EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 24 July 2013  
on the macro -prudential oversight of the national financial system  
(CON/20 13/54)  
 
Introduction and legal basis  
On 17 June 2013 the European Central Bank (ECB) received a request  from the Minister of Finance  of 
the Republic of Cyprus for an opinion on a proposed amendment to the Central Bank of Cyprus Laws of 
2002 to 20071 (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 and the  third and sixth  indent s 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 the Central Bank of Cyprus (CBC) and 
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 Pro cedure of 
the European Central Bank, the Governing Council has adopted this opinion.  
 
1.  Purpose of the draft  law 
1.1 The draft  law aims to implement Recommendation ESRB/2011/3 of the European Systemic Risk 
Board of 22nd December 2011 on the macro- prudential mandate of national authorities
3 
(hereinafter the ‘ESRB Recommendation’ ). The proposed amendment s to section s 2 and 6, as well 
as proposed new section 47A  of the Central Bank of Cyprus Laws of 2002 to 2007 provide for the 
following:  
1.2  The draft law  assigns the task of macro -prudential oversight of the financial system to  the CBC.  
The ultimate objective  of macro -prudential oversight of the financial system  is to safeguard the 
stability of the financial system as a whole , inter alia , by strengthening the resilience of the 
financial system and decreasing the build -up of systemic risks, thereby ensuring a sustainable 
contribution of the financial sector to economic growth. This task will be achieved by : 
(a) identifying, monitoring and assessing risks to financial stability ; and ( b) implementing policies 
to prevent or mitigate those risks.  
                                                 
1  Law 138(I)/2002.  
2  OJ L 189, 3.7.1998, p.  42. 
3  OJ C 41, 14.2.2013, p. 1. 
ECB -PUBLIC  
2 1.3 In accordance with section 47A(6) of the draft law , the CBC develops and applies instruments for 
the performance of  its task of macro -prudential oversight of the financial system either on its own 
initiative , or in order to implement recommendations of the European Systemic Risk Board (ESRB)  
or decisions of the ECB or other competent Union authorities. The CBC may issue special or 
general directives or guidelines to f inancial institutions, subject to ECB guidelines and instructions 
and the regulations in force within the framework of the ESCB. 
1.4 The draft law further provides  that the CBC may  cooperate and exchange data and information 
with competent authorities in C yprus, in other Member States and also in third countries, as well as 
with competent Union authorities, including the ECB and the European System of Central Banks 
(ESCB). 
 
2. General observations  
2.1 The ECB supports the effective design of macro -prudential po licy frameworks within the Member 
States, in line with the guiding principles expressed in the ESRB  Recommendation. Moreover, the 
ECB and national central banks should play a leading role in macro- prudential oversight, given 
their expertise and existing re sponsibilities in the area of financial stability4. 
2.2 In light of the above, the ECB welcomes the arrangement under which the CBC is the national 
authority responsible for the conduct of macro- prudential oversight , acting in cooperation with 
other competent authorities whose actions have a material impact on financial stability ; in this 
context , the consulting authority is invited to revise subsection (3) of proposed Section 47A  so as to 
ensure that the CBC shall cooperate with such competent authorities in a ccordance with the ESRB 
Recommendation.  
2.3 At the same time, performance by the CBC of macro -prudential tasks should not affect: (a) the 
CBC ’s institutional, functional and financial independence; or (b) the performance by the ESCB  of 
its tasks under the Tre aty and the Statute of the European System of Central Banks and of the 
European Central Bank5. Section 6 (2)(e) of the Central Bank of Cyprus Laws of 2002 to 2007 
currently in force provides that one  of the main tasks of the CBC is ‘ ensuring the stability o f the 
financial system ’. The draft law replaces this task with ‘ the macro -prudential ov ersight of the 
financial system’ . The consulting authority  is invited to ensure consistency with Art icle 127( 5) of 
the Treaty  by supplementing the proposed amendment to the aforementioned S ection 6(2)(e) by 
making reference also to the CBC’s objective as an integral part of the Eurosystem of contributing 
to the stability of the financial system.   
2.4 The consulting authority is invited to revise subsection  (5) of proposed Section 47A so as to ensure 
that the CBC shall  cooperate and exchange data and information with the ECB and the ESRB  and, 
                                                 
4  See, for example , paragrap h 2.1 of Opinion CON/2013/45 and paragraph 2.1 of Opinion CON/2013/30. All ECB 
opinions are published on the ECB’s website at www.ecb.europa.eu.  
5  See paragrap h 2.2 of Opinion CON/2013/45 and paragraph 2.3 of Opinion CON/20 13/30.  
ECB -PUBLIC  
3 where needed, with the macro- prudential authorities of other Member States, in accordance with 
the ESRB Recommendation . 
2.5 The consulting authority is also invited to ensure consistency of the proposed rules concerning 
exercise of macro -prudential tasks by the CBC with the national transposition of: 
(a) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 
on prudential requirements for credit institutions and investment firms and amending Regulation 
(EU) No  648/20126, and (b) 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
7. 
2.6 This opinion is without prejudice to the conclusions of the follow -up assessment of the above -
menti oned ESRB Recommendation, which the ESRB will prepare in accordance with Article 17 of 
Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 
24 November  2010 on European Union macro- prudential oversight of the financial system and 
establishing a European System Risk Board8. 
 
This opinion will be published on the ECB’s website.  
  
Done at Frankfurt am Main, 24 July 2013.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
6 OJ L 176, 27.6.2013 , p. 1. 
7 OJ L 176, 27.6.2013 , p. 338. 
8  OJ L 331, 15.12.2010, p. 1.