) is to be considered a central banking task 
or a government task for the pur poses of assessing such a conferral against the prohibition of 
monetary financing under Article 123 of the Treaty16. The concrete assessment of whether the 
CBC’s task of supervising credit acquiring companies is to be considered a central banking task or 
a government task is then undertaken in paragraph 3.1 of this opinion.  
2.4.1 General considerations  
First, genuinely new tasks  or those tasks that did not form an integral part of the central banking 
tasks already assigned to the NCB in the past  must be syst ematically categorised as central 
banking or government tasks . In recognition of the different Member States’ legal frameworks, 
central banking traditions and national set -ups, the tasks that an NCB currently carries out  as 
central banking tasks are not re viewed and re- categorised, but may be reassessed if they are 
subject to substantial legislative amendments.  
Second, 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.  
Third , 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.  
Fourth, new tasks conferred on an NC B 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 government tasks. In that context, a distinction should be drawn betwee n 
the liquidity - and solvency -related tasks of NCBs. Wh ereas  for the purposes of the prohibition of 
monetary financing, solvency support is a government task, liquidity -related tasks  that have the 
ultimate objective of financ ing the economy are central banking tasks.  
2.4.2 Specific considerations  
Banking supervision and macro- prudential tasks are central bank tasks when car ried out by an 
NCB , provided they do not undermine its independence in accordance with Article 130 of the 
Treaty.  
An important criterion for qualifying a ne w task as a government task is the  impact of the task on an 
NCB’s  institutional, financial and personal independence. In particular, the following should be 
taken into account.  
First, it should be assessed whether the performance of the new task will create conflicts of 
interests with existing central banking tasks, and whether the new task  actual ly complement s those 
existing central banking tasks. If a conflict of interest arises between existing and new tasks, there 
should be sufficient mitigation measures 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 an indefinite chain of ancillary tasks  being created. 
Complementarity should also be examined in terms of how  those tasks  are financed.  
                                                 
16  See Opinion CON/2015/22.  
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5 Second, it should be assessed whether the NCB’s financial and organisation capacity is 
disproportionate to the amount of time and resources it will need to perform the new task  without 
additional financial resources  and whether this could have a negative impact on the NCB’s  capacity 
to properly perform its existing central banking tasks.  
Third , it should be assessed whether the performance of the new task fit s into the NCB’s 
institutional set -up when considering central bank independence and accountability.  
Fourth, it should be assessed whether there are substantial financial risks inherent in the  
performance of the new task.  
Fifth, it should be assessed whether the perfor mance of the new task exposes the members of the 
NCB’s decision -making bodies to political risks t hat: (a) are disproportionate,  (b) could also have an 
impact on their personal independence;  and in particular, (c) could possibly jeopardise the 
guarantee of  their term of office under Article 14.2 of the Statute of the European System of Central 
Banks and of the European Central Bank . 
2.4.3 Any final assessment on the qualification of a task given to an NCB as either falling within the 
scope of a central bank ing task or a government task should be guided by the objective of ensuring 
that the prohibition of monetary financing within the Eurosystem and the ESCB is consistently 
applied, to the extent that it applies to its members.  
 
3. Specific observations  
3.1 Conferral on the CBC of the  task of supervising credit acquiring companies  
The draft law designates the CBC as the supervisory authority f or credi t-acquiring  companies , thus 
broadening its current functions and activities. In the light of the guidance set out in 
paragraphs  2.4.1 to 2.4.3, it must be assessed whether the CBC’s new tasks constitute a breach of 
the prohibition of monetary financing.   
3.1.1 Principle of financial independence   
The principle of financial independence requires NCBs to have suffici ent means to carry out not 
only their ESCB -related tasks from an operational and financial point of view, but also their national 
tasks17. In this regard the draft law provides that credit -acquiring companies must pay an annual 
fee, which is fixed at a leve l specified in the law, in order to cover  the CBC’s costs incurred in 
carrying out its supervisory functions18. As the impact of these new tasks on the financial position 
of the CBC is not clear at this stage, a more flexible mechanism for the determinin g the fee level 
would be more appropriate , with a view to safeguarding CBC’s financial independence.  
3.1.2 Links to tasks listed in Article 127(5) of the Treaty  
Supervision over credit -acquiring  companies can be considered a task  related to thos e referred to 
in Article  127(5) of the Treaty, based on the understanding that it is complementary to the 
supervisory tasks  exercised by the NCB , particularl y where, as in this case, the CBC already 
                                                 
