(1)

Pursuant to Article 18.1 of the Statute of the European System of Central Banks and of the European Central Bank, the European Central Bank (ECB) and the national central banks of Member States whose currency is the euro (NCBs) may conduct credit operations with credit institutions and other market participants, with lending being based on adequate collateral. The standard criteria determining the eligibility of collateral for the purposes of Eurosystem monetary policy operations are laid down in Annex I to Guideline ECB/2011/14.

(2)

Pursuant to Section 1.6 of Annex I to Guideline ECB/2011/14, the Governing Council may, at any time, change the instruments, conditions, criteria and procedures for the execution of Eurosystem monetary policy operations. Pursuant to Section 6.3.1 of Annex I to Guideline ECB/2011/14, the Eurosystem reserves the right to determine whether an issue, issuer, debtor or guarantor fulfils its requirements for high standards on the basis of any information it may consider relevant.

(3)

Marketable debt instruments issued or fully guaranteed by the Republic of Cyprus currently do not meet the Eurosystem’s minimum requirements for credit quality thresholds applicable to marketable debt instruments, as established in Annex I to Guideline ECB/2011/14.

(4)

The Governing Council has taken into consideration the Memorandum of Understanding concluded between the Republic of Cyprus and the European Commission and endorsed by the Member States, reflecting the economic and financial adjustment programme for Cyprus.

(5)

The Governing Council considers this programme to be appropriate, so that the marketable debt instruments issued or fully guaranteed by the Republic of Cyprus have a quality standard sufficient to warrant their eligibility as collateral for Eurosystem monetary policy operations, irrespective of any external credit assessment.

(6)

The Governing Council has therefore decided that the eligibility of marketable debt instruments issued or fully guaranteed by the Republic of Cyprus must be restored for the Eurosystem’s monetary policy operations, subject to applying specific haircuts to such instruments different from those provided for in Section 6.4.2 of Annex I to Guideline ECB/2011/14.

(7)

Under Article 7 of Guideline ECB/2013/4, the Eurosystem’s credit quality threshold shall not apply to marketable debt instruments issued or fully guaranteed by the central governments of euro area Member States under a European Union/International Monetary Fund programme, unless the Governing Council decides that the respective Member State does not comply with the conditionality of the financial support and/or the macroeconomic programme. However, under Article 1(3) of the same Guideline, for the purposes of its Article 5(1) and Article 7, only Ireland, the Hellenic Republic and the Portuguese Republic are considered euro area Member States compliant with a European Union/International Monetary Fund programme. Therefore an additional Governing Council decision is required to waive the Eurosystem’s credit quality threshold for marketable debt instruments issued or fully guaranteed by the Republic of Cyprus.

(8)

This exceptional measure will apply temporarily until the Governing Council considers that the normal application of the Eurosystem’s eligibility criteria and risk control framework for monetary policy operations can be reintroduced,