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Framework
What is the scope of Law 20(I)/2016 on recovery and resolution?
It applies to CIFs, third-country entities undertaking investment business in the Republic, financial holding companies (and mixed ones), and branches of third-country investment undertakings.
Who is the resolution authority in Cyprus, and under which law?
The Central Bank of Cyprus (CBC), under Law 22(I)/2016. CySEC is the supervisory authority; the CBC is the resolution authority — a frequently tested distinction.
Which law governs the verification and classification of claims in a CIF's normal insolvency?
Company Law — specifically Article 300. This distinguishes ordinary insolvency (Company Law) from resolution (Law 22(I)/2016).
Recovery plans
What type of arrangement is a recovery plan, and who must approve it before submission to CySEC?
It is part of the CIF's governance arrangements and must be approved by the management body (board of directors) before it is filed with CySEC.
What form of support must a recovery plan NOT assume access to?
Extraordinary public financial support (a government bail-out). A credible recovery plan must rely only on the firm's own resources and private-market solutions.
How often must a CIF review its recovery plan?
At least annually, and additionally after any material change to its legal or organisational structure.
Who prepares a group recovery plan and what must it cover?
The union parent undertaking supervised on a consolidated basis. It must coordinate measures at the level of the parent and its subsidiaries and significant branches, and include intra-group financial support arrangements.
When is a CIF's operation a 'significant share' of the financial system?
When its total assets exceed €30 billion, OR its total assets exceed 20% of the Member State's GDP — but the GDP test applies only if assets also exceed €5 billion.
Whom must CySEC notify before specifying simplified recovery-plan obligations?
The EBA. Simplified obligations are a CySEC supervisory decision (based on the systemic impact of the firm's failure), not a shareholder vote.
Intra-group support
What are the conditions for an intra-group financial support agreement?
Each party freely enters into it and acts in its own best interest; the supporting party has full disclosure of the recipient's relevant information; and the consideration excludes any anticipated temporary impact on market prices.
When may intra-group support be given without a formal agreement, and when will CySEC approve one?
Support may be given ad-hoc, case by case, per group policies, provided it poses no risk to the whole group. CySEC approves an agreement only where none of the parties meets the conditions for early intervention.
Early intervention
What own-funds trigger signals a likely infringement?
Own funds at the minimum requirement plus 1.5% — an early-warning buffer indicating a deteriorating trend before an actual breach.
What early-intervention measures may CySEC require when own funds are (likely) breached?
A debt-restructuring plan, convening an emergency shareholders' meeting, removing/replacing management, changing business strategy, and on-site inspections with information provided to the resolution authority. It may NOT suspend client trading or shut the firm down — those are resolution measures.
Administrators
Who appoints a temporary administrator, when, and for how long?
CySEC appoints one when replacing senior management alone is deemed insufficient. CySEC may appoint, remove or vary the terms at any time; the appointment may not exceed one year.
Who appoints a special administrator, and what are the key terms?
The resolution authority (CBC). Appointment may be of one or more persons, for no more than one year; remuneration is borne by the institution; and the administrator may not take other employment unless the resolution authority approves.
What must a special administrator report, and within what period?
Within 30 days of appointment: an updated balance sheet, an assessment of the effectiveness of the resolution measures, and a list of assets categorised by degree of risk.
With what qualities must a special administrator exercise their duties?
Diligence, professionalism, integrity, discretion and confidentiality. Their powers include increasing the institution's capital, restricting operations, and revising policies.
Resolution tools
What are the four resolution tools available to the CBC, and what is excluded?
Sale of business, transfer to a bridge institution (asset separation tool), transfer to an asset management company, and bail-in. A bail-out using public funds is NOT a resolution tool — resolution exists to avoid it.
What is the bail-in mechanism?
The exercise by the resolution authority of write-down and conversion powers over the institution's liabilities — writing them down or converting debt into equity to recapitalise the firm without public money.
How does the 'write down or conversion' mechanism treat the capital stack?
Common Equity Tier 1 is written down first; then Additional Tier 1 and Tier 2 instruments are written down or converted into CET1 — absorbing losses from the bottom up.
How does the 'sale of business' tool differ from the bridge institution tool?
Sale of business transfers shares, ownership instruments, or assets/rights/liabilities to an independent private acquirer. The bridge institution (asset separation) tool transfers them to a temporary resolution-authority-controlled vehicle.
What is the asset management company tool?
A mechanism for the resolution authority to transfer assets, rights or liabilities of an institution under resolution to a specialised asset management company that holds and manages them separately.
Sale & bail-in mechanics
What is CySEC's role in the sale of business tool, and what if its assessment is not finalised at transfer?
CySEC checks whether the acquirer has appropriate authorisation to undertake the business. If the assessment is not finalised by the transfer date, the transfer takes effect immediately but the acquirer's voting rights are suspended until completion.
In the sale of business tool, whom must CySEC notify of its assessment?
The resolution authority (CBC) and the acquirer — whether it approves or opposes the transfer.
In the bail-in tool, what is suspended if CySEC has not completed its shareholder assessment at application?
The legal transfer takes immediate effect, but only the voting rights are suspended until CySEC finishes its assessment — preserving the acquirer's economic interest while withholding governance control.
Notifications & cooperation
When a CIF is failing or likely to fail, whom does CySEC notify first?
The relevant resolution authorities, sharing details of any crisis-prevention measures already in place, so they can prepare for potential resolution.
Once CySEC determines the conditions for resolution are met, whom must it inform?
A broad set of authorities: the resolution authority, the competent authority, the CBC/central bank, the deposit guarantee scheme, the consolidating supervisor, the ministry, the ESRB and the designated national macro-prudential authority.
What are CySEC's tasks in a resolution college as consolidating supervisor?
Exchanging information relevant to the development of group resolution plans (including preparatory and preventative powers), and coordinating the public communication of group resolution strategies.
What conditions apply to sharing confidential resolution information with third-country authorities?
The third country's professional-secrecy standards must be at least equivalent to EU standards, the exchange must be necessary for resolution functions, and appropriate data protection must apply. CySEC must notify the EBA of any cooperation arrangements.
Business continuity
How does a disaster recovery plan relate to a business continuity plan, and where should the DR site be?
The disaster recovery plan (DRP) is a component of the broader business continuity plan (BCP). The disaster recovery site should be geographically separated from the main office (so one event does not hit both) but within the same jurisdiction — e.g. Nicosia for a Limassol firm.