Directive 2013/36/EU on the prudential supervision of credit institutions and investment firms requires what the directive defines as “systemically important institutions”, that is, institutions of such significance that their failure or malfunction could lead to systemic risk, to maintain appropriate contingency buffers of common equity tier one capital, over and above the levels required for other, non-systemically important, institutions.

The directive divides systemically important institutions into two categories: global systemically important institutions (“G-SIIs”) and other systemically important institutions (“O-SIIs”). Systemic importance is assessed on the basis of factors including size, importance to the European or national economy, significance of cross-border activities and interconnectedness with the financial system.

Member states are responsible for identifying systemically important institutions and categorising them into G-SIIs and O-SIIs in accordance with guidelines issued by the European Central Bank. The guidelines prescribe a two-stage process. The first stage is based on mandatory quantitative indicators related to size, interconnectedness, relevance for the economy and complexity, with an upper and a lower threshold score. Institutions scoring above the upper threshold are automatically included as O-SIIs and those scoring below the lower threshold are excluded. In the second stage, institutions scoring between the lower and upper thresholds are assessed on the basis of a list of parameters specified in the guidelines.

The Central Bank of Cyprus (“CBC”) has been designated as the Macro Prudential Supervisory Authority for Cyprus, with overall responsibility for identifying O-SIIs authorised in Cyprus and for setting the O-SII buffer.

The Cyprus Securities and Exchange Commission (CySEC”) is responsible for identifying O-SIIs among entities it supervises, and will also monitor the application of O-SII buffers by such entities that are designated as O-SIIs. Investment firms that are authorised to provide the investment services of dealing on own account and underwriting of financial instruments or placing of financial instruments on a firm commitment basis and that are systemically important will fall within the definition of OSIIs and in order to identify them CySEC has requested Cyprus investment firms that offer relevant services to provide the data needed to complete the first-stage stage assessment.