New bill to modernise Central Bank of Cyprus’ governance moves forward

Finance Minister Makis Keravnos and Central Bank of Cyprus (CBC) governor Christodoulos Patsalides met on Mondayto discuss a draft bill reforming the governance of the CBC.

The aim of the bill is to modernise its structure and align it with current economic and institutional realities.

The meeting lasted more than an hour and a half and focused primarily on the proposed legislation prepared by the central bank.

“I would like to thank the governor of the central bank,” the finance minister said after the meeting, adding that they had been given the opportunity to be briefed on the new bill concerning changes to the governance of the CBC, which is being prepared by the institution itself.

Governor Patsalides described the meeting as “very useful” and said discussions had begun with the proposed bill for the central bank.

“We started with the proposed bill for the central bank,” he said.

He then said that he had provided an in-depth briefing and that a number of related issues had been discussed.

Asked about the main points of the bill, the governor said that the operation of the central bank is currently based on legislation dating back to 1963, which has only been amended a few times since then.

He said the framework requires significant renewal, explaining that “the world is changing, because we are part of the Eurosystem, because needs are different and it should be modernised”.

The proposed change αφορά the governance of the Central Bank of Cyprus, based on the model of the German central bank, he explained.

Under this model, there would be an executive board consisting of six members, each serving a single term, with the governor acting as president and the deputy governor as vice president.

He said decisions would be taken by majority vote, except for decisions that fall under the competence of the Eurosystem.

He added that the most important of these is the decision on interest rates, which is taken by the governing council of the European Central Bank (ECB).

Asked when the bill is expected to be submitted, the finance minister said it should first be submitted in the “immediate next period” to the European Central Bank and the Legal Service, after which it will follow the required legislative process.

Meanwhile, the minister said that other issues were also discussed during the meeting.

“We exchanged views on the course of our economy and on the banking system in general,” he said, adding that there were converging views.

“We agree on all issues and we made references to continuing this ongoing cooperation and coordination,” he added.

On his part, the governor said that a range of issues concerning the Cypriot economy were discussed, with an emphasis on the financial sector and the banking industry.

“We discussed eurozone issues and broader European economic matters and how they affect Cyprus,” he said, adding that there are converging views.

“I share the minister’s position on the fiscal discipline we have,” he said.

Moreover, he stressed that this buffer, together with the banking buffer in terms of capital reserves, is important for the economy in order to protect it from any shocks that may arise.

Asked by a journalist on how he assesses ongoing developments in the banking and insurance sectors in Cyprus, the governor said that “any interest is welcome“.

“This demonstrates the interest of foreign investors in Cyprus and the confidence that foreign investors have in the Cypriot economy,” he said.

He added that “each investment is assessed by the competent authorities, depending on the nature of the investment”.