The government is considering introducing a single supervisory authority, press reports revealed on Thursday. According to newspaper “Phileleftheros”, the issue has been brought to light recently but the model is still unclear. Newspaper “Simerini” reports that thoughts focus on the removal of the banks’ supervision from the Central Bank and its assignment to an independent authority, which will be headed by a person appointed by the President of the Republic.

According to newspaper “Alithia”, the government has plans for radical changes in the supervision of the banking system aiming at weakening the role of the Central Bank and the CB Governor, Athanasios Orphanides. Sources refer to the establishment of a new monetary authority that will undertake the supervision of the commercial banks and the Coops. If it fails, the alternative scenario provides for the gradual control of the CB Board of Directors by the government via the appointment of new members.

According to the press, the Finance Minister stated that it is not a top priority for the government but expressed his concerns on the theoretical distortions that the Cypriot supervisory system creates. He also clarified that if the government proceeds with the single Authority, the power will be transferred to the Central Bank and there is no intention to abolish its competencies but to expand them.

The issue was raised in 2001-2002 and it was backed by the Association of Cyprus Commercial Banks (ACCB). It provided that the Central Bank, the SEC, the Insurance Superintendent, the Provident Funds and the Coops come under in a single authority and it was among former government’s pre-electoral commitments.

The possible creation of a single supervisory authority arouses strong feelings since in the case of Northern Rock, the British supervisory system failed due to difficulties in the cooperation and coordination between the Ministry of Finance, the Bank of England and the Financial Services Authority.