Which CIFs need a recovery plan, and what must it contain?

Two main Cyprus laws transpose the EU Bank Recovery and Resolution Directive (BRRD). Law 20(I)/2016, supervised by CySEC, covers recovery plans, intra-group support, early intervention, temporary administrators and CySEC's tasks in resolution. Law 22(I)/2016 is the resolution law; its resolution authority is the Central Bank of Cyprus (CBC). Both were published on 18 March 2016.

The exam material says the recovery law applies to CIFs generally and to entities authorised in third countries that carry on investment business in Cyprus, including holding companies and branches. The law is narrower. Since 18 March 2016 it has covered only CIFs in the top initial capital class. That class was €730,000 until 2021. It has been €750,000 in the BRRD since 26 June 2021 and in Cyprus law since 5 November 2021 (Laws 158(I)/2021 and 165(I)/2021). The class covers firms authorised to deal on own account or to underwrite or place on a firm-commitment basis. The recovery law's scope clause was not updated in 2021, but CySEC applies it to the €750,000 class (Circular C526). The law also covers EU financial-institution subsidiaries under consolidated supervision, holding companies supervised by CySEC and branches of third-country investment firms. For the capital classes, see Which prudential rules apply to a Cypriot investment firm, and how are groups supervised?

A CIF outside a group under consolidated supervision must prepare and keep up to date a recovery plan showing how it would restore its financial position after a significant deterioration. The plan is part of its governance arrangements and may not assume extraordinary public financial support.

The plan contains at least the 20 items in Annex A to the law, among them: summaries of the plan, its recovery capacity and material changes since the last plan; a communication and disclosure plan; capital and liquidity actions and their timeframes; impediments; critical functions; arrangements on own funds, contingency funding, risk and leverage, restructuring, access to financial market infrastructures and continued operations (since 21 February 2025 referring to network and information systems under DORA); sales preparations; other management actions; preparatory measures; and indicators. Disaster recovery and business continuity planning are separate duties; see What processes must a CIF have for credit, market, liquidity, operational and leverage risk? and What rules apply when an investment firm outsources critical or important functions?

The law also requires, outside Annex A: where relevant, an analysis of when and how the CIF could use central bank facilities and which assets would be eligible collateral; measures for use if the early intervention conditions are met; conditions for timely implementation and a wide range of options; severe stress scenarios; and any information CySEC requests. The exam material treats the Annex A items as the minimum and puts these others outside it, and exam questions follow that split. Since 18 March 2016, Law 20(I)/2016 has required them all; its Annex A also includes other management actions, which the exam list omits.

The management body approves the plan before submission. Every plan must be updated after a material change, and a full plan also at least yearly. CySEC assesses a plan within six months; if it finds material deficiencies or impediments, a revised plan is due within two months, extendable by one. CySEC passes plans to the resolution authority.

CySEC may set simplified obligations by directive: on plan content, on the date of the first plans and how often they are updated, and on the information required. It first assesses what the CIF's failure could do to financial markets, other institutions, funding conditions or the wider economy, consulting the CBC as macroprudential authority where appropriate. The exam material describes CySEC notifying the EBA and then specifying the obligations; since 18 March 2016 the law has simply required CySEC to inform the EBA, without setting an order.

Directive DI20-01 of 20 December 2019 applies this. A CIF not designated as an other systemically important institution (O-SII) whose latest audited accounts show total assets below €1 billion, total liabilities below €1 billion or total income below €100 million may file a simplified plan on Form 20-01 every two years by 30 September. Other CIFs file a full plan every year by 30 June. The exam material makes the yearly review the rule for every CIF; since 20 December 2019 it has applied only to full plans.

A CIF whose operations are a significant share of the Cyprus financial system must draw up its own plan. Since 21 May 2019 that means total assets above €30 billion, or above 20% of Cyprus GDP unless total assets do not exceed €5 billion.

A Union parent undertaking that CySEC supervises on a consolidated basis prepares a group plan, approved by its management body, to stabilise the group as a whole or any CIF in it, with measures coordinated across the parent, subsidiaries and significant branches. Group and subsidiary plans both include intra-group support arrangements where applicable and impediments at group and entity level. CySEC sends the group plan to the college's competent authorities, those where significant branches are, the group-level resolution authority and the subsidiaries' resolution authorities. The exam material names only the first two; the others have received it since 18 March 2016.