Opinion of the European Central Bank of 25 November 2025 on the prevention of conflicts of interest among the staff of the Central Bank of Cyprus (CON/2025/38)

OPINION OF THE EUROPEAN CENTRAL BANK of 25 November 2025 on the prevention of conflicts of interest among the staff of the Central Bank of Cyprus (CON/2025/38) Introduction and legal basis

On 17 November 2025 the European Central Bank (ECB) received a request from the Central Bank of Cyprus (CBC) for an opinion on a draft directive of the CBC amending the Directives on the Employees of the Central Bank of Cyprus (Terms of Service) of 2024 (hereinafter the ‘draft directive’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and Article 2(1), third indent, of Council Decision 98/415/EC , as the draft directive relates to the CBC and the specific tasks conferred upon the ECB concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft directive

1.1 The main purpose of the draft directive is to transpose into Cypriot law Article 4a of Directive 2013/36/EU of the European Parliament and of the Council , which was introduced by Directive (EU) 2024/1619 of the European Parliament and of the Council (hereinafter the ‘CRD6’) and which relates to the supervisory independence of competent authorities and the prevention of conflicts of interest involving members of their governance bodies and staff. 1.2 According to the explanatory memorandum accompanying the draft directive, given that Article 4a explicitly exempts governors of national central banks (NCBs) from the scope of its application and the executive functions as to the day-to-day management of the CBC’s supervisory function are solely vested in the Governor , the Cypriot transposition of Article 4a of Directive 2013/36/EU focuses

on those CBC employees who are involved in the performance of supervisory tasks and on the prevention and management of conflicts of interest. 1.3 In particular, the draft directive provides that CBC employees are to be subject to a cooling-off period following the termination of their employment with the CBC. During this period, CBC employees may not take up employment or accept any contract for the provision of professional services with any of the following: (a) institutions with which the employee has been directly involved for purposes of supervision, including direct or indirect parent undertakings, subsidiaries or affiliated companies of those institutions; (b) entities providing services to any of the institutions referred to in point (a); or (c) entities conducting lobbying and advocacy activities directed at the CBC in relation to matters for which the employee was responsible during the course of his or her employment. The cooling-off period begins on the day on which the CBC employee ceases to directly participate in the supervision of the abovementioned institutions or entities. During the cooling-off period, the CBC must ensure that the CBC employee has no access to confidential or sensitive information concerning the abovementioned institutions or entities and may take relevant actions, such as the reassignment of the employee. The draft directive further provides that the duration of the cooling-off period is six months for employment in the institutions and entities referred to in points (a) and (b), and three months for employment in the entities referred to in point (c) or by direct competitors of the institutions referred to in point (a) . 1.4 The draft directive also provides that employees who are subject to a cooling-off period are entitled to compensation amounting to 50 % of the employee’s last gross salary, and only upon notification to the CBC that the employee received a formal and binding employment offer from an institution or entity listed above which the employee was prohibited from accepting due to the cooling-off requirement. The payment of compensation will cease if, during the cooling-off period, the employee becomes employed in the public or private sector or by an institution or entity other than those referred to in paragraph 1.3, becomes self-employed or receives pension benefits. In the event of receipt of an unemployment benefit, this will be deducted from the amount of the compensation. The draft directive further provides that the competent organisational unit of the CBC responsible for regulatory compliance and ethics may issue guidelines on the implementation of these requirements, including on the adoption of guidelines of the European Banking Authority, and will maintain a register of employees to whom a cooling-off period has been applied . 1.5 Upon their appointment and on an annual basis thereafter, the draft directive requires CBC employees to submit a signed declaration of interests, which must include information regarding their private activities, duties and financial interests, as well as their potential conflicts of interest . Financial interests include shareholdings, shares, bonds, mutual funds, investment funds, mixedtype funds, hedge funds and exchange-traded funds. If a conflict of interest is identified, the Governor has the power to take the appropriate measures to manage or mitigate the conflict, including by discharging the employee from duties or responsibilities connected to the object of the conflict and/or

requesting the disposal of the financial interests causing the conflict. The draft directive also provides that all actual or potential conflicts of interest declared through declaration of interests must be recorded in a dedicated register . 1.6 Finally, the draft directive replaces the definition of the term ‘financial instrument’ , which is used in the CBC Directive in connection with employees’ private financial transactions . Specifically, the CBC Directive prohibits employees from carrying out private financial transactions involving (a) equity and debt securities issued by a regulated entity; (b) derivatives related to equity and debt securities issued by a regulated entity; and (c) units in collective investment schemes whose declared investment policy is mostly directed at regulated entities, while allowing certain other private financial transactions – such as foreign exchange transactions and transactions relating to gold, euro area government securities, equities and debt securities issued by insurance corporations, as well as equity and debt securities issued by non-regulated entities and purchased by Eurosystem central banks under any ECB asset purchase programme – with the prior approval of the competent organisational unit. Short-term transactions are also prohibited. With the exception of the proposed replacement of the definition of ‘financial instrument’, the draft directive does not alter the abovementioned provisions or any of the existing provisions on the private financial transactions of CBC employees.

2. General observations

2.1 Article 130 of the Treaty and Article 7 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) address the independence of central banks in the European System of Central Banks (ESCB) , stipulating that when exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB, neither the ECB, nor an NCB, nor any member of their decision-making bodies, are to seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. This independence was thus entrusted to the ECB and the CBC, as an NCB, by primary law . 2.2 Based on considerations of central bank independence, and in order to ensure the independence of NCBs such as the CBC when exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB, the ECB has established an ethics

framework. This includes the ECB’s Code of Conduct for high-level ECB officials (hereinafter the ‘Single Code’), which applies, among others, to the members of the Governing Council of the ECB when exercising their functions as members of a high-level ECB body, and Guideline (EU) [2021/2253] of the European Central Bank (ECB/2021/49) , which is addressed to the NCBs of the Eurosystem and establishes ethics requirements applicable to the members of the decision-making bodies and staff of the NCBs . 2.3 The NCBs, as an integral part of the ESCB, must act in accordance with the guidelines of the ECB . Hence, national legislation transposing the CRD6 into Cypriot law is without prejudice to the ethics framework which the ECB has established in order to ensure the independence of the ECB and the NCBs when exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB, as both frameworks have their own scope and legal basis . 2.4 Furthermore, Article 19 of Council Regulation (EU) No 1024/2013 (hereinafter the ‘SSM Regulation’) stipulates that when carrying out the tasks conferred on it by the SSM Regulation, the ECB and the national competent authorities acting within the SSM must act independently. Article 31(3) of the SSM Regulation furthermore requires the ECB, in cooperation with the national competent authorities, to: (a) establish and maintain comprehensive and formal procedures including ethics procedures and proportionate periods to assess in advance and prevent possible conflicts of interest resulting from subsequent employment within two years of members of the Supervisory Board; and (b) provide for appropriate disclosures. Those procedures are without prejudice to the application of stricter national rules . The legal basis for these provisions of the SSM Regulation is Article 127(6) of the Treaty. 2.5 In view of this independence and these requirements of the SSM Regulation, the ECB has established an ethics framework to ensure the independence of national competent authorities, such as the CBC, when assisting the ECB in carrying out the tasks conferred on it by the SSM Regulation. This ethics framework includes the Single Code, which applies, among others, to the members of the Supervisory Board of the ECB when exercising their functions as members of a high-level ECB body, and Guideline (EU) 2021/2256 of the European Central Bank (ECB/2021/50) , which is

addressed to the national competent authorities of the SSM and establishes ethics requirements applicable to the members of their bodies and the members of staff of the national competent authorities. In view of the responsibility of the ECB for the effective and consistent functioning of the SSM , the national competent authorities must comply with Guideline (EU) 2021/2256 (ECB/2021/50) . 2.6 In contrast to the ethics framework, which is ultimately based on Article 127(6) of the Treaty, the CRD6, including its provision on the supervisory independence of competent authorities , is based on Article 53(1) of the Treaty. A legal act based on this provision cannot alter the rights and obligations of the ECB and the national competent authorities when carrying out the tasks conferred on them by the SSM Regulation based on Article 127(6) of the Treaty. It follows from settled caselaw of the Court of Justice of the European Union that the different legal bases, namely Article 53(1) and Article 127(6) of the Treaty, cannot be combined as the legal basis for a legal act, in view of the different procedures involved. In particular, the measures adopted under Article 53(1) of the Treaty are adopted by the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, and after consulting the Economic and Social Committee (and, if relevant, the ECB in accordance with Articles 127(4) and 282(5) of the Treaty). By contrast, the regulations adopted under Article 127(6) of the Treaty are adopted by the Council alone, in a special legislative procedure in which the Council acts unanimously, after consulting the European Parliament and the ECB . 2.7 Hence, the amendments made by the CRD6 are without prejudice to the ethics framework which the ECB has established to ensure the independence of the national competent authorities in the context of the SSM, as both frameworks have their own scope and legal basis. The Union legislator acknowledged this through the CRD6’s amendments to Directive 2013/36/EU, which provide that Article 4a(2) of Directive 2013/36/EU is without prejudice to the rights and obligations of the national competent authorities pursuant to the SSM established by the SSM Regulation . For the avoidance of doubt, the CBC may wish to clarify this within the text of the draft directive. From an ECB perspective, the provisions from the CRD6 may nevertheless serve as guidance for establishing safeguards for the independence of the ECB and the national competent authorities when carrying out the tasks conferred on them by the SSM Regulation .

3. Specific observations

3.1 The ECB considers that the draft directive overall reflects the relationship with the rules mentioned in the previous paragraphs by maintaining the provisions of the SSM Ethics Framework laid down in Guideline (EU) 2021/2256 (ECB/2021/50) that have been implemented in national law, including the reporting of personal interests, the prohibition and management of conflicts of interests and the regulation of private financial transactions . The ECB highlights that the draft directive should be without prejudice to the Eurosystem and SSM Ethics Frameworks which the ECB has established, and to the Single Code, as it may be amended from time to time . 3.2 The Single Code sets limits on the establishment of post-employment relationships directly with credit institutions, ‘any other financial institution’ or ‘any entity engaged in lobbying in relation to the ECB, or consultancy and/or advocacy for the ECB or for any institution’ . For the first category, the Single Code establishes a cooling-off period of one year for ‘members’ and six months for ‘alternates’, while for the two latter categories it establishes a cooling-off period of six months for members and three months for alternates . In contrast, under the draft directive, the categories of entities in respect of which a cooling-off period is applied extend to those listed in paragraph 1.3 of this Opinion and follow the wording of Article 4a of Directive 2013/36/EU. From this perspective, the cooling-off regime under the draft directive appears to introduce slightly different provisions from those contained in the Single Code as far as the CBC member of the Supervisory Board of the ECB is concerned, who the ECB understands is a member of the CBC’s staff and thus subject to the CBC Directive. In this respect, the ECB reiterates that the draft directive must be interpreted without prejudice to the Single Code, and the CBC may wish to explicitly clarify in the text of the draft directive that the Single Code applies to the CBC staff member who participates in the Supervisory Board of the ECB. This internal act, to be adopted by the CBC, would thus support a better alignment with the Single Code .

Done at Frankfurt am Main, 25.11.2025.

[signed]

The President of the ECB

Christine LAGARDE