Central Bank of Cyprus

The Central Bank of Cyprus (CBC) is the national central bank of the Republic of Cyprus. Established in 1963 after the country became independent, it replaced the former issuing institution that had continued the functions of the colonial-era Cyprus Currency Board. The bank initially operated as the monetary authority for a country using the Cypriot pound. It issued currency, supported the functioning of the domestic banking system, managed international reserves and contributed to the formulation and implementation of national monetary policy. The institution's origins reach back to 1927, when the British colonial administration created a Cyprus Currency Board. That board issued notes and coins linked to sterling and maintained a currency-board arrangement under which Cyprus pounds were backed by sterling deposits held in London. After independence in 1960, the Constitution of the Republic of Cyprus provided for an issuing bank and allowed the government to transform it into a full central bank. That transformation took place in 1963, creating the CBC in its modern form. Cyprus joined the European Union in 2004 and adopted the euro on 1 January 2008. With euro adoption, the CBC became part of the Eurosystem, the network comprising the European Central Bank and the national central banks of euro-area member states. Responsibility for setting the common monetary policy of Cyprus consequently moved from the national level to the European Central Bank's Governing Council, in which the CBC Governor participates. The CBC continues to contribute to Eurosystem monetary operations and carries out national responsibilities assigned under European and Cypriot law. The bank also serves as a major financial-sector authority. It supervises domestic credit institutions and implements European Union banking and financial regulation. Under the Single Supervisory Mechanism, significant Cypriot banks are directly supervised by the European Central Bank, while the CBC supervises less significant institutions as the national competent authority. Its wider institutional responsibilities include macroprudential oversight, financial stability work, payment-system functions, reserve management, currency-related operations and the collection and publication of economic and financial statistics. The CBC is also Cyprus's designated national resolution authority and participates in the Single Resolution Board. It is represented in European financial-stability and supervisory structures, including the European Banking Authority, the European Systemic Risk Board and the European framework for anti-money-laundering supervision. Through these roles, the bank operates at the intersection of national public administration and the integrated European financial system. The Central Bank of Cyprus is not a commercial bank and does not compete for retail deposits or provide ordinary consumer banking products. Its institutional offering consists of public monetary, supervisory, regulatory and financial-infrastructure functions. Its continuing importance is linked to the stability of Cyprus's banking system, the soundness of payment and settlement arrangements, compliance with European financial rules and the country's participation in the euro area.

The institutional history of the Central Bank of Cyprus begins with the Cyprus Currency Board, established by the British colonial administration in 1927. The board was created within the colonial monetary system and issued notes and coins denominated first in pounds, shillings and piastres and later in pounds and mils. The Cyprus pound was linked to sterling at a fixed rate. Currency issuance was supported by the requirement that corresponding sterling reserves be deposited in London, leaving ultimate monetary and fiscal control with the British authorities and the Bank of England-related arrangements. Cyprus became independent in 1960. Its Constitution provided for an issuing bank and empowered the President and Vice-President to establish the institution. The constitutional framework also allowed the Republic to convert the issuing institution into a central bank through subsequent legislation. In practice, the post-independence issuing bank continued much of the former currency-board function while the new state developed its own public institutions and economic policy framework. A decision to establish a full central bank was taken in 1963. The Issuing Bank was replaced by the Central Bank of Cyprus, which assumed responsibility for currency issuance and broader central-bank duties. During the period in which Cyprus used the Cypriot pound, the CBC served as the country's monetary authority, managing reserves, supporting monetary conditions and participating in the supervision and development of the financial system. Cyprus joined the European Union in 2004. This created a further transition in the CBC's institutional environment because monetary and financial regulation increasingly operated under European Union rules. The decisive change came on 1 January 2008, when Cyprus adopted the euro. The CBC then became a member of the Eurosystem. The common monetary policy of the euro area was no longer set independently by Cyprus; instead, the CBC participates in the implementation of decisions taken by the European Central Bank and contributes to the Eurosystem through its Governor and operational functions. The bank's supervisory role has also become increasingly European. It remains the national competent authority for Cyprus in the European banking-supervision system, while the European Central Bank directly supervises significant credit institutions. The CBC supervises less significant entities and applies European and national requirements across the domestic financial sector. Its responsibilities extend beyond conventional prudential supervision to financial stability, macroprudential policy, payment systems, reserves, statistics and the orderly handling of failing financial institutions. The CBC is Cyprus's designated national resolution authority and participates in the Single Resolution Board. It also holds representation in European supervisory and systemic-risk bodies, including the European Banking Authority and the European Systemic Risk Board. In the anti-money-laundering architecture, it provides Cyprus's permanent common representative in the relevant supervisory composition of the European Anti-Money Laundering Authority. The bank's modern history therefore reflects the transformation of Cyprus from a British-administered currency-board economy into an independent state and then into a euro-area member. Although the CBC no longer issues a separate national currency or independently determines Cyprus's interest-rate policy, it remains central to the operation of the Cypriot financial system and to the country's participation in European monetary, supervisory and resolution institutions.

• 2022

  RCB Bank licence withdrawn

  [1]Central Bank of Cyprusen.wikipedia.org

  The licence of RCB Bank was withdrawn in December during the evolution of Cyprus's European banking-supervision framework.

• 2008

  Cyprus adopts the euro

  [1]Central Bank of Cyprusen.wikipedia.org

  Cyprus replaced the Cypriot pound with the euro, and the CBC joined the Eurosystem.

• 2004

  Cyprus joins the European Union

  [1]Central Bank of Cyprusen.wikipedia.org

  EU membership brought the CBC more fully into European monetary, banking and financial-regulatory arrangements.

• 1963

  Central Bank of Cyprus established

  [1]Central Bank of Cyprusen.wikipedia.org

  The Issuing Bank was replaced by the Central Bank of Cyprus, giving the independent republic a full national central bank.

• 1960

  Independence creates a constitutional basis for an issuing bank

  [1]Central Bank of Cyprusen.wikipedia.org

  The Constitution of the Republic of Cyprus provided for an issuing bank and allowed the institution to be converted into a central bank.

• 1927

  Cyprus Currency Board established

  [1]Central Bank of Cyprusen.wikipedia.org

  The British colonial administration established the Cyprus Currency Board, the institutional predecessor of the modern central bank.

Cyprus's statutory monetary and financial-stability institution, operating nationally while implementing Eurosystem and European Union frameworks.

• Central-bank function · 2008

  Monetary policy implementation

  The CBC participates in the implementation of euro-area monetary policy under the Eurosystem. Since euro adoption, it no longer independently sets a national monetary policy, but it supports the transmission of European Central Bank decisions in Cyprus and contributes through its Governor and operational activities.

• Financial regulation · 1963

  Banking and financial supervision

  The CBC is Cyprus's national competent authority for banking supervision. It supervises less significant institutions and applies European and national prudential requirements, while significant institutions fall under direct European Central Bank supervision within the European banking-supervision framework.

• Currency management · 1963

  Currency and cash services

  Before euro adoption, the CBC issued and managed the Cypriot pound. It now performs national central-bank functions associated with euro cash and currency operations within the Eurosystem rather than issuing a separate Cypriot currency.

• Financial stability · 1963

  Financial stability and macroprudential oversight

  The bank monitors risks to Cyprus's financial system and contributes to macroprudential policy and systemic-risk management. These responsibilities complement its prudential supervision of domestic institutions and its participation in European stability bodies.

• Bank resolution

  Bank resolution authority

  The CBC is Cyprus's designated national resolution authority and participates in the Single Resolution Board framework. This role concerns the orderly resolution of failing institutions and coordination with European resolution authorities.

• 2008

  Integrate Cyprus into the EurosystemStrategy

  Background

  Cyprus joined the European Union in 2004 and subsequently prepared to replace the Cypriot pound with the euro.

  Action taken

  Cyprus adopted the euro, and the CBC became part of the Eurosystem.

  Aftermath

  The European Central Bank assumed responsibility for common euro-area monetary policy, while the CBC continued national implementation, supervision and financial-stability functions.

  Source

• 1963

  Replace the issuing institution with a central bankStrategy

  Background

  Following independence, Cyprus retained an issuing institution derived from the colonial currency-board system. The constitutional framework allowed the Republic to establish a full central bank.

  Action taken

  The Issuing Bank was replaced by the Central Bank of Cyprus.

  Aftermath

  Cyprus acquired a national central bank with responsibilities extending beyond currency issuance into monetary administration, reserves and financial-sector oversight.

  Source

• 2022

  RCB Bank licence withdrawn[1]Central Bank of Cyprusen.wikipedia.org

  Regulation

  The banking licence of RCB Bank, one of the institutions identified as significant in Cyprus's banking-supervision framework, was withdrawn in December 2022.

• 2014

  European banking supervision framework covers Cyprus[1]Central Bank of Cyprusen.wikipedia.org

  Regulation

  The CBC began operating within the European banking-supervision architecture, with the European Central Bank directly supervising significant institutions and the CBC supervising less significant institutions as Cyprus's national competent authority.

• 2008

  Cyprus adopts the euro and joins the Eurosystem[1]Central Bank of Cyprusen.wikipedia.org

  Other

  Cyprus replaced the Cypriot pound with the euro, and the Central Bank of Cyprus became part of the Eurosystem. Monetary-policy authority for Cyprus was integrated into the European Central Bank framework.

1. 1Central Bank of Cyprusen.wikipedia.org
2. 2Central Bank of Cyprus official websitecentralbank.cy