Summary of CySEC's Circular C425
Memo #03-2021
CySEC Circular No: C425
Date: 02/02/2021
Subject: Recommendation 2020/15 of the European Systemic Risk Board (ESRB) on restriction of distributions during the COVID-19 pandemic (the ‘Recommendation ESRB/2020/15’), amending Recommendation ESRB/2020/07 (the ‘Recommendation ESRB/2020/07’)
Purpose: To inform CIFs that the ESRB issued the Recommendation ESRB/2020/15 on restriction of distributions during the COVID-19 pandemic amending Recommendation ESRB/2020/07.
In Summary:
CySEC has issued the Circular C425 on 02/02/2021 to inform the Cyprus Investment Firms (the “CIFs”) that the European Systemic Risk Board (ESRB) issued on 18 December 2020 the Recommendation ESRB/2020/15 on restriction of distributions during the COVID-19 pandemic, amending Recommendation ESRB/2020/07. The Recommendation ESRB/2020/07 issued on 27 May 2020 and CySEC informed CIFs about the Recommendation ESRB/2020/07 with the Circular C397.
The Recommendation ESRB/2020/15 recommends that at least until 30 September 2021 the relevant authorities request financial institutions under their supervisory remit to refrain from undertaking any of the following actions:
a) make a dividend distribution or give an irrevocable commitment to make a dividend distribution;
b) buy-back ordinary shares;
c) create an obligation to pay variable remuneration to a material risk taker.
Investment firms are included in the list of financial institutions under Recommendation ESRB/2020/7, as they play an important role in market functioning and may present similar risks to banks.
CySEC informs that has decided to adopt Recommendation ESRB/2020/15 and urges CIFs that have been recognized as Other Systemically Important Institutions (OSIIs) to refrain from any of the actions mentioned above unless they apply extreme caution in carrying out any of those actions. CySEC further notes that CIFs that have been recognized as OSIIs are recommended to engage in discussions with CySEC prior taking either of the actions referred above.
The Recommendation ESRB/2020/15 can be found at the following link: https://www.esrb.europa.eu/pub/pdf/recommendations/esrb.recommendation201215_on_restriction_of_distributions_during_the_COVID-19_pandemic~2502cd1d1c.en.pdf
Read the CySEC Circular C425
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