CYPRUS: New Prudential Framework for Investment Firms

Monday March 9 2020

The Cyprus Securities and Exchange Commission (“CySEC”) announced that the new prudential framework for investment firms will replace the existing prudential requirements of investment firms currently set out in the Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment Firms.

The new prudential framework comprises of:

REGULATION (EU) 2019/2033 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (the “IFR”), and

DIRECTIVE (EU) 2019/2034 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (the “IFD”).

The IFR becomes directly applicable in all EU Member States on June 26, 2021.

The IFD should be transposed into national legislation by June 26, 2021 and will be in force from June 26, 2021.

The European Commission will issue in the coming months a number of implementing technical standards that will be developed by the European Banking Authority (EBA) regarding the new prudential framework.

CySEC published a practical guide to provide CIFs an overview of the new prudential framework for investment firms. Note that further requirements exist and thus all CIFs are urged to review the IFR and IFD carefully so that they understand, as a first step, the class of investment firm they will be categorized as.

CIFs should make their own assessment on the impact that the IFR and IFD will have on their own funds, concentration risk, liquidity risk, disclosure, reporting, remuneration requirements and take the necessary actions to ensure compliance by the date of entry into force i.e. on 26th June 2021.

Click on the above link for further information.