“O-SIIs – those institutions which, along with Global Systemically Important Institutions (G-SIIs) are deemed systemically important – have been identified by the relevant authorities across the Union according to harmonised criteria provided by the EBA Guidelines,” the EBA said.
This list also reflects the additional capital buffers that the relevant authorities have set for the identified O-SIIs.
Three Cypriot banks were identified as O-SIIs: the Cooperative Central Bank, Alpha Bank Cyprus and Eurobank Cyprus. The capital buffers for Alpha Bank and Eurobank were kept at 0.5% while that for the co-op was raised form 0.5% in 2015 to 1% in 2016.
O-SIIs are institutions that, due to their systemic importance, are more likely to create risks to financial stability.
“Whilst maximising private benefits through rational decisions, these institutions may bring negative externalities into the system and contribute to market distortions,” the EBA said.
Under an EU directive these institutions are obliged to have higher loss absorbency requirements, with a Core Tier 1 (CET1) capital buffer of up to 2% of the total risk exposure amount.
The O-SIIs identification process started in 2015 and takes place on a yearly basis.
As of the third quarter of 2016, the co-op had a CET1 ratio of 16.5% and a non-performing exposures (NPE) ratio of 59.8% – the highest among the top three banks.
The Cooperative Central Bank postponed the announcement of its annual results this week following an enquiry into reported mistakes in charges applied for loans.
Head of Strategy and Communications Yiannos Stavrinides said: “These are loans which had been agreed on during the lira, and were then connected to the interest rate of the European Central Bank”, said Stavrinides, referring to the period before the Cyprus adopted the euro.
According to the estimates, the faulty loan contracts account for 3% of the loan portfolio, translating into several thousand customers.