A decentralised CBC… Patsalides’ plan to transform the Central Bank

Central Bank of Cyprus (CBC) Governor Christodoulos Patsalides appears determined to transform the CBC so it can cope in the best possible way with its role and mission, conceding that the way it is functioning today is showing weaknesses and distortions.

As part of these changes, he revealed at a recent press conference that the two executive members of the CBC’s Board of Directors, currently Evgenia Christodoulou and George Karatzias, will be assigned expanded competences.

“In order to cope and be effective, we must proceed with transforming the Central Bank, in order to have reflexes, to have a strategy, to have the sufficiency to be able to face future challenges,” said Patsalides.

He pointed out that "without proper governance, you cannot do anything sufficiently".

CBC Governor Christodoulos Patsalides

And he said governance means two things: “First, to be useful and to be able to function, and secondly to be able to create with balance, with supervision, in a decentralised way, so that you are not dependent on someone else."

"The first thing we did was to create a framework, a mechanism to be able to operate," he added, admitting that the Central Bank has several weaknesses and distortions in the way it operates.

"As such, there are many delays, pending issues, and other issues that could benefit from better governance," he pointed out.

As things stand today, he said, everything is decided by the governor. “At some stage there must be a wider mechanism for making decisions," he added.

To begin with, and without requiring any legislative amendments, Patsalides said he established a coordinating team that is tasked with resolving all the issues, “initially the horizontal issues and at a later stage, as the studies on how to change the Central Bank’s governance proceed, all issues will be put to discussion at a senior management level”.

A previous study to change the way the CBC is governed may have been approved by the European Central Bank, said Patsalides, however, it had a number of constitutional issues.

Now, he continued, he was in contact with the Single Supervisory Mechanism regarding the CBC’s transformation, with the aim of finding the best practices. Cyprus, he reiterated, also has certain particularities that need to be taken into account, such as its British judicial system and the provision for a Turkish Cypriot deputy governor.

Patsalides stressed that transforming the CBC was a priority for him personally, though he added: “Any changes must be made in a way that is legally covered.”

Asked during the press conference about the expanded role of the executive Board members, Patsalides said: “Their competences will be broad. The three of us met (on 11 June) and have decided which sector will be assigned to whom.”

Executive Board Member Evgenia Christodoulou

He added that the CBC’s legal service is in the process of preparing a memo to update the staff on what is going on, as the two executive members will have very specific duties.

“They are the senior executives of the Central Bank; they will participate in the coordinating team with me and I hope for and look forward to close cooperation,” said Patsalides. “I am happy to have both of them as they are very knowledgeable in a variety of topics that concern the Central Bank. I see that they both have the will to work and are willing to collaborate with everyone. I believe that our coexistence and cooperation will be easy.”

Executive Board Member George Karatzias