With regard to systemically important institutions, the CBC, in its capacity as the macroprudential authority, is responsible for:
a) the designation of the global systemically important institutions (G-SIIs) that have obtained a license to operate in Cyprus and the setting of the additional G-SII capital buffer that each G-SII credit institution must maintain, and
b) the designation of the other systemically important institutions (O-SIIs) that have obtained a license to operate in Cyprus and the setting of the additional O-SII capital buffer that each O-SII institution must maintain.
o Global systemically important institutions (G-SIIs) and capital buffer for global systemically important institutions (G-SII capital buffer)
This additional capital buffer, is mandatory for credit institutions that are designated by the CBC as G-SIIs, in order to compensate for the higher risk they represent to the global financial system and the potential consequences of their failure.
The systemic importance of a credit institution, is determined in accordance with the criteria for the G-SIIs, as agreed by the G20, which have been incorporated in the Macroprudential Oversight of Institutions Laws, 2015 - 2022 (Law 6(Ι), 2015). These criteria include the size of each institution, the level of its cross-border activities and the interconnectedness of each credit institution.
The CBC has not issued a banking licence to any G-SII.
o Other systemically important institutions (O-SIIs) and capital buffer for other systemically important institutions (O-SII capital buffer)
The Macroprudential Oversight of Institutions Laws, 2015 - 2022 (Law 6(Ι), 2015) also requires the maintenance of an additional capital buffer by the systemically important institutions either at the national level or at the EU level. These institutions are referred to as other systemically important institutions (O-SIIs).
The assessment of the systemic importance of O-SIIs, is based on the size of each institution, its importance for the economy of the European Union or Cyprus, the level of its cross-border activities, and the interconnectedness of the institution or group with the financial system.
The CBC requires each O-SII to maintain an O-SII capital buffer of up to 3% of its total risk exposure. The O-SII capital buffer consists of Common Equity Tier 1 capital. Furthermore, subject to obtaining the European Commission’s authorisation as per paragraph 5A of Article 131 of Directive 2013/36/EU, the CBC may require each O-SII institution to maintain an O-SII capital buffer higher than 3% of its total risk exposure amount.
The O-SII capital buffer, reflects the cost for an institution of being systemically important and compensates for the higher risk it represents to the country's financial system and the potential consequences of its failure.
The methodology used for the designation of a credit institution or of a Cyprus Investment Firm as an O-SII institution, is based on the provisions of the Macroprudential Oversight of Institutions Laws, 2015 - 2022 (Law 6(Ι), 2015) and takes into consideration the guidelines issued by the European Banking Authority (EBA/GL/2014/10).
The list of institutions that have been designated by the CBC as O-SIIs as well as the level of the O-SII capital buffer that each systemically important institution must maintain, are published in the macroprudential policy decisions section.