Opinion of the European Central Bank of 24 July 2013 on the macro-prudential oversight of the national financial system (CON/2013/54)
Date: 2013-07-24
Institutions: European Central Bank
Subjects: Cyprus, central bank, competence of the institution, financial stability, financial supervision, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 July 2013 

on the macro-prudential oversight of the national financial system 

(CON/2013/54) 

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 indents  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 Procedure 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  authorities3 

(hereinafter the ‘ESRB Recommendation’). The proposed amendments to sections 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  
2  
3  

Law 138(I)/2002. 
OJ L 189, 3.7.1998, p. 42. 
OJ C 41, 14.2.2013, p.1. 

 
 
 
 
                                                 
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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 financial 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 Cyprus, 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 policy 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 responsibilities 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 accordance 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  Treaty  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 of the 

financial  system’.  The  draft  law  replaces  this  task  with  ‘the  macro-prudential  oversight  of  the 

financial system’. The consulting authority is invited to ensure consistency with Article 127(5) of 

the  Treaty  by  supplementing  the  proposed  amendment  to  the  aforementioned  Section  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  

5  

See,  for  example,  paragraph  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. 
See paragraph 2.2 of Opinion CON/2013/45 and paragraph 2.3 of Opinion CON/2013/30. 

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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/EC7. 

2.6  This  opinion  is  without  prejudice  to  the  conclusions  of  the  follow-up  assessment  of  the  above-

mentioned 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 
7 
8  

OJ L 176, 27.6.2013, p. 1. 
OJ L 176, 27.6.2013, p. 338. 
OJ L 331, 15.12.2010, p. 1. 

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