The EBA Guidelines clarify how Cyprus Investment Firms (CIFs), under Article 8 of the IFR, can request to hold a lower amount of capital than typically required if they meet specific conditions. Here’s a summary of the main points:

1. Purpose of the EBA Guidelines: The EBA Guidelines provide guidance to competent authorities, such as CySEC, in evaluating when CIF groups may apply the group capital test, potentially allowing them to hold reduced capital if for example they pose limited risks to clients or markets and if they are deemed to be sufficiently simple.
2. Application scope: The EBA Guidelines apply both individually and on a consolidated basis under the scope of Article 8 of IFR and to investment firms under IFR’s and Directive (EU) 2019/2034’s scope. Importantly, the EBA guidelines will apply on 1 January 2025.
3. Conditions for Lower Capital: CIF groups can be considered for reduced capital requirements if they demonstrate operational simplicity and low risk levels. The EBA Guidelines outline specific criteria CIFs must meet to qualify, ensuring regulatory compliance and market safety.
4. Reporting requirements: CIFs applying for reduced capital must submit detailed information on group activities and structure, intra-group transfers, capital and own funds calculations, a statement indicating the fulfilment of the conditions in relation to the group capital test permission and the valuation of key subsidiaries. This reporting ensures transparency and regulatory oversight.
5. Revocation conditions: If a CIF group no longer meets the eligibility criteria, CySEC may revoke its reduced capital permission and revert to standard regulatory supervision.

CIFs seeking to implement these capital adjustments under the group capital test should submit a formal request to CySEC, complete with required information, through CySEC’s portal.

CySEC’s Circular can be found here.