The European Central Bank has welcomed the Ministry of Finance’s draft law amending the Law of 2002 on the Central Bank of Cyprus and a draft amendment to the Constitution of the Republic.
The draft law introduces amendments to the Law on the CBC in respect to the supervisory body’s governance structure and the independence of its directors as well as to its capital and alteration.
The ECB was already consulted on an earlier version of the draft law sent to Frankfurt in February 2018, and provided its observations in May 2018. These were included in the new opinion which was made public a week ago.
Amongst other, the ECB welcomed the revisions introduced as regards the grounds for dismissal of the members of the executive committee as these are now aligned with Article 14.2 of the Statute of the European System of Central Banks. And it noted that they reinforce the independence of these members.
The ECB also welcomed the amendment to the provision that limits the voting rights of the members of the executive committee at the meetings of the board of directors.
As well as the provision of the draft law conferring powers on the board of directors to determine the level of ‘maximum provisions and reserves’ that the CBC can maintain in the medium term.
In relation to the amendments introduced regarding the CBC’s capital and its alteration, the ECB reiterated its understanding that according to the draft law the CBC will be entitled to be automatically recapitalised up to the level of the prescribed capital referred to in the relevant law.
In addition, the ECB welcomed the provision of the draft law conferring powers on the board of directors to determine the level of ‘maximum provisions and reserves’ that the CBC can maintain in the medium term.
In this respect, the ECB reiterated its understanding that this provision intends to address financial buffers comprising general reserves, and capital and financial risk provisions.
Moreoever, the ECB welcomed the objective of the draft amendment to the Constitution to guarantee legal certainty by ensuring that the draft law is in line with the provisions of the Constitution.
In particular, the ECB welcomed the extension of the scope of Article 118(4) of the Constitution on the grounds of dismissal to cover the CBC’s executive directors, putting them on an equal footing with the governor and deputy governor.
And it noted that the draft amendment to the Constitution goes a step further by providing that the same procedure for the dismissal of the governor and deputy governor also applies with regard to the dismissal of non-executive directors.