By Constantinos Psillides
THE House Finance Committee yesterday began discussions on changes to the Resolution Authority, with main opposition party AKEL fuming that this was the second time the legislation was being revised by the House.
The proposed bill amends the composition of the committee, returning the Central Bank of Cyprus (CBC) the powers it had been stripped of when the current law was voted, while granting the finance minister veto power on significant issues.
The governor of the Central Bank and two of the CBC’s executive board members will comprise the new Resolution Authority, tasked with implementing relevant legislation, making decisions and issuing decrees or directives.
“This bill turns the Memorandum of Understanding into a joke,” said AKEL MP Yiannos Lamaris, pointing out that on March 2013 it was decided by the House parties – citing troika demands – that the head of the CBC should also head the Resolution Authority. “Only to have that decision repealed on August 2013 by the same House parties, who again cited troika requirements. Now, the government says that in order to secure the next instalment from the troika we have to repeal that decision, returning to the original one.”
When the previous decision was reached, the CBC head was Panicos Demetriades, who was in open conflict with all parliament parties, save AKEL.
To date, the Resolution Authority was comprised of the CBC Governor, the finance minister and the head of the Securities and Exchange Commission, following months of discussion in the House.
The change enabled the Authority to have a decisive say in electing members to the Bank of Cyprus’ board through an 18 per cent stake in the bank’s equity owned by legacy Laiki.
Reinstating the initial composition of the Resolution Authority is one of the conditions for the release of the fifth tranche of a €10 billion international bailout loan by international creditors to Cyprus, to the tune of €600 million.
The bill sets out decision-making procedures, committee-session rules, convening scheduled and extraordinary sessions, and minute-keeping practices.
A clause in the bill calls for the CBC to set up a ‘resolution unit’ to provide support to the Resolution Authority in executing its powers and duties.
Also, the finance minister’s consent will be required for decisions that affect public finances or are systemic in nature.
Specifically, the minister’s approval will be required for decisions on the resolution of a banking or other institution, the resolution measures, the selling of banking operations, or decrees relating to the transfer of all or part of the assets of a bank undergoing resolution to an intermediate banking institution or asset management company.
The bill also includes provisions relating to the Resolution Authority’s power to gather information, as well as entering and investigating procedures, and impose administrative fines and other criminal clauses.
Securities and Exchange Commission (CySEC) boss Demetra Kalogirou also informed the House Finance Committee on a new EU directive going into effect on January 1, 2015. The directive states that a European Resolution Authority will be set up to oversee large European banks while the national Resolution Authorities will only be tasked with overseeing smaller banks and investment firms. Cypriot investment firms will be placed under the same supervision, instead of CySEC’s.
Kalogirou requested a bill that saw to that transfer of authority, in order to be in accordance with the new EU directive.