ICF (Investment Compensation Fund) on the treatment of additional cash buffer in funds calculation

CySEC (Cyprus Securities and Exchange Commission) has recently provided guidance to the CIFs (Cyprus Investment Firms), regarding the treatment of additional cash buffer of ICFs in the calculation of the requirements of capital. The guidance consists of the following requirements:

  • According to CySEC’s circular C162, Cyprus Investment Firms must subtract the contribution of ICF which is presented in their records from the Common Equity Tier 1 Capital (Common stock held by a bank or other financial institution).
  • CySEC has recently (March 2019) issued a Directive (D187-07) which concerns the operation of the Investment Compensation Funds.
  • Based on paragraph 11(6) of the Directive, ICF members must keep a minimum cash buffer of 3 per thousand of the eligible funds and financial instruments of their clients as at the year before in a different bank account. This is required in the possibility of the need for an extraordinary contribution and no other purpose.
  • CIFs must deduct the additional cash buffer of 3 per thousand of the eligible funds and financial instruments of their clients from the Common Equity Tier 1 capital.
  • CIFs must act on the above by submitting the Form 144-14-06.1 (calculation of own funds and capital adequacy ratio) for the period until the 30th of September 2019 which must be submitted to CySEC by the 11th of November 2019.

Per request of any additional information on CySEC’s announcement, Simon Zenios & Co LLC will be of your assistance.