CYPRUS Law and Practice Contributed by: Marcos Georgiades, Dominique Pelides and Panayiota Elia, Georgiades & Pelides
and of the Council of 15 May 2014 establish - ing a framework for the recovery and resolution of credit institutions and investment firms (as amended) (as these are implemented in Cyprus), which, among others, require banks to satisfy the following own funds requirements at all times: • a Common Equity Tier 1 (as defined in the CRR) capital ratio of 4.5%; • a Tier 1 (as defined in the CRR) capital ratio of 6%; and • a total capital ratio of 8%. Key requirements of the CRR/CRD frame - work (as this has been implemented in Cyprus) include: • In addition to the Common Equity Tier 1 and Tier 1 capital ratios, banks must hold an addi - tional capital conservation buffer of 2.5% of risk-weighted assets. • In accordance with the Macroprudential Oversight of Institutions Law of 2015, Law No 6(I)/2015, a systemic risk buffer may also be applied in order to prevent and mitigate macroprudential or systemic risk not other - wise covered by the CRR. • Banks must also maintain a countercycli - cal capital conservation buffer, consisting of Common Equity Tier 1 capital. • A number of banks in Cyprus have been designated by the CBC as Other Systemically Important Institutions (O-SIIs) and are there - fore subject to an O-SII buffer requirement, which is set individually for each bank by the CBC and is reviewed by the CBC on an annual basis. Liquidity Requirements In addition to meeting the general liquidity cover - age requirement imposed under Article 412 of the CRR, banks must ensure that long-term assets
and off-balance-sheet items are adequately met with a diverse set of funding instruments that are stable under both normal and stressed condi - tions (the stable funding requirement). The Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquid - ity coverage requirement for Credit Institutions (Regulation 2015/61) sets out rules specifying in detail the liquidity coverage requirement pro - vided for in Article 412(1) of the CRR. The CBC has issued a directive to banks on the computation of prudential liquidity in all curren - cies, which sets out, among other matters, the principles that banks should implement for the management of liquidity risk. Leverage Ratio The CRR requires banks to calculate their lever - age ratio and report it to the CBC. Regulation (EU) 2019/876 (which amends the CRR) has introduced a leverage ratio require - ment of 3%, which has applied since 28 June 2021. 8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework Legal Framework The relevant provisions relating to the winding- up of banks incorporated in Cyprus are set out in Part XIII of the Banking Law and Part V of the Companies Law, and in winding-up rules issued under the Companies Law.
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