EN ECB -PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 22 November 2013  
on changes to decision -making powers at the Central Bank of Cyprus  
(CON/2013/78)  
 
Introduction and legal basis  
On 30 September 2013 , the European Central Bank (ECB) received a request  from the President of the 
House of Representatives  of the Republic of Cyprus (hereinafter the ‘consulting authority’) for an opinion 
on a proposed amendment (hereinafter the ‘ draft law’) to the Central Bank of Cyprus Laws of 2002 to 
20131 (hereinafter the ‘Law on the CBC’). 
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  indent of Article  2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the Eur opean Central Bank by national authorities regarding draft  
legislative provisions2, as the draft law relates to the Central Bank of Cyprus  (CBC) . 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 draft law  amend s Article  15A of the Law on the CBC  to extend the range of decisions that the 
Governor take s with the assent  of the CBC’s Board of Directors  by includ ing those  decisions  the 
CBC is assigned to take pursuant to the Law on c redit institutions3. 
1.2 Article  15A of the Law on the CBC was originally introduced by Amending Law No 86(I)/2013 on 
26 July 2013 , and provided for  decisions on the licencing of banks and on  the exercise of banking 
business to be taken by the Governor with the assent  of the Board  of Directors . The same a rticle 
was later  amended  by Amending Law No 103(I)/2013 on 9 September 2013 , to provide that  
decisions on granting licence s and on  the exercise  of business by credit institution s are to  be taken 
by the Governor with the assent  of the Board  of Directors . 
1.3 The Law on c redit institutions sets out the CBC’s competence in relation to credit institutions 
operating in Cyprus and their officials. Th is competence cover s a wide range of matters, inter alia , 
in relation to (a) granting and revoking licenc es to  credit institutions ; (b) provi ding cross -border 
                                                 
1  Law 138(I)/2002.  
2  OJ L 189, 3.7.1998, p.  42. 
3  Law 66(I)/1997.  
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2 services ; (c)  foreign credit institutions setting up branches  in Cyprus ; and (d) Cypriot credit 
institutions  setting up branches abroad . 
 
2. General observations  
The ECB notes that there is an overlap within the proposed amendment , as the powers  that are assigned to 
the CBC pursuant to the Law on c redit institutions  include d ecisions concerning licenc ing and the 
exercise of business by credit institution s. Accordingly, the consulting authority may wish to reconsider 
the wording  of the proposed amendment.  
 
3.  Decisions regarding licensing and supervision of credit institutions  
3.1 With regard to  Article  15A of the Law on the CBC , according to which the Governor is required to 
obtain the Board  of Director ’s assent  for decisions regarding the licencing and supe rvision of credit 
institutions , the ECB notes that , pursuant to Council Regulation (EU) No 1024/ 20134, the ECB has 
the exclusive competence to grant authorisations for taking up the business of a credit institution to 
be established in a participating Member State  and to supervise  the significant credit institutions in 
that participating Member State  as of 4 November 2014 . Ther efore, the ECB understands that the 
Governor’s decisions regarding licencing of credit institutions , as well as the supervision of 
significant credit institutions , constitute decisions regarding the CBC’s  contribution to th ese 
exclusive task s of the ECB under  Regulation (EU) No 1024 /2013 . The ECB is required to perform 
these tasks independently according to Article 130 of the Treaty and Article 7 of the Statute of the 
European System of Central Banks and of the European Central Ba nk (hereinafter the ‘Statute of 
the ESCB’) . The NCBs’ Governors, in their capacity as members of the Governing Council, are 
therefore required to exercis e their duties with regard to the ECB’s specific tasks concerning 
policies relating to the prudential s upervision of credit institutions  in full independence according 
to Article 130 of the Treaty and Article 7 of the Statute of the ESCB.  
3.2 This implies that , without prejudice to the mandate of the members of the ECB’s Supervisory 
Board,  the NCBs’ Governo rs should be responsible for the NCBs ’ contribution to the specific tasks 
conferred on the ECB by Regulation (EU) No 1024 /2013 . Any national law provision s assigning 
duties with regard to the ECB’s specific tasks concerning policies relating to the prudent ial 
supervision of credit institutions  to other members of an NCB’s board who do not enjoy the same 
level of independence as the Governor  for the performance of such duties , or requiring the approval 
of an NCB’s  board for decisions of the NCB’s Governor  in relation to such duties , raise concerns 
about the Governor ’s independence being hindered in the performance of functions related to those 
tasks.  Article 15A of the Law on the  CBC should be amended to address these concerns . 
 
                                                 
4  Council Regulation (EU) No 1024/2013 of October 15 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.1 0.2013, p. 63).  
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3 4. CBC Governance  
The ECB refer s to its Opinion CON/2013/41 on changes to the governance of the CBC5, which concerns 
previous amendments to the Law on the CBC . A number of observations made in that Opinion were not 
taken into account and the ECB invites the relevant Cypriot authorities to address them in this draft law . 
In Opinion CON/2013/41, the ECB noted that unless an NCB’s executive directors an d board members 
are subject to the same legal requirements as that NCB’s Governor, any provision s assigning Eurosystem -
related tasks (such as monetary policy , payment systems, statistics) to the executive directors and other 
members of the CBC’s Board , or requiring the approval of the CBC’s Board for the Governor’s decisions , 
raise concerns about the Governor’s ability to independently carry out the ESCB -related tasks assigned to 
the Governor. This would not be compatible with Article 130 of the Treaty and Article 7 of the Statute of 
the ESCB. From this perspective, as noted in Opinion CON/2013/41, the nature of the executive 
directors’ powers as well as the interplay between the  powers granted to the two executive directors and 
the governance structure’s co mpliance with the requirement of central bank independence still  need to be 
clarified6. 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 22 November  2013 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
5  All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.  
6  See paragraphs 2.3 and 2.4 of Opinion CON/2013/41.