Cyprus Securities and Exchange Commission | CAPITAL CONSERVATION BUFFER (CCB)
CAPITAL CONSERVATION BUFFER (CCB)
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CAPITAL CONSERVATION BUFFER (CCB)
The CCB is designed to ensure that CIFs build up capital buffers outside periods of stress which can be drawn down as losses are incurred. It needs to be maintained at all times and only utilised in exceptional circumstances.
 
The CCB is set to 2,5% of the total risk exposure amount calculated in accordance with Article 92(3) of the Regulation [par. 52 of the Directive DI144-2014-14 of the Cyprus Securities and Exchange Commission for the Prudential Supervision of Investment Firms (the ‘Directive’)].
 
According to par. 66 of the Directive, the CCB of 2.5% can be applied gradually. In particular, the following transitional provisions are in place regarding the level of the CCB:
 

Period %
1/7/2016-31/12/2016 0,625
1/1/2017-31/12/2017 1,25
1/1/2018-31/12/2018 1,875
From 1/1/2019 and onwards 2,5
 
The Macroprudential Authority has decided to exercise the abovementioned discretion and requires CIFs to apply the 2.5% CCB gradually as per the table above.
 
In addition, according to par. 52(2) of the Directive, the Macroprudential Authority may exempt small and medium sized CIFs from holding a CCB, in addition to their Common Equity Tier 1 Capital.
 
The Macroprudential Authority has decided not to exempt small and medium sized CIFs.  Therefore, the CCB applies to all CIFs that are authorized to provide the investment services listed in points 3 (dealing on own a/c) and/or 6 (underwriting with firm commitment) of the Law, irrespective of their size.
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