Opinion of the European Central Bank of 14 May 2010 on the transfer of rights and obligations in relation to the issuance, distribution and redemption of public debt (CON/2010/39)
Date: 2010-05-14
Institutions: European Central Bank
Subjects: Cyprus, national law, public borrowing

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 14 May 2010  

on the transfer of rights and obligations in relation to the issuance, distribution and redemption of 

public debt 

(CON/2010/39) 

Introduction and legal basis 

On  28  April  2010  the  European  Central  Bank  (ECB)  received  a  request  from  the  Cypriot  Minister  for 

Finance (hereinafter ‘the consulting authority’) for an opinion on a draft law amending the Laws of 1989 

to  2008  on  Treasury  bills  (hereinafter,  the  ‘draft  law’)  and  on  two  accompanying  draft  regulations 

(hereinafter, the ‘draft regulations’).  

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 on the third 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 provisions1, 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 and the draft regulations 

1.1  The objective of the draft law and of its associated draft regulations is to transfer from the CBC to 

the  Ministry  of  Finance  the  ‘rights,  privileges,  obligations,  responsibilities,  competences,  duties 

and tasks’ involved in the issuance, distribution and redemption of public debt. This objective is to 

be  achieved  by  means  of  the  adoption  of  three  identically  worded  legal  acts,  namely  (i)  the 

(Amending)  Law  of  2010  on  Treasury  bills,  (ii)  the  (Amending)  Regulations  of  2010  on  loan 

(development),  (iii)  the  (Amending)  Regulations  of  2010  on  savings  loans.  According  to  the 

request  for  an  opinion,  these  legal  acts  are  interrelated  and  are  to  be  submitted  to  the  Cypriot 

Council of Ministers and Parliament as a single legislative package. 

1.2  Until  now,  the  issuance,  distribution  and  redemption  of  Government  bonds,  Treasury  bills  and 

other  securities  have  been  carried  out  by  the  CBC  which,  in  its  capacity  as  agent  to  the  Cypriot 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                      
Government in financial matters pursuant to Sections 6(2)(f) and 51(c) of the Laws on the CBC2, 

has also managed public debt. 

2 

General observations   

2.1  The domestic legal framework governing the issuance, distribution and redemption of Government 

bonds,  Treasury  bills  and  other  securities  comprises  not  only  those  legal  acts  that  the  consulting 

authority proposes amending through the draft law and its associated draft regulations, but also the 

CBC  Laws.  Section  51(c)  thereof  attributes  specific  executory  powers  to  the  CBC  in  connection 

with (i) the issuance of Government bonds, Treasury bills and other securities, and (ii) the servicing 

of public debt.  

2.2  Section  51(c)  of  the  CBC  Laws  expressly  provides  that  the  CBC’s  powers  pertaining  to  the 

issuance of Government bonds, Treasury bills and other securities and the servicing of public debt 

may be repealed by the Cypriot Council of Ministers, provided that certain procedural requirements 

are  met.  In  July  2008  the  Council  of  Ministers  transferred  the  CBC’s  public  debt  management 

authority  from  the  CBC  to  the  Ministry  of  Finance,  with  effect  from  1  August  2010.  More 

generally, the ECB notes that it is common for central banks not to be responsible for public debt 

management and, instead, for this task to be the responsibility of an independent debt management 

agency.  

2.3  Without prejudice  to  the  foregoing observations,  the  ECB  stresses  the  need  for  Cyprus  to  ensure 

the same level of transparency and accountability in managing its public debt as that achieved by 

the CBC, inter alia, in the interests of the Eurosystem’s liquidity management. If the Ministry of 

Finance  is  to  be  directly  responsible  for  debt  management,  debt  management  should  be  kept 

separate from budget and fiscal control, and sufficient material resources and expertise will need to 

be  secured  for  a  public  debt  management  office  to  substitute  the  CBC  in  its  public  debt 

management tasks. Alternatively, if debt management is to be delegated to a separate, independent 

agency outside the Ministry of Finance, clear governance, legal and institutional arrangements will 

need  to  be  established  to  control  and  monitor  the  external  agency’s  compliance  with  the  debt 

management  objectives,  benchmarks  and  guidelines  set  by  the  Ministry  of  Finance  and  to  avoid 

conflicts of interest.  

This opinion will be published on the ECB’s website. 

2  

Law 138(I)/2002, O περί της Κεντρικής Τράπεζας της Κύπρου Νόµος (Official Government Gazette No. 3624 of 19 July 
2002), as amended. 

2 

 
 
 
 
 
                                                      
Done at Frankfurt am Main, 14 May 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

3