17  See the ECB’s 2014 Convergence Report, p. 25.  
18  See Article 16 of the draft  law.  
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6 carries out supervision of credit institutions , including asset management activities19, and has the 
task of ensuring the stability of the financial system20. The purchase of problematic loan portfolios 
by entities specialised in asset management  can be a useful and  effective  tool that financial 
institutions can use to deal wi th non -performing loans on their balance sheet s. Member States are 
not required to have a legal framework for supervising  credit -acquiring activities under Directive 
2013/36/EU21. Howe ver, point 11 of Annex 1 t o Directive 2013/36/EU lists portfolio management  as 
an activity that is subject to mutual recognition.  To the extent that portfolio management covers 
credit acquisition and management  activities , credit institutions authorised and supervised by the 
competent authorities of another Member State may car ry these out in other Member States , 
provided that the appropriate credit institution has given the relevant authorisation for such 
activities.  
3.1.3  Atypical tasks 
The purchase and sale of assets such as loan portfolios typically f orms a significant part  of the 
business  of an authorised credit institution or other speci alised financial institutions, including,  e.g., 
an asset  management company . Generally, the ECB has accepted the fact that NCBs are 
allocated financial supervisory tasks related to specific  areas , provided they do not interfere with 
the performance of the NCB’s ESCB -related tasks22. An NCB’s tasks with regard to the supervision 
of credit -acquiring companies can therefore be regarded as typical tasks of a central bank, 
particularly if, as in t he CBC’s case,  it has a statutory responsibility for  bank supervision and 
financial stability23. Moreover, the complementarity between the supervisory tasks already carried 
out by the CBC and the new task of  supervis ing such companies is reflected in the common 
system of financing  the CBC’s supervisory tasks through contributions from the supervised entities.  
3.1.4  Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public 
entities  
The CBC  is designated as the sole superviso ry authority for credit -acquiring  companies in its own 
name and not on behalf of any other authority. T here is no indication that , in carrying  out its 
supervis ory function,  the CBC acts exclusively in the interests of another public entity.  
3.1.5 Extent to  which conflicts of interests with existing CBC tasks are addressed and the performance of 
tasks fits into the CBC ’s institutional set -up in the light of central bank independence and 
accountability  
The conferral of these tasks on the CBC does not, at firs t glance, raise any issues with regard to 
conflict of interest. The performance of these tasks fit s into the CBC’s institutional set -up, and do es 
not raise any issues as regards  central bank independence and accountability.  
                                                 
