We researched and summarised for you, all recent regulatory updates from Cyprus and Europe, which are applicable for Regulated Companies operating in the Region.
We support our clients and associates by providing a comprehensive page with the recent circulars, directives, and guidance issued by the following Regulators:
- Cyprus Securities and Exchange Commission ("CySEC")
- Central Bank of Cyprus ("CBC")
- European Central Bank ("ECB")
- European Banking Authority ("EBA")
- European Securities and Markets Authority ("ESMA")
Cyprus Securities and Exchange Commission ("CySEC")
30/11/22: C537 -New Form CBRT-CIF
CySEC issued a circular on 30/11/2022 regarding New Form CBRT-CIF, Freedom to provide Investment Services and Activities (Cross Border Activity). The circular refers to a reporting template issued by ESMA regarding the collection of data from investment firms with cross-border activity to their retail clients analysed by each Member State.
13/12/22: C538 – Guidance in relation to the requirement to raise capital from investors within a specified period.
The CySEC reminds AIFMs regarding the raising of capital from investors (Circular 321) within a specific time period. In addition, as a result of some observations identified after relevant reviews performed by CySEC over the period from 2019 to 2021 on Funds following the enforcement of the Law 124(I)/2018 ('the AIF Law'), CySEC aims with this circular to give AIFMs an indication regarding the implementation of articles 14(1)(a), 129(1)(a) and 136 of the Law.
23/12/22 : C542-CIFs Quarterly Statistics-(Form QST-CIF)
The circular is issued by CySEC to inform all CIFs about the following:
- Information requested by CySEC regarding Quarterly Statistics.
- Deadline for the Submission of Form (via TRS by 15:00, Tuesday, 31 January 2023).
- General comments for the preparation and completion of the Form.
- Method of creating, signing, and submitting the Form to the CySEC via TRS.
Central Bank of Cyprus ("CBC")
1/12/2022: Decision of the Central Bank of Cyprus ("CBC") to increase the countercyclical buffer rate from 0% to 0,5% effective from 30 November 2023
The CBC, following a consultation with the European Central Bank, in accordance with the provisions of the Macroprudential Oversight of Institutions Laws of 2015 to 2022, has decided on 30 November 2022 to increase the countercyclical buffer rate from 0% to 0,5%.
The new buffer rate will be effective from 30 November 2023.
CBC COUNTERCYCLICAL BUFFER RATE DECISION
2/12/2022: Statistics on Interest Rates applied by Monetary Financial Institutions
The CBC released the statistics on interest rates applied by monetary financial institutions in Cyprus on deposits and loans of euro-area residents in euro, as well as data regarding volumes (amounts) of new euro-denominated loans to euro-area residents for the reference month of October 2022.
These statistics are included in the November 2022 edition of
Monetary and Financial Statistics.
The main developments in interest rates on new deposit and loan contracts, including contracts which were renegotiated, are summarised as follows:
- The interest rate on deposits from households with an agreed maturity of up to one year recorded an increase to 0,19% (0,11% in the previous month).
- The corresponding interest rate on deposits from non-financial corporations registered an increase to 0,47%, compared with -0,09% in the previous month.
- The interest rate on consumer credit decreased to 3,57%, compared with 3,59% in the previous month.
- The interest rate on loans for house purchase decreased to 2,93%, compared with 3,06% in the previous month.
- The interest rate on loans to non-financial corporations for amounts up to €1 million increased to 4,17%, compared with 4,13% in the previous month. The interest rate on loans to non-financial corporations for amounts over €1 million registered a decrease to 3,43%, compared with 3,69% in the previous month.
Amounts of new loans
Total new loans recorded a decrease to €240,3 million in October 2022, compared with €478,3 million in the previous month. The main categories of new loans are analysed below:
- New loans for consumption decreased to €15,1 million, compared with €15,6 million in the previous month.
- New loans for house purchase recorded a decrease to €72,7 million, compared with €102,9 million in the previous month.
- New loans to non-financial corporations for amounts up to €1 million dropped to €42,7 million, compared with €54,1 million in the previous month.
- New loans to non-financial corporations for amounts over €1 million registered a decrease to €102,6 million, compared with €295,9 million in the previous month.
MORE INFORMATION ON THE STATISTICS
20/12/22: The Central Bank of Cyprus encourages financial innovation through the Innovation Hub
In order to encourage, promote and support domestic financial innovation, the CBC announces the operation of an Innovation Hub.
