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Information for Cyprus Expats on the function of the Central Bank of Cyprus
The Central Bank of Cyprus was established in 1963, about three years after Cyprus gained its independence, as an autonomous institution in accordance with the Central Bank of Cyprus Law 1963. Since July 2002, the Central Bank has been governed by the Central Bank of Cyprus Law 2002. This law ensures the independence of the Bank and compatibility with the relevant provisions both of the Treaty establishing the European Community and of the Statute of the European System of Central Banks and of the European Central Bank. The pertinent constitutional provisions have been amended so as to ensure central bank independence as prescribed by the European Union acquis communautaire.
The most important changes effected by the 2002 law concern the necessary adjustments with the acquis regarding the Bank’s independence and primary objective as well as the financing of the public sector. Furthermore, the Monetary Policy Committee (MPC) has been upgraded to a decision-making body in the areas of its competence (e.g. monetary policy) whereas under the previous legislation the MPC’s role was only advisory.
More specifically, the law establishes the institutional and financial independence of the Bank and the independence of the members of its decision-making bodies when carrying out the tasks conferred upon them. In addition, the law specifies that the primary objective of the Bank is to ensure price stability, as stipulated in the Treaty establishing the European Community and in the Statute of the European System of Central Banks and of the European Central Bank. The law explicitly prohibits the financing of the government, local authorities, public corporations or public undertakings by the Central Bank.
Under the Central Bank of Cyprus Law, the main tasks of the Bank are the:
• formulation and implementation of monetary policy (including credit policy);
• conduct of exchange rate policy;
• holding, keeping and management of official international reserves;
• supervision of banks;
• promotion, regulation and oversight of the smooth operation of payment and settlement systems;
• provision of services or performance of the tasks of banker and financial agent of the government; and
• participation in international monetary and economic organizations.
PIO
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