On Tuesday 11 May 2021, the Cyprus National Competent Authority (NCA) CySEC, after conducting a series of advisory events and under the direction of the European Banking Authority (EBA), published Law 98 (I)/2021 regarding the capital adequacy of investment firms and new capital requirements for Cyprus Investment Firms. This law transposes the provisions of Directive (EU) 2019/2034 (IFD) and European Investment Firms Regulation (EU) 2019/2033 (IFR). Thus, through the activities of the regulatory body, the prudential capital requirements of investment companies are established in the national legislation.
Cyprus Investment Firms: capital requirements
Part of a broader regulatory package is the Capital Requirements Directive (CRD V), which includes the Capital Requirements Regulation II (CRR II). These provisions are intended to improve how investment firms can improve their risk management and compliance. This reform applies to all banking and investment institutions in the European Union and is considered one of the largest reforms in banking regulation since the 2008 financial crash.
The beginning of the entry into force of the new regulatory framework was laid on June 26, 2021 in the context of capital requirements for CIF. All companies, without exception, must understand the essence of these changes and ensure that they can obtain the necessary information and collect the necessary forms of capital adequacy in order to submit all this to CySEC.
New requirements for the initial capital in Cyprus
IFD and IFR introduced new requirements for initial capital in order to be able to authorize all investment companies in Cyprus in accordance with the accepted services of the investment field.
CIF type according to the permitted services of the investment field | Current capital requirements | New capital requirements |
Portfolio management operations or CIF investment consulting services, with no withholding of client funds Any of the following services: 1. Operations for receiving and transmitting orders for one or several instruments of the financial field. 2. Fulfillment of orders that were left by customers 3. Portfolio management. 4. Investment consulting. 5. Services for the placement of financial instruments without firm commitments. | 50 thousand euros | 75 thousand euros |
“STP CIF” while the client’s funds are deposited. Any of the above services of the investment field, and the storage of client funds. | 125 thousand euros | 150 thousand euros |
| “Market maker or DOA CIF” with the client’s funds being deposited. Any of the above investment field services, and those listed below: 1. Professional activity at own expense. 2. Underwriting and placement operations on a firm commitment basis. | 730 thousand euros | 750 thousand euros |
Also there is a classification and categorization of investment companies. We could share it per your request. Do not hesitate to contact us for any questions regarding requirements for Cyprus investment companies.
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