The Innovation Hub aims to become an official platform for communication between the Supervisory/Regulatory Authority and businesses or even start-ups active in Financial Technology (Fintech) sectors, that is, combining innovative technology with financial services. Stakeholders' access to the Innovation Hub will be based on pre-established objective criteria. The CBC shall provide non-binding guidance on requests, including the provision of information and guidance on actions required for the licensing of innovative Fintech products or services.
The operation of the Innovation Hub simultaneously enhances the knowledge of the CBC for the ex-ante regulation and prudential supervision of new and innovative financial activities, as well as the early identification of risks that may affect companies and the financial system of the country.
European Central Bank ("ECB")
15/12/2022: Monetary Policy Decisions
The Governing Council today decided to raise the three key ECB
interest rates by 50 basis points and, based on the substantial
upward revision to the inflation outlook, expects to raise them
further. In particular, the Governing Council judges that interest
rates will still have to rise significantly at a steady pace to
reach levels that are sufficiently restrictive to ensure a timely
return of inflation to the 2% medium-term target. Keeping interest
rates at restrictive levels will over time reduce inflation by
dampening demand and will also guard against the risk of a
persistent upward shift in inflation expectations. The Governing
Council's future policy rate decisions will continue to be
data-dependent and follow a meeting-by-meeting approach.
The Governing Council today also discussed principles for normalising the Eurosystem's monetary policy securities holdings.
From the beginning of March 2023 onwards, the asset purchase
programme (APP) portfolio will decline at a measured and
predictable pace, as the Eurosystem will not reinvest all of the
principal payments from maturing securities. The decline will
amount to €15 billion per month on average until the end of
the second quarter of 2023 and its subsequent pace will be
determined over time.
Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP)
The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP until the end of February 2023. Subsequently, the APP portfolio will decline at a measured and predictable pace, as the Eurosystem will not reinvest all of the principal payments from maturing securities. The decline will amount to €15 billion per month on average until the end of the second quarter of 2023 and its subsequent pace will be determined over time.
As concerns the PEPP, the Governing Council intends to reinvest
the principal payments from maturing securities purchased under the
programme until at least the end of 2024. In any case, the future
roll-off of the PEPP portfolio will be managed to avoid
interference with the appropriate monetary policy stance.
The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic.
European Banking Authority ("EBA")
13/12/22: The EBA publishes its roadmap on sustainable finance
The European Banking Authority (EBA) published today its roadmap outlining the objectives and timeline for delivering mandates and tasks in the area of sustainable finance and environmental, social, and governance (ESG) risks.
The roadmap explains the EBA's sequenced and comprehensive approach over the next three years to integrate ESG risk considerations in the banking framework and support the EU's efforts to achieve the transition to a more sustainable economy.
Numerous legislative acts and initiatives allocate to the EBA new mandates and tasks in the area of sustainable finance and ESG risks. Most of these mandates and tasks are closely linked to the EBA's broader objective of contributing to the stability, resilience, and orderly functioning of the financial system. These mandates and tasks cover the three pillars of the banking framework as well as other areas related to ESG.
ROADMAP ON SUSTAINABLE FINANCE -
14/12/2022: EBA publishes its first thematic review on the transparency and level of fees and charges for retail banking products in the EU, observing that significant detriment still arises for consumers
The European Banking Authority (EBA) published today a thematic review on the transparency and level of fees and charges levied by financial institutions (FIs) on the retail banking products in the EU.
Overall, the review finds that fees and charges vary greatly in terms of level and type not only across the European Union (EU) market but also across FIs within the same jurisdiction. Furthermore, the variety of types for fees and charges cause different levels of detriment to consumers, and, with the exception of payment accounts, fees and charges are difficult to compare between providers.
More specifically, the review finds that national legal frameworks are mostly subject to the general principle of freedom of contract. Despite the improvements in consumer protection brought about by several EU sectoral directives introduced in the past decade to regulate the banking retail products, market practices for fees and charges are causing significant detriment to consumers.
The exception of payment accounts, the insufficient harmonisation, and standardisation of fees across EU Member States may disadvantage consumers when comparing the costs of financial institutions' products and services.
FIRST THEMATIC REVIEW - ANNOUNCEMENT
16/12/22: EBA standardises information requirements to support sales and transfers of non-performing loans
- The EBA introduces information standardisation to increase the efficiency of secondary markets for sales of non-performing loans (NPL) and to reduce entry barriers for smaller banks and smaller investors.
