Financial supervision in the Republic of Cyprus: the case for reform
| Date | 01 January 2006 |
| Pages | 57-69 |
| DOI | https://doi.org/10.1108/13581980610644761 |
| Published date | 01 January 2006 |
| Author | Phoebus Athanassiou |
| Subject Matter | Accounting & finance |
Financial supervision in the
Republic of Cyprus: the case for
reform
Phoebus Athanassiou
Directorate General Legal Services, European Central Bank,
Frankfurt am Main, Germany
Abstract
Purpose – Aims to examine the current financial scenario in Cyprus and to suggest medium-term
reforms to the institutional set-up of Cypriot financial supervision.
Design/methodology/approach – Details the different sectors in Cyprus’s financial set-up and
suggests measures necessary for remedial reform.
Findings – The suggested reforms should considerably enhance the consistency and extend the
viability of the Cypriot financial supervision system without unduly upsetting its hitherto institutional
balance or introducing unnecessary complications to its contemporary arrangements.
Originality/value – This represents a starting-point for Cypriot financial reform, which has up to
press been only marginally considered.
Keywords Financial control,Banking, Securities, Insurance,Cyprus
Paper type General review
1. Introduction
The organization of financial supervision in Cyprus reflects the traditiona l separation
of financial markets into three sectors, with separate agencies sharing the
responsibility for their supervision and regulation. As the Cypriot financial system
evolves and domestic market intermediaries diversify the scope of their activities to
areas beyond their traditional preserves, this sector-based architecture is increasingly
coming under attack while the resulting fragmentation of supervisory responsibilities
alongside rigid institutional lines casts doubt on the effectiveness and efficiency of
supervision.
In recent years, several countries around the world have consolidated their
financial supervision arrangements in order to, inter alia, respond to the development
of financial conglomerates, build effective supervisor y capacity and achieve
economies of scale[1]. Although the mechanics and the outcome of the
consolidation process inevitably differ across jurisdictions, depending on their
market conditions and distinct regulatory cultures, the commonality of the principal
driving forces underlying that process renders legitimate their use as starting points
for comparisons between the supervisory choices made in different countries and as
yardsticks against which to measure the likelihood of their successful application
elsewhere in the world.
The purpose of this paper is to discuss medium-term adjustments to the
contemporary institutional design of Cypriot financial supervision in order to
rationalize the allocation of supervisory and regulatory responsibilities among
domestic supervisors and to enhance their effectiveness and efficiency. This paper is
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
Financial
supervision in
Cyprus
57
Journal of Financial Regulation and
Compliance
Vol. 14 No. 1, 2006
pp. 57-69
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980610644761
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