So as to achieve, between the Member States, mutual recognition of the systems granting authorisation to Investment Firm (IFs) and the exercise of supervision, it was deemed necessary to establish, at a European level, coordinating measures for the definition of IFs own funds, the level of the initial capital and common framework for supervising the risks that the IFs are subject to.
For this purpose, two European Directives were issued, 2006/48/EC and 2006/49/EC. The Cyprus Securities and Exchange Commission (the ‘Commission’), in order to harmonize with these European Directives, has issued two directives, the Directive 144-2007-05 regarding capital adequacy of IFs and the Directive 144-2007-06 for the large exposures of the IFs.

Supervisory disclosure
The Committee of the European Banking Supervisors (CEBS), and Directive 2006/48/EC, stress, among other, the importance of supervisory disclosure. Supervisory disclosure makes the regulating practices more transparent and offers to the interested parties’ access to comparative information. The need for transparency has become more imperative due to increased consolidation of the European financial markets, which calls for consistent implementation of the European legislation and the harmonization of the regulators’ practices.

The article 144 of the European Directive 2006/48/EC mentions that:
“The regulatory authorities disclose the following information:
a) the body of the laws, regulations, administrative regulations and general guidelines issued in the home Member State as far as the regulatory supervision is concerned,
b) the way of exercising the rights and discretions offered by the European legislation,
c) the general criteria and methodology used for review and evaluation as mentioned in article 124, and
d) with the reservation of the provisions of Chapter 1, Section 2, the summation statistics data for the basic aspects of the regulatory framework implementation in every Member State.
The published information that is provided in the first section should be adequate for the reliable comparison of the methods that the regulatory authorities of the Member States apply. The information is published according to a uniform platform, is updated regularly and are accessed via a single electronic location”.

For achievement of the above CEBS has issued the ‘Guidelines for supervisory transparency – GL05’. The target of these guidelines is to increase the transparency of the regulatory practices and to facilitate the comparison between Member States that apply the European Directive 2006/48/EC. In addition, these guidelines assist the IFs to compare the criteria and methods that the regulatory authorities use to evaluate them. The implementation field of the CEBS framework is limited to the provisions of the European directive 2006/48/EC. The framework is implemented by CEBS and the national bodies of each Member State that are responsible for the supervision of credit institutions and investment firms.

This web page has been designated as the place where the information for the Commission’s obligations as derived from article 144 of the European Directive 2006/48/EC will be published. The information is divided into four sections:

1. Laws and Regulations
This section includes the Commission’s Directives that adopt the European Directives 2006/48/EC and 2006/49/EC for the capital adequacy of the IFs. Furthermore, it includes general guidelines texts issued by the Commission for the above European Directives.

2. Options and National Discretions
The EU Directives 2006/48/EC and 2006/49/EC contain a large number of options and national discretions which may either be exercised by the IFs and the Member States or the competent supervisory authorities. This increases the differences between supervisory practices, national circumstances and individual strategies allowed for in the implementation of the Directives. The Commission publishes the list of options and national discretions which contains all options and discretions available to the national competent authorities as well as the way of exercising these discretions by the Commission in implementing the European Directives 2006/48/EC and 2006/49/EC.

3. Supervisory Review
This section contains the Commission’s approach regarding the IFs’ Supervisory Review and Evaluation Process (SREP), the Internal Capital Adequacy Assessment Process (ICAAP) and the Commission’s policies on supervisory measures.

4. Statistical Data
This section includes aggregate statistical data on key aspects of the implementation of the European Directives in Cyprus. The disclosed tables comprise information on the financial sector in Cyprus, credit risk, operational risk, market risk as well as supervisory actions and measures taken by the Commission. The Commission will omit information regarded as proprietary and or confidential. The information presented in this web page have been adopted in a uniform way from the other competent supervisory authorities of the European Union Member States. The CEBS’s web site, which operates as a central electronic storage place, provides quick and easy access as well as comparison of all relevant information. In the web sites of the other competent supervisory authorities you can find details requested by the European Directive 2006/48/EC for the other Member States.