- The proposed NPL transaction data templates are built on previous voluntary templates and consider the experience of market participants from the sell- and buy-side and other stakeholders.
- The NPL transaction data templates are the linchpin for numerous initiatives under the December 2020 European Commission's action plan for NPL in the aftermath of the COVID-19 pandemic.
The European Banking Authority (EBA) today published its final draft Implementing Technical Standards (ITS) specifying the requirements for the information that credit institutions selling NPL shall provide to prospective buyers. The objective of the draft ITS is to provide a common data standard for the NPL sales or transfers across the EU enabling cross-country comparison and thus reducing information asymmetries between the sellers and buyers of NPL, thus improving the functioning of NPL secondary markets.
The draft ITS is built around the templates to be used for the provision of loan-by-loan information for the sales or transfers of NPL portfolios. The templates cover information regarding counterparties related to the loan, contractual characteristics of the loan itself, any collateral and guarantee provided, any legal procedures and enforcement procedures in place, and the historical collection of loan repayment.
The NPL transaction data templates are also complemented by a data glossary and the instructions for filling in the templates.
The draft ITS is based on strong proportionality arrangements, focusing on the sales of portfolios of NPL and setting different information requirements depending on the nature of the borrowers and of the loans included in the portfolios to be sold, by specifying mandatory data fields. Proportionality is further reinforced by allowing all data fields to be treated as not mandatory for certain types of transactions.
These draft ITS have been submitted to the European Commission for adoption.
EBA STANDARDISES INFORMATION REQUIREMENTS
19/12/22: EBA updates list of CET1 instruments
The European Banking Authority (EBA) published today an updated list of capital instruments that Competent Authorities across the European Union (EU) and for the first time the European Economic Area (EEA) have classified as Common Equity Tier 1 (CET1). Since the publication of the previous update in December 2021, the CET1 instruments compliant with the Capital Requirements Regulation (CRR) and issued by institutions from Iceland, Liechtenstein, and Norway have been added to the list. The list will be maintained and updated on a regular basis.
Since the publication of the last updated list of CET1 capital instruments on 8 December 2021, the EBA has continued monitoring and assessing the capital instruments issued by EU institutions and their eligibility towards the criteria set in the CRR. A new type of instrument issued by Spanish investment firms has been added as it was assessed and evaluated as compliant with the CRR. According to the Spanish national law, this type of instrument may only be issued by investment firms and, therefore, a dedicated mark has been introduced to highlight this limitation. For ease of reference, a new row has been added and highlighted to flag this new instrument.
Following the Joint Committee EEA Decision adopting the CRR1 that entered into force on 1 January 2020, the EBA assessed all types of CET1 instruments issued in the EEA counties in order to add them to the CET1 list. Given that all instruments were considered as fully compliant with the eligibility criteria set out in the CRR, the instruments are now included in the updated CET1 list and new highlighted rows have been added to flag these instruments.
Furthermore, a few instruments no longer used by institutions have been deleted in order to reflect only instruments used in the EU or EEA on the list.
Finally, a few minor amendments have been introduced in the column referring to the national provisions in order to mirror legislative changes or to provide further clarifications.
For the purpose of correctly reading this list, the EBA recommends taking into account the caveats described in the intro section of the list.
EBA UPDATES LIST OF CET1 INSTRUMENTS
21/12/2022: EBA publishes final technical standards on the identification of a group of connected clients
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on the identification of a group of connected clients (GCC) under the Capital Requirements Regulation (CRR). These draft RTS, in conjunction with the EBA Guidelines on connected clients, provide the complete framework for the identification of two or more natural or legal persons who are so closely linked by idiosyncratic risk factors, that it is prudent to treat as a single risk.
In particular, the following conditions lead to the identification of two or more legal persons as connected:
- if they are part of the same consolidated financial statements, even in the absence of exposures towards the natural or legal person that controls the group. These draft RTS also provide a non-exhaustive list of circumstances of control criteria and control indicators to assess if there is a parent-subsidiary-similar relationship among natural and/or legal persons.
- if it is likely that the financial difficulties of one natural or legal person would spread to other(s) impacting full and timely repayment of liabilities.
- in case-control and economic dependencies co-exist within group of connected clients in such a way that all relevant natural and/or legal persons constitute a single risk.
EBA FINAL TECHNICAL IDENTIFICATION STANDARDS OF A
GROUP OF CONNECTED CLIENTS
European Securities and Markets Authority ("ESMA")
No new announcements/circulars/directives for this month
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.