Cyprus has now enacted all the new laws requited to align its legislative framework with the EU Bank Recovery and Resolution Directive 2014/59/EU and the Deposit Guarantee Schemes Directive 2014/49/EU, which provide a unified framework for the recovery and resolution of entities active in financial markets, including credit institutions, investment firms and financial holding companies, and the protection of depositors.
Cyprus had already established a comprehensive framework of this type in 2013, prior to Directive 2014/59/EU and Directive 2014/49/EU being adopted. After the adoption of the Directives as the new European standard for the recovery and resolution of credit institutions and investment firms, it became necessary to replace some of the existing domestic legislation to align it with the Directives and provide a unified structure for the entire financial sector.
The new Deposit Guarantee Scheme and Resolution of Credit and other Institutions Law, Law 5(I)/2016 ) was enacted in February 2016. The two remaining laws required to complete the package have now been enacted. They are Law 20(I)/2016, "Regarding the Recovery of Cyprus Investment Firms and Other Entities Supervised by CySEC" ("the Recovery Law"), and Law 21(I)/2016, "Regarding the Resolution of Credit Institutions and Investment Firms" ("the Resolution Law"). The designated Resolution Authority is the Central Bank of Cyprus.
The Recovery Law requires CIFs and other entities within its scope to put in place adequate preventative and early intervention measures to be taken in the event of possible insolvency, including recovery plans. The European Banking Authority ("EBA") has issued a series of Draft Regulatory Technical Standards and Guidelines on the content of recovery plans, specifying the essential items of information a recovery plan is expected to include, guidelines on the range of scenarios to be used in recovery plans and guidelines on the circumstances and events that will trigger a recovery plan. CySEC intends to adopt the EBA standards and will also issue its own guidance and timetables for submission of recovery plans.
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