articles | 29 May 2014

Bill amends composition of Resolution Authority

Finance Minister Harris Georgiades will have veto power in the new structure of the Resolution Authority, according to a bill tabled recently by the government.

The bill amends the composition of the committee, returning the Central Bank of Cyprus 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.

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% stake in the bank’s equity owned by legacy Laiki – currently under administration by the government.

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 memorandum of understanding (MoU) agreed to between Cyprus and its Troika of lenders (European Commission, European Central Bank and International Monetary Fund) provided for the competent authorities to revise the effectiveness of the Resolution Authority, including its composition and governance, with a view to adopting legislative amendments by the end of March 2014.

But the revised MoU that followed the Troika’s fourth progress review mandated that the changes need to be enforced by mid-July.

According to the bill’s introductory note, its aim is the enhancement and improvement of the Resolution Authority so that it can become more effective.

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.

Source: Cyprus Mail

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