Central Bank of Cyprus: The Central Bank of Cyprus was created in 1963, after Cyprus gained its independence in 1960, as an autonomous Bank, in accordance with the Central Bank of Cyprus Law 1963 and the relevant articles of the Constitution. Today the Cyprus Central Bank is governed by the Central Bank of Cyprus Laws 2002-2007, which ensure the Bank’s independence as well as obedience with the relevant provisions of the Treaty establishing the European Community and the Statute of the European System of Central Banks and of the European Central Bank. The law’s amendment in March 2007 paved the way for the legal integration of the Bank into the Euro system in January 2008.

The Main Functions of the Central Bank of Cyprus Are:

The main functions of the Central Bank include:

  1. Implementing the European Central Bank’s monetary policy decisions;
  2. Holding and managing the official international reserves;
  3. Supervising banks;
  4. Ppromoting, regulating and overseeing the smooth operation of payment and settlement systems;
  5. Safe guarding the stability of the financial system.

During the early years of its operation, the Central Bank, took over fully the functions of banker to the government of Cyprus and the management of international reserves. Very soon the Bank organised its internal structure and prepared the regulatory organization for banking supervision, also setting up the operational framework for the implementation of monetary policy.

In the late 1960s and early 1970s, monetary policy became more active, while bank supervision was widened. During this period Stocks for the Government of Cyprus were first issued. Following the economic disaster caused by the Turkish invasion in 1974, the Central Bank of Cyprus, was actively involved in the reactivation of the economy.

Thus, the Bank pursued an expansionary monetary policy and facilitated the financing of the housing needs of the refugees and the replenishment of lost capital stock and infrastructure. The role of the Cyprus Central Bank was crucial in the achievement of a fast improvement of the economic conditions that took place subsequently. A great historical point in time is the liberalization process of the financial sector and the abolition of the statutory interest rate ceiling on 1st January 2001.

On 2 May 2005 the Cyprus pound joined the Exchange Rate Mechanism II (ERM II) at the pre-existing central parity of €1=CY£0,585274, unchanged from the parity at which it had been unilaterally pegged to the euro since 1999. The standard fluctuation margins of + 15% were maintained, although in practice the pound fluctuated within the narrower range of +2,25, both before and after ERM II entry.

On 1 January 2008 Cyprus joined the euro area thus bringing to fruition the island’s goal of becoming a fully integrated member of the EU. The conversion rate between the euro and the Cyprus pound was set at CY£0, 585274 by the ECOFIN Council on 10 July 2007, in other words the same rate at which the Cyprus pound joined ERM II.


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