19  In accordance with Article 6(2)(d) of the Laws of 2002 to 2007  on the Central Bank of Cyprus , the CBC exercises 
supervision of banks. Banks are allowed to provide asset management services by virtue of item  11 in Annex IV to 
the Laws of 1997 to 2015 on the business of credit institutions . 
20  Article 6(2)(e) of the Laws of 2002 to 2007 on the Central Bank of Cyprus .  
21  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of 
credit institutions and the prudential supervision of credit 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. 338).  
22  See Opinion CON/2009/57.  
23  See Article 6(2)(d) and (e) of the Central Bank of Cyprus Laws of 2002 to 2007.  
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7 3.1.6 Extent to which the perfor mance of tasks is proportionate to the CBC ’s financial and operational 
capacity and its ability to perform its ESCB -related tasks  
As noted above, in order to remain financially independent, NCBs must have sufficient means to 
carry out not only their ESCB -related tasks from an operational and financial point of view, but also 
their national tasks. In this regard the ECB welcomes the fact that the draft law provides  that the 
CBC’s costs for supervisin g credit -acquiring companies will be covered by such companies . 
However, as mentioned above, the ECB considers a more flexible mechanism for the 
determination of the fee level to  be more appropriate in order to safeguard the CBC’s financial 
independence.  For example, i t may be useful to include a provision in the draft law that will allow 
the fees to be increase d, if needed.   
3.1.7  Extent to which the performance of tasks harbours substantial financial risks  
The draft law is silent on the issue of the CBC’s liability with regard to its  supervision  of credit -
acquiring companies . The draft law does not contain  any provisions excluding or limiting the liability 
of the CBC as the  authority responsible for  the supervision of  credit acquiring companies.  In 
contrast, the CBC’s  liability with regard to its  supervision over credit  institutions is excluded, unless 
it is shown that the act or omission was not done in good faith or was the result of gross 
negligence24. The ECB considers that it would be useful to align the CBC’s liability under the draft 
law with its liability concern ing its supervision of  credit institutions,  given that potential liability 
issues could represent financial risk s for the CBC.  
3.1.8  Conclusion and summary regarding conferral on the CBC of the task of supervising credit acquiring 
companies  
The ECB consider s that there are grounds for regarding the CBC’s task of supervising credit -
acquiring companies as a central banking task  in the sense that it complement s the CBC’s existing 
bank supervisory functions. The fact t hat the performance of the new supervisory f unction will be 
financed by supervised entities has  a positive impact on the CBC’s  financial capacity to assume  
those tasks. However, the ECB considers that the draft law potentially creates  financial risks for  the 
CBC because it does not limit the CBC’s  liability  as a public authority,  for damages caused in the 
course of the exercise of its new supervisory powers , in ways similar to the CBC’s liability in 
connection with its bank supervisory tasks . It would be useful to align the CBC’s liability under the 
draft law  with its liability when conducting its supervisory powers over credit institutions . 
Additionally , the ECB considers that a more flexible mechanism for determining  the fee level would 
be more appropriate with a view to safeguarding CBC’s financial  independence. For example, it 
may be useful to include a provision in the draft law that allows  an increase in the level of fees, if 
needed.  
3.2 Free movement of capital  
In the case of credit -acquiring companies that are not credit or financial instituti ons as defined in 
the draft law, the acquiring company would be required not only to obtain CBC authorisation for 
                                                 
24  Article 32(1) of the Laws of 1997 to 2015 on business institutions . See also Principle 2 of the principles established 
by the Bank for International  Settlements,  setting out that the supervisor and its staff  should be protected against 
lawsuits for actions taken and/or omissions made while discharging their duties in good faith.  
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8 such activity but also to be incorporated in Cyprus25.  To the extent that a credit acquiring company 
incorporated in a Member State other than Cyprus seeks to carry on credit acquiring activities in 
Cyprus, the consulting authority is invited to consider, subject to the competences of the European 
Commission, whether this additional requirement is in line with the provisions on the free 
movement  of capital under the Treaty .26 
3.3 Concerns over a level playing field and opportunities for regulatory arbitrage  
The draft law subjects credit -acquiring companies  to notional minimum capital  requirements , as 
well as other regulatory requirements. The ECB understands that the Cypriot authorities opted not 
to impos e express limits on leverage and liquidity requirements at this stage, in order  to offer wider 
opportuniti es for new companies  entering the market for such services , with a view to  facilitating 
privat e debt restructurin g.  
3.4 Credit institutions directly supervised by the ECB 
 With regard to credit institutions directly supervised by the ECB, the powers  given to the CBC 
should be in line with the ECB’s competence under Council Regulation (EU) No 1024/ 201327. 
 
This opinion will be published on the ECB’s website.  
  
Done at Frankfurt am Main,  12 November  2015.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
25  See Article 4(1)(a) of the draft law.  
26  Articles 63- 65 of the Treaty 
27  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) .