Study notes · 7 topics · Free

Recovery and Resolution: CySEC Advanced study notes

Which CIFs must plan for recovery, when CySEC can step in early, how the Central Bank of Cyprus resolves a failing firm and how authorities cooperate, explained in 7 short notes.

By the ExamPass CY editorial teamLast reviewed About 53 minutes to read all 7

CySEC Advanced exam

Chapter 11 · about 5 of 70 questions

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What this chapter covers

Recovery and resolution rules deal with a firm in trouble, before and after it fails. In Cyprus the main rules sit in two laws of March 2016: Law 20(I)/2016, under which CySEC supervises recovery planning and early intervention, and Law 22(I)/2016, which makes the Central Bank of Cyprus the resolution authority. Among CIFs, only those subject to the €750,000 initial capital are covered. The first notes explain recovery plans and financial support within a group.

The middle notes cover early intervention: its triggers and warning signs, the measures CySEC can require and the temporary administrator CySEC can appoint. They also cover the special administrator, whom the resolution authority appoints to run an institution under resolution; the exam material teaches it alongside early intervention.

The last group covers resolution itself: the three conditions, the four tools and the write-down power, who must be told when a firm is failing, professional secrecy, and cooperation in resolution colleges and with third countries. The exam material does not reflect the changes made since December 2019, and it states some older rules loosely. Each note teaches what the exam tests and what applies today and, where relevant, flags the EU changes due from January 2027 and May 2028.

The 7 topics

Each note starts with a short answer and a table of the facts to remember.

Recovery planning

  1. Which CIFs need a recovery plan, and what must it contain?Which CIFs need a recovery plan, what it must contain, approval and review, and the simplified plans CySEC allows under Directive DI20-01.€750,000
  2. When can group entities support each other financially, and when does CySEC approve it?Who may sign a support agreement, when support may be given, CySEC's approval, and the decision and notice before support is paid.5 working days

Early intervention

  1. When can CySEC step in early at a weakening CIF, and what can it require?The triggers and warning signs for early intervention, the measures CySEC can require, and what follows if they fall short.1.5 points
  2. Who appoints a temporary or a special administrator, and what can each one do?Who appoints each administrator, their powers, publicity, removal and term, and the special administrator's pay and first report.1 year30 days

Resolution

  1. Who resolves a failing CIF, which tools can it use, and what does CySEC do?The Central Bank of Cyprus and the Single Resolution Board, the three resolution conditions, the four tools, the write-down power and the ranking of claims.
  2. Who must be told when a CIF is failing, and how is the information kept confidential?The firm's duty to tell CySEC it is failing, whom CySEC must then inform, and the rules on professional secrecy.
  3. How does CySEC cooperate on cross-border resolution and with third countries?Resolution colleges, memoranda with third countries, notice to the EBA and the conditions for sharing confidential information.

The numbers to know

Every figure in this chapter, with the note that explains it.

FigureWhat it isNote
€750,000Initial capital that brings a CIF within the recovery and resolution laws; CIFs with €75,000 or €150,000 initial capital are outsideTopic 1: Which CIFs need a recovery plan, and what must it contain?
Every 2 yearsFiling cycle, by 30 September, for a simplified recovery plan under CySEC Directive DI20-01; other CIFs file a full plan every year by 30 JuneTopic 1: Which CIFs need a recovery plan, and what must it contain?
5 working daysTime CySEC has to agree, prohibit or restrict intra-group support after the providing CIF notifies its decisionTopic 2: When can group entities support each other financially, and when does CySEC approve it?
1.5 pointsOwn funds only 1.5 percentage points above the requirement, one trigger that a set of early intervention triggers may includeTopic 3: When can CySEC step in early at a weakening CIF, and what can it require?
1 yearLongest first term of a temporary or a special administrator; either may be extended exceptionallyTopic 4: Who appoints a temporary or a special administrator, and what can each one do?
4 toolsResolution tools: sale of business, bridge institution, asset management company (only with another tool) and bail-inTopic 5: Who resolves a failing CIF, which tools can it use, and what does CySEC do?