Inconsistency and lack of coordination between the Ministry of Finance, Central Bank of Cyprus and the island’s Legal Service in the preparation of legislation are leading the Republic towards adventures.
And not for the first time either. This time it regards amendments to the law on credit facilities, as well as on the consumer credit contracts in relation to residential property.
Even though Cyprus is on the brink of getting slapped with heavy fines from the European Commission, the divergence of views between institutions and the executive power came to light during yesterday’s debate before the House Finance Committee of the draft legislation.
In relation to the bill on facilities which provides a capital buffer for the protection of depositors in the event of resolution or liquidation of a credit institution with the establishment of eligible debt instruments, the Legal Service has amended the article on the classification of claims in the event of a financial institution’s insolvency. The Finance Ministry was informed about the amendment, but not the Central Bank.
The representative of the Legal Service said that when the bill was sent to them for a review the Finance Ministry had additional provisions that are not part of harmonisation reforms. He also said that the additional provisions are not compatible with the European directive.
But he called on the House to vote in favour of the bill anyway because the Republic’s infringement will be penalised. As for the Finance Ministry’s Financial Stability Director Andreas Charalambous he said that they had failed to convince the Legal Service of the additional provisions.
But, he added, it would be better to approve the reform bill now and change it later. Central Bank representative Maria Kettirou said the specific article does not concern harmonisation reforms but rather reflects government policy. The Central Bank is against the proposed article.
Representatives of the Ministry will meet today (Tuesday) with those of the Legal Service to find a compromise solution. However, the representative of the Legal Service has rushed to clarify that it should not be taken for granted that the additional provisions proposed by the Ministry will be accepted.