Cypriot financial services regulatory authority CySec has today issued a notice with regard to the recent developments relating to the extreme movements in the currency markets on January 15 due to the decision by the Swiss National Bank to remove the 1.20 peg on EURCHF following its collection of data from all of supervised companies which provide investment services and hold CIF licenses in order to determine the material impact on their capital adequacy and / or in their work.
The evaluation of the data collected was found that 158 of the 182 licensed CIF had no negative effect on their capital adequacy or their commercial operations, however the remaining 24 CIFs reported having experienced some losses, but they either have no effect on their capital adequacy, or the effect is negligible.
Accordingly, the affected CIFs still have an equity and capital adequacy ratio above the minimum, being within allowable limits prescribed under the law.
The total loss suffered by the affected CIF is about € 42,5 million. CySec’s conclusion is that losses experienced by affected CIF resulted mainly from negative balances on the customer accounts due to leverage, and balances order flow which was processed via liquidity providers which was subject to differing pricing due to the extreme volatility in the currency markets on January 15.
CySec’s notification states that FX brokerages in Cyprus will endeavor to recover the aforesaid amounts, however a positive byproduct is that due to the problems facing investment businesses in other countries, CySec has observed a slight increase in the business of companies in Cyprus.
CySec has specified parameters for capital adequacy, and supervises FX brokerages with regard to this matter, and has confirmed that it will continue to do so.
For the full announcement from CySec, click here.