The European Central Bank (ECB) said the Central Bank of Cyprus should acquire additional staff due to new duties assigned to it by a law on credit agreements for consumers, relating to residential immovable property.
The draft law submitted by the Finance Ministry assigns the CBC with the supervision of creditors and credit intermediates provided for in the law transposing EU directive 2014/17/EU into national law. Under the Eurosystem rules, the Cyprus Finance Ministry requested the opinion of the ECB.
“When allocating specific non-Eurosystem-related tasks to the National Central Banks (NCBs), additional personnel and financial resources must also be allocated so that these tasks may be carried out in a manner that will not affect the NCBs’ operational or financial capacity to perform their Eurosystem-related tasks,” the ECB.
Noting that while the task assigned to the ECB under the draft law seems to be broadly of the same nature as the supervisory tasks already performed by the CBC, the ECB notes that conflicts of interest may arise and recommends that sufficient mitigation measures are put in place in this respect.
The ECB also points out that the draft law does not specify how the costs related to the supervision of credit intermediaries and non-credit institutions by the CBC are to be financed and invites the Finance Ministry to consider establishing a cost recovery regime, such as requiring credit intermediaries and non-credit institutions to pay to the CBC an authorisation fee or an annual fee to cover the actual costs incurred by the CBC in the performance of its new supervisory tasks.
Once a cost recovery regime is established, the ECB adds, the CBC would then need to arrange for the additional necessary staff with the appropriate skills that are considered essential for the supervision of these entities and institutions, in view of the need to ensure that its capacity to perform its ESCB-related tasks and existing supervisory functions is not affected by the assumption of these new tasks.
The draft law aims to enhance consumer protection in respect of consumer loans for the acquisition of real estate which are secured by residential immovable property. The law designates that the CBC together with the Consumer Protection Service of the Republic of Cyprus are responsible for the application and enforcement of certain of the rules that transpose Directive 2014/17/EU into national legislation.
Source: Cyprus News Agency