PILLAR III DISCLOSURES

According to Directives DI144-2014-15 and DI144-2014-14 of the Cyprus Securities &Exchange Commission for the prudential supervision of investment firms and Part Eight ofRegulation (EU) No 575/2013 of the European Parliament and of the Council on prudential
requirements for credit institutions and investment firms

YEAR ENDED 31 DECEMBER 2020

April 2021

Pillar III Disclosures Report 2020

CONTENTS
Specific References to CRR .......................................................................................................... 4
1. Introduction ............................................................................................................................... 9
1.1 Information ............................................................................................................................ 9
1.2. Scope of application ............................................................................................................. 9
1.3. Pillar III Regulatory Framework ........................................................................................ 10
1.3.1. Overview .................................................................................................................... 10
1.3.2. Disclosure Policy: Basis and Frequency of Disclosure / Location and verification .. 11
1.4. Risk management objectives and policies .......................................................................... 12
1.4.1. Risk Management Framework ................................................................................... 13
1.4.2. Risk Statement ........................................................................................................... 14
1.4.3. Risk Culture ............................................................................................................... 16
1.4.4. Capital Requirements ................................................................................................. 16
1.5. Declaration of the Management Body ................................................................................ 19
2. Corporate Governance ............................................................................................................ 20
2.1. The Board of Directors ....................................................................................................... 20
2.2. Number of Directorships held by members of the Board ................................................... 20
2.3. Policy on Recruitment ........................................................................................................ 21
2.4. Policy on Diversity ............................................................................................................. 21
2.5. Information flow on risk to the management body ............................................................ 21
3. Own Funds ............................................................................................................................... 23
3.1. Tier 1 & Tier 2 Regulatory Capital .................................................................................... 23
3.2. Main features of Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments ......... 25
3.3. Balance Sheet Reconciliation ............................................................................................. 26
4. Compliance with Regulatory Capital and the overall Pillar II Rule .................................. 27
4.1. Internal Capital ................................................................................................................... 27
4.2. Approach to assessing adequacy of Internal Capital .......................................................... 27
5. Pillar I Capital Requirements ................................................................................................ 29
5.1. Credit Risk .......................................................................................................................... 29
5.1.1. Credit risk adjustments ............................................................................................... 29
5.1.2. Credit Risk – Risk Weighted Assets .......................................................................... 30
5.1.3. Credit Risk – Risk Weighted Assets by Geographical distribution of the exposure
classes ................................................................................................................................... 31
5.1.4. Credit Risk – Distribution of exposures by industry .................................................. 32
5.1.5. Residual maturity broken down by exposure classes ................................................. 33
5.2. Use of ECAIs ...................................................................................................................... 33
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Pillar III Disclosures Report 2020
5.3. Securitisations ..................................................................................................................... 34
5.4. Counterparty Credit Risk .................................................................................................... 35
5.5. Market Risk ........................................................................................................................ 36
5.5.1. Equity Risk ................................................................................................................. 36
5.5.2. Foreign Exchange Risk .............................................................................................. 36
5.5.3. Commodities Risk ...................................................................................................... 39
5.5.4. Interest Rate Risk ....................................................................................................... 39
5.6. Operational Risk ................................................................................................................. 39
5.7. Credit Valuation Adjustment Risk ..................................................................................... 41
6. Leverage Ratio ......................................................................................................................... 42
7. Other Risks ............................................................................................................................... 43
7.1. Concentration Risk ............................................................................................................. 43
7.2. Reputation Risk .................................................................................................................. 43
7.3. Strategic Risk ...................................................................................................................... 44
7.4. Business Risk ...................................................................................................................... 44
7.5. Capital Risk Management .................................................................................................. 44
7.6. Regulatory Risk .................................................................................................................. 44
7.7. Legal and Compliance Risk ................................................................................................ 45
7.8. IT Risk ................................................................................................................................ 45
7.9. Risk Reporting .................................................................................................................... 45
7.10. Liquidity Risk ................................................................................................................... 46
7.11. Conduct Risk .................................................................................................................... 46
8. Remuneration policy ............................................................................................................... 47
8.1. Remuneration System ......................................................................................................... 47
8.2. Link between the pay and performance .............................................................................. 48
8.3. Remuneration of Senior Management Personnel and Directors ........................................ 493

Pillar III Disclosures Report 2020
SPECIFIC REFERENCES TO CRR
Scope of disclosure requirements
431(1)

SectionRequirement to publish Pillar III disclosures

1.2

Disclosures regarding operational risk.
Institution shall adopt a formal policy to comply with the431(3)
disclosures and have policies for assessing theirappropriateness, including their verification and frequency
Non - material, proprietary or confidential information
The policy on diversity with regard to selection of members ofthe management body432
Own Funds

5.6

431(2)

Remuneration policy
Frequency of disclosure
Disclosures must be published at least on an annual basis, in433
conjunction with the date of publication of the financial
statements
Means of disclosure
Determine the appropriate medium, location and means to434(1)
publish the disclosures, preferably all disclosures in one
medium434(2)

Equivalent disclosures made under accounting, listing or otherrequirements may be deemed to constitute compliance with
Pillar III

Risk management objectives and policies
Disclosure of risk management objectives and policies for435(1)
each category of risk435(1) (a)strategies and processes
the structure and organisational structure of the relevant risk435(1) (b)management function
the scope and nature of risk reporting and measurement435(1) (c)systems
Declaration approved by the management body on the435(1) (e)adequacy of risk management arrangements
435(1) (f)Concise risk statement approved by the management body
Disclosure at least annually, regarding governance435(2)
arrangements.
Number of directorships held by members of the management435(2) (a)body
Recruitment policy for the selection of members of the435(2) (b)management body and their actual knowledge, skills and1.3.2
Section
2.4
3
8
Section
1.3.2
Section
1.3.2
Crossreferences toaccounting
and otherdisclosuresareindicated in
the Report
Section
1.4
1.4.1
1.4.1
1.4.1
1.5
1.4.2
2.1
2.2
2.3
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Pillar III Disclosures Report 2020
expertise
Policy on diversity of management body, its objectives andtargets and the extent to which these have been achieved
Description of information flow on risk to the management435(2) (e)body
Scope of application
435(2) (c)436(a)

2.4
2.5
Section
1.1

436 (b) (i)Name of institution.
Difference in the basis of consolidation for accounting andprudential purposes, describing entities that are:• Fully consolidated;

436 (b) (ii)•

Proportionally consolidated;

1.2

436 (b) (iii)•

Deducted from own funds;

436 (b) (iv)•

Neither consolidated nor deducted.

436 (b)Own Funds - Requirements regarding the own funds table
A full reconciliation of Common Equity Tier 1 items,
Additional Tier 1 items, Tier 2 items and filters and437 (1) (a)deductions applied pursuant to Articles 32 to 35, 36, 56, 66
and 79 to own funds of the institution and the balance sheet in
the audited financial statements of the institution;a description of the main features of the Common Equity Tier
437 (1) (b)1 and Additional Tier 1 instruments and Tier 2 instruments
issued by the institution
the full terms and conditions of all Common Equity Tier 1,
437 (1) (c)Additional Tier 1 and Tier 2 instruments
437 (1) (d) (ii) each deduction made pursuant to Articles 36, 56 and 66
items not deducted in accordance with Articles 47, 48, 56, 66
437 (1) (d) (iii)and 79
Capital Requirements
Summary of institution’s approach to assessing the adequacy438(a)of its internal capital
Capital requirement amounts for credit risk for each438(c)
Standardised approach exposure class (8% of risk-weighted
exposure).
Capital requirements amount for position risk, FX risk,
438(e)
settlement risk, commodities risk
Capital requirements amount for large exposures exceeding438(e)
limitsCapital requirements for the Basic Indicator approach, the438(f)
Standardised approach, and the Advanced Measurement
approach as applicable and disclosed separately.
Exposure to counterparty credit risk (CCR)
Discussion of the methodology used to assign internal capital
439(a)and credit limits for counterparty credit exposures.
Discussion of policies for securing collateral and establishing439(b)
reserves.

Section

3.3

3.2
3.2
3.1
3.1
Section
4.2
5.1
5.5
7.1
5.6
Section
5.4
5.4

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Pillar III Disclosures Report 2020
439(c)
439(d)

439(e)
439(f)
439(g)

439(h)

Discussion of policies with respect to wrong-way exposures.
A discussion of the impact of the amount of collateral theinstitution would have to provide given a downgrade in its
credit rating
Gross positive fair value of contracts, netting benefits, netted
current credit exposure, collateral held and net derivatives
credit exposure
Exposure values under mark-to-market, original exposure,standardised and internal model methods.
Notional value of credit derivative hedges and the distributionof current credit exposure by type of exposure.
Notional amounts of credit derivative transactions for own
credit portfolio, as well as in its intermediation activities,
including the distribution of the credit derivatives products
used, broken down further by protection bought and soldwithin each product group

Capital buffers
440(1)(b)442(b)
442(d)
442(e)
442(f)

Disclose the amount of its institution specific countercyclicalcapital buffer

5.4
5.4
5.4

5.4

1.4.4
SectionDefinitions for accounting purposes of ‘past due’ and‘impaired’.
Approaches for determining specific and general credit risk
adjustments.
Geographical distribution of exposures, broken down insignificant areas by material exposure classes
The distribution of the exposures by industry or counterparty
type, broken down by exposure classes, including specifying
exposure to SMEs
The residual maturity breakdown of all the exposures, broken
down by exposure classes

Use of ECAI’s

5.1.1
5.1.1
5.1.3
5.1.4
5.1.5
SectionNames of the nominated ECAIs used in the calculation ofStandardised approach RWAs, and reasons for any changes.
444(b)
Exposure classes for which ECAI is used
Description of the process used to transfer the issuer and issue444(c)
credit assessments onto items not included in the tradingbook;444(d)
Mapping of external rating to credit quality steps.
Exposure values pre- and post-credit risk mitigation, by credit444(e)
quality step.
Exposure to market risk
Disclosure of position risk, large exposures exceeding limits,
445
FX, settlement and commodities risk.
Operational Risk
444(a)

446

5.4

SectionCapital buffers
442(a)

5.4

Disclosure of the scope of approaches used to calculate

5.2
5.2
5.2
5.2
5.2
Section
5.5
Section
5.6
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Pillar III Disclosures Report 2020
operational risk, discussion of internal and external factors
considered in the case of advanced measurements approach.
Exposure to interest rate risk on positions not included in the trading book
Nature of interest rate risk and key assumptions and frequency
448(a)of measurement
Remuneration Disclosures
Information concerning the decision-making process used for450(1)(a)determining the remuneration policy
450(1)(b)Information on link between pay and performance
The most important design characteristics of the remuneration
450(1)(c)system450(1)(d)The ratios between fixed and variable remuneration
Information on the performance criteria on which the450(1)(e)entitlement to shares, options or variable components ofremuneration is based
The main parameters and rationale for any variable
450(1)(f)component scheme and any other non-cash benefits
Aggregate quantitative information on remuneration, broken
450(1)(g)down by business area
450(1)(h)(i)Section
5.5.4
Section
8.1
8.2
8.2
8.1
8.3
8.1
8.1

450(1)(h)(ii)
450(1)(h)(iii)
450(1)(h)(iv)
450(1)(h)(v)Aggregate quantitative information on remuneration, broken
down by senior management and members of staff whose
actions have a material impact on the risk profile of theinstitution

8.3

450(1)(h)(vi)

450(1)(i)450(2)The number of individuals being remunerated €1 million ormore per financial year, for remuneration between €1 millionand €5 million broken down into pay bands of €500.000 andfor remuneration of €5 million and above broken down into
pay bands of €1 million
For institutions that are significant in terms of their size,internal organisation and the nature, scope and the complexityof their activities, the quantitative information shall also bemade available to the public at the level of the members of the
management body of the institution.

Leverage451(1)
451(1)
451(1) (c)451(1) (d)451(1) (e)

8.3

8.3

SectionDisclose the leverage ratio and breakdown of total exposure
measure, including reconciliation to financial statements, andderecognised fiduciary items.
Description of the risk management process to mitigate
excessive leverage and factors that had an impact on theleverage ratio during the year.
a description of the factors that had an impact on theleverage ratio during the period to which the disclosed

6

6
6

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Pillar III Disclosures Report 2020
leverage ratio refers.
Use of Credit Risk mitigation techniques
Policies and processes, and an indication of the extent to453(a)
which the CIF makes use of on- and off-balance sheet netting.
Policies and processes for collateral valuation and453(b)
management.
Description of the main types of collateral taken by the453(c)
institution
Information about market or credit risk concentrations within453(e)
the credit mitigation taken.

Section
5
5
5
7.1

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Pillar III Disclosures Report 2020
1. INTRODUCTION
1.1 Information
The purpose of this document is to disclose information in accordance with the scope of
application of the Capital Requirements Directive IV (CRD IV) requirements for GBE
Beteiligungs-Holding GmbH (hereinafter, the ‘Group’).
GBE Beteiligungs-Holding GmbH Ltd was incorporated in the Germany with registration
number HRB 187059 and it is the parent company of GBE brokers Beteiligungs-GmbH
which was incorporated in Germany with registration number HRB 187941 and indirect parentof GBE Brokers Ltd (the “CIF”) which was incorporated in the Republic of Cyprus on 5
August 2013 with registration number HE 324205 and licensed by the Cyprus Securities andExchange Commission (hereinafter the “CySEC”) with number CIF 240/14 .
Moreover, pursuant to the Regulation (EU) 575/2013 (the “Regulation” or “CRR”), theGroup’s minimum/initial capital requirement is €730k.
1.2. Scope of application
The Pillar III disclosures Report (the ‘Report’) is prepared on a consolidated basis inaccordance with the Pillar 3 disclosure requirements as laid out in Part Eight of the CRR andhave as a starting point the financial information used in the Company’s Financial Statements
which are prepared in accordance with the International Financial Reporting Standards(“IFRS”). As the two documents serve different purposes, the reported figures illustratedifferences, which lie on the differences of the fundamental concepts between the CRR and the
IFRS. The regulatory exposure classes are based on different criteria from accounting asset
types and are therefore not comparable on a line-by-line basis. Moreover, through financial
statements, a company aims to provide the value of all on-balance sheet items at a given point
in time, whereas regulatory exposures entail an element of risk which is taken into
consideration during the calculation and determination of the said exposures.
The basis of consolidation of the Group entities for accounting and prudential purposes ispresented in the Group Structure below:

9Pillar III Disclosures Report 2020

The subsidiary companies, their activities and their consolidation method as at 31 December
2020 are presented in the table below.
Table 1: Basis of Consolidation of Group entities for regulatory purposes
Method of accounting Method of regulatory Description of theName of the entity
consolidation
consolidation
entityGBE Brokers
Full consolidation
Full consolidation
Financial Holding
Beteiligungs GmbH
GBE brokers Ltd
Full consolidation
Full consolidation
Investment Firm
1.3. Pillar III Regulatory Framework
1.3.1. Overview
This Report has been prepared in accordance with Section 4 (Paragraph. 32) of the Directive
for the prudential supervision of investment firms which implements the Regulation and theCRD IV, as well as the relevant provisions of new Law 87(I)/2017 (hereinafter, the “Law”), as
amended.
The CRR establishes the prudential requirements for capital, liquidity and leverage that entities
need to abide by. Furthermore, CRR introduces significant changes in the prudential regulatory
regime applicable to institutions including amended minimum capital ratios, changes to thedefinition of capital and the calculation or risk weighted assets and the introduction of new
measures relating to leverage, liquidity and funding. Additionally, CRR is immediately bindingon all EU member states. CRD IV governs access to internal governance arrangements
including remuneration, Board of Directors (the “Board” of “BoD”) composition andtransparency.

10Pillar III Disclosures Report 2020
The Regulatory framework consists of a three “Pillar” approach:•••

Pillar I - Establishes minimum capital requirements, defines eligible capital
instruments, and prescribes rules for calculating RWA for credit risk, market risk andoperational risk.
Pillar II – Requires firms and supervisors to take a view on whether a firm should holdadditional capital against: risks considered under Pillar I that are not fully captured by
the Pillar I process (e.g. credit concentration risk), risks not taken into account by the
Pillar I process (e.g. interest rate risk in the banking book, business and strategic risk)
and factors external to the firm (e.g. business cycle effects). Pillar II connects theregulatory capital requirements to the Internal Capital Adequacy Assessment Process(“ICAAP”) and to the reliability of its internal control structures. The function of Pillar
II is to provide communication between supervisors and institutions on a continuous
basis and to evaluate how well the institutions are assessing their capital needs relative
to their risks. If a deficiency arises, prompt and decisive action is taken to restore theappropriate relationship of capital to risk.
Pillar III - Market Discipline requires the disclosure of information regarding the risk
management policies of the Group, as well as the results of the calculations of minimum
capital requirements, together with concise information as to the composition of original
own funds.

1.3.2. Disclosure Policy: Basis and Frequency of Disclosure / Location and verification
The Group has a formal policy, approved by the Board, which details its approach incomplying fully with the Pillar 3 disclosure requirements as laid out in Part Eight of the CRR.
According to the Directive, the risk management disclosures should be included in either thefinancial statements if these are published, or on their websites.
The Pillar III disclosure requirements are contained in Articles 431 to 455 of the Regulation. In
addition, these disclosures must be verified by the external auditors of the Group and the Groupis responsible to submit the external auditors’ verification report to CySEC. The Group has
included its risk management disclosures as per the Directive on its website as it does not
publish its financial statements.
As per the Article 432(1) of the CRR, institutions may omit one or more disclosures, if suchdisclosures are not regarded as material, except for the following disclosures:• Regarding the policy on diversity with regard to selection of members of the
management body, its objectives and any relevant targets set out in that policy, and theextent to which these objectives and targets have been achieved (Article 435 (2) (c)of
CRR).
• Own funds (Article 437 of CRR).
• Remuneration policy (Article 450 of CRR).
Materiality is based on the criterion that the omission or misstatement of information would be
likely to change or influence the decision of a reader relying on that information for the purposeof making economic decisions. Where the Group has considered a disclosure to be immaterial,
this was not included in the document.

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Pillar III Disclosures Report 2020
Disclosures and Confidential Information
The Regulation also provides that institutions may omit one or more disclosures, if suchdisclosures are