The state has the obligation to step in and provide support to the banking system to ensure that it continues to operate and function smoothly, Finance Minister has said, underscoring that the state intervention will be made not by choice but when necessary and upon the invitation of the competent supervising authority.
In statements to the press after the discussion of three new government Bills at the Parliamentary Committee on Financial and Budgetary Affairs on Tuesday, Kazamias said that the legislation will act as an added safeguard for financial institutions and would help boost the confidence placed of clients, partners and foreign investors.
Kazamias said that he stressed to MPs that “a state intervention will take place only after the private sector has taken all necessary action and will aim to ensure financial stability”.
He also clarified that any possible state intervention would only be made upon the request by Central Bank of Cyprus and only after a consultation with the competent supervising authority of the financial institution in question. The Central Bank of Cyprus is responsible for supervising banks whereas the Central Cooperative Bank supervises cooperative credit institutions.
“In such a case, the government should and is obligated to protect the rights and interests of the Cypriot taxpayer”, Kazamias stressed.
He further expressed the view that a spirit of mutual understanding and readiness for cooperation were evident during the discussion, which took place.
Kazamias reiterated that if the government was called upon to act, it would undertake its obligation and will be glad when its aid will no longer be necessary.
The government has been taking the necessary steps in cooperation will all relevant bodies so that if the need arises the task of intervention may be undertaken successfully, he added.
The financial system in Cyprus is faced with difficulties just as is the case in the eurozone in general, Cyprus Central Bank Governor Athanasios Orphanides said on his part, adding that necessary actions are being taken by the Central Bank, the Finance Ministrty and all relevant bodies to manage the situation.
“Eurozone is faced with a problem”, he said, adding that “we are dealing with this problem and it is manageable”.
Orphanides recalled that after the meeting of Eurozone Heads of State which took place last week assurances were given to all EU citizens that EU political leadership is proceeding with those measures necessary in order to manage the difficult current situation.
He stressed that state support to a financial institution is an extreme measure, not only in Cyprus but in any EU country. He further added that the Bill under discussion should not be considered as a Bill aiming to nationalize institutions or to interfere with investors’ rights etc.
The goal, Orphanides said, is that the possibility of such an extreme measure should be in place and be drafted in such a way so that a balance is struck between investors and taxpayers in case the government is called upon to provide support.
The three Bills concern the imposition of a special tax on financial institutions, managing financial crisis and the establishment and operation of an independent financial stability fund.
