The governor of Cyprus` central bank, Athanasios Orphanides, announced that it will create a financial stability fund worth around 500 million euros.
Orphanides, a member of the European Central Bank’s Governing Council, told the finance committee of parliament, that ‘as an initial target, our aim is to build a fund of around 3.0 percent of GDP.’
It is hoped that this will create an additional safety buffer for the island’s banks.
Orphanides added, ‘our aim is to have this fund ready by September … the creation of a financial stability fund is of primary importance to ensure the credibility of the banking system, irrespective of … public finances which, as we know, are not in the best of state of late.’
Orphanides said the central bank would be drafting regulations for the operation of the fund. He said it would be built on contributions from banks, but did not provide further detail.
Commercial banks said that, in principle, they did not oppose the creation of a financial stability fund.
‘It is however important for our Association to take part in the consultation process for the drafting of any Bill (legislation) in relation to such fund, since we have several core issues as well as other technical provisions we would like to raise,’ the Association of Cyprus Commercial Banks said.
The fund will run independently of plans by the finance ministry to impose a 0.095 percent levy on financial sector deposits.
That levy is expected to generate an estimated 120 million euros for its two-year validity in 2011 and 2012.
The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.