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Cyprus

ECB says Central Bank must remain independent

By George Psyllides

THE EUROPEAN Central Bank (ECB) yesterday urged parliament to ensure the independence of the Central Bank of Cyprus’ (CBC) as lawmakers are looking to pass a bill granting executive powers to two board members.

The bill also provides that decisions relating to the CBC’s policy, including licensing of banking institutions and amendments to existing banking licences, are to be adopted by the governor with the approval of the board.

The board will also assign specific duties to the executive directors who, in turn, will assist the governor in the management, supervision and control of the CBC’s operations.
Executive directors will be employed on a full-time basis.

In its opinion, given at the request of the House President Yiannakis Omirou, the ECB said that unless the executive directors and board members of a national central bank (NCB) were subject to the same legal requirements, and enjoyed the same independence safeguards as the governor, any provision assigning European System of Central Banks-related tasks to an executive director, or requiring the approval of the board for decisions of the governor, “raises concerns about the governor’s ability to independently carry out the ESCB-related tasks.”

The ECB said this would not be compatible with the relevant regulations governing European central banks.

“The governor should not be influenced by an executive director or the members of the board in the performance of ESCB-related tasks which, under national law, are assigned exclusively to the governor,” the ECB said.

The ECB said the draft law was unclear with regard to the executives’ powers.

In the ECB’s view, the draft law should provide clarity in terms of the precise scope of the executives’ powers and tasks, the limits of the competence of the executives when assisting the governor, and the position of the proposed executives in the CBC’s organisational structure.

“Without clarity in these respects, the ECB is concerned that the CBC’s decision making processes will be undermined,” the ECB said.

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