Notification template for Article 131 CRD - Other Systemically Important Institutions (O-SII)

Please send this template to

  • notifications@esrb.europa.euwhen notifying the ESRB;
  • macropru.notifications@ecb.europa.euwhen notifying the ECB;
  • notifications@eba.europa.euwhen notifying the EBA.

Emailing this template to the above-mentioned addresses constitutes an official notification, no further official letter is required. In order to facilitate the work of the notified authorities, please send the notification template in a format that allows electronically copying the information.

1. Notifying national authority

1.1 Name of the notifying

The Central Bank of Cyprus (CBC).

authority

2. Description of the measure

2.1 Concerned institution or group of institutions

  1. Level of the buffer applied
  2. Name of the EU ultimate parent institution
  3. Names of subsidiaries

The measure applies to the following investment firms which have been designated as O-SII:

  • Renaissance Securities (Cyprus) Ltd - (IK9CLH4U15AXJVV22968) - Individual level
  • BrokerCreditService (Cyprus) Ltd - (5493008C22FNI0QEEF10) - Individual level
  • SIB (Cyprus) Ltd - (F68F5WN6OGTEHIP5ZT82) - Individual level
  • Etoro (Europe) Ltd - (213800GIFQMSV7HROS23) - Individual level
  • Alfa Capital Holdings (Cyprus) Ltd - (549300XTCMOUXC51WZ58) - Individual level

Investment Firm's name

O-SII Buffer requirement

Renaissance Securities (Cyprus)

2,0%

Ltd

BrokerCreditService (Cyprus) Ltd

1,0%

SIB (Cyprus) Ltd

0,5%

Etoro (Europe) Ltd

0,5%

Alfa Capital Holdings (Cyprus) Ltd

0,5%

Not applicable.

Not applicable.

3. Timing of the measure

Date of template version: 2016-03-01

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  1. Timing of the Decision
  2. Timing of the Publication
  3. Disclosure
  4. Timing of Application
  5. Phasing in
  6. Review of the measure

24 July 2020.

One month after the date of this notification, i.e. 31 August 2020.

The measure is communicated to the ESRB, the EBA and the Commission. One month after the date of this communication, the CBC will publish the measure on its website and circular letters will be sent to the O-SII investment firms informing them of this decision.

  • November 2020
    Not applicable.
    Annual review, as required by the CRD.

4. Reason for O-SII identification and activation of the O-SII buffer

4.1 Scores of concerned institution or group of institutions, as per EBA guidelines on the assessment of O-SIIs

(Article 131.3)

4.2 Methodology and indicators used for designation of the O-SII

(Article 131.3)

For the detailed scores of each identified O-SII investment firm, please refer to the attached file.

The CBC followed the relevant EBA guidelines for the assessment of O-SII investment firms. As this assessment relates specifically to investment firms, a number of indicators that were considered as specific to banking were replaced by indicators that are more relevant to investment firms.

The following mandatory indicators do not in general apply to the operations of Cyprus investment firms and for this reason they were not taken into account in this assessment:

  1. Value of domestic payment transactions
  2. Cross-jurisdictionalliabilities
  3. Cross-jurisdictionalclaims and
  4. Debt securities outstanding.

The following indicators are more relevant to the operations of Cyprus investments firms and for this reason they have been used in this assessment process:

  1. Total assets (after the application of ISDA/CSA netting agreements)
  2. Funds guaranteed under the Investor Compensation Fund scheme (as a proxy of the optional indicator "deposits guaranteed under deposit guarantee system")
  3. Number of retail customers and
  4. Value of trading and available for sale securities.

The designation threshold was set to 350 basis points as per the relevant EBA guidelines.

The assessment covered all investment firms registered in Cyprus that are authorised to provide the investment services listed in points 3 and 6 of Section 1 of Annex I to Directive 2004/39/EC (i.e. Dealing on own account and/or

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4.3 Supervisory judgement

4.4 Calibrating the O-SII buffer

4.5 Effectiveness and proportionality of measure

Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis), as required by the CRD.

Not applicable.

The CBC followed the relevant guidelines issued by the EBA and set the threshold for the designation of O-SII investment firms at 350 basis points. Thus, five investment firms were identified and designated as O-SII investment firms.

To ensure a level playing field and to reflect the hierarchy between O-SIIs in terms of systemic importance, the CBC calibrated the O-SII buffer in relative proportionality with the O-SII scores. A mapping table was developed under which investment firms that scored between 350 and 1,000 basis points are assigned an O-SII Buffer of 0.5% of the Total Risk Exposure amount (TRE). Investment firms with scores greater than 2,500 basis points are assigned an O-SII Buffer of 2% of TRE, the maximum allowed under the CRD. The space between 1,000 and 2,500 basis points is divided into two equal categories where for every 750 basis point increment, an additional 0.5% O-SII buffer is required.

Investment firms are considered systemic because of their size, interconnectedness and importance to the economy of Cyprus. In addition, their activities entail a number of risks and they contribute to the pro-cyclicality of the financial system. The imposition of the O-SII buffer on systemically important investment firms, is considered an effective measure to increase their resilience, so as to ensure that these investment firms can withstand future losses without adversely affecting the stability of the financial system.

5. Cross-border and cross-sector impact of the measure

5.1 Assessment of cross- border effects and the likely impact on the internal market

(Recommendation

ESRB/2015/2)

The imposition of the O-SII buffer increases their resilience, making them more capable of absorbing future losses. The imposition of the O-SII buffer is not expected to adversely affect their economic activities. No inward or outward spillovers are expected.

Effect on financial stability

The measure is not only expected to improve the financial stability of the Cyprus investment firms sector, but also contribute towards the financial stability of the internal market.

Effect on lending

These investment firms are in general not active in lending activities. As a result, no adverse effects on lending are expected.

Effect on economic growth

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5.2 Assessment of leakages and regulatory arbitrage within the notifying Member State

Based on the above characteristics of the measure, and the small size of the Investment firms sector of Cyprus in relation to the size of the internal market, we do not expect any material effect on economic growth.

Leakages and regulatory arbitrage within the financial system are not likely, since the services that the O-SII investment firms provide, can only be provided by authorised investment firms. No substitute services are available from unregulated providers.

6. Combinations and interactions with other measures

  1. Combinations between G- SII and O-SII buffers (Article 131.14)
  2. Combinations with SRB buffers

(Article 131.14 + Article 133.5)

  1. O-SIIrequirement for a subsidiary (Article 131.8)
  2. Interaction with other measures

Not Applicable.

Not applicable.

Not applicable.

Not applicable.

  1. 7. Miscellaneous

  2. Contact person(s) at notifying authority
  3. Any other relevant information

Mr Constantinos Trikoupis

Head Macroprudential Oversight Section, Financial Stability Department, Central Bank of Cyprus

phone: +357 22714342,

email: constantinostrikoupis@centralbank.cy

A separate assessment took place for the designation of O-SII credit institutions.

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ESRB - European Systemic Risk Board published this content on 19 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 October 2020 15:34:00 UTC