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)
Date: 2013-11-22
Institutions: European Central Bank
Subjects: Cyprus, central bank, competence of the institution, credit institution, national law

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  European  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 amends Article 15A of the Law on the CBC to extend the range of decisions that the 

Governor takes with the assent of the CBC’s Board of Directors by including those decisions the 
CBC is assigned to take pursuant to the Law on credit 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 article 

was  later  amended  by  Amending  Law  No  103(I)/2013  on  9  September  2013,  to  provide  that 

decisions on granting licences and on the exercise of business by credit institutions are to be taken 

by the Governor with the assent of the Board of Directors. 

1.3  The  Law  on  credit  institutions  sets  out  the  CBC’s  competence  in  relation  to  credit  institutions 

operating in Cyprus and their officials. This competence covers a wide range of matters, inter alia, 

in  relation  to  (a)  granting  and  revoking  licences  to  credit  institutions;  (b)  providing  cross-border 

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Law 138(I)/2002. 
OJ L 189, 3.7.1998, p. 42. 
Law 66(I)/1997. 

 
 
 
 
                                                 
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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  credit  institutions  include  decisions  concerning  licencing  and  the 

exercise of business by credit institutions. 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 supervision 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. Therefore, 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  these 

exclusive tasks 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 Bank (hereinafter the ‘Statute of 

the  ESCB’). The  NCBs’  Governors, in  their  capacity  as  members  of  the  Governing  Council,  are 

therefore  required  to  exercise  their  duties  with  regard  to  the  ECB’s  specific  tasks  concerning 

policies relating to the prudential supervision 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’ Governors should be responsible for the NCBs’ contribution to the specific tasks 

conferred on the ECB by  Regulation (EU) No  1024/2013. Any national law provisions assigning 

duties  with  regard  to  the  ECB’s  specific  tasks  concerning  policies  relating  to  the  prudential 

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. 

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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, 29.10.2013, p. 63). 

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4. 

CBC Governance 

The ECB refers 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 and board members 

are subject to the same legal requirements as that NCB’s Governor, any provisions 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 compliance 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 

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6  

All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
See paragraphs 2.3 and 2.4 of Opinion CON/2013/41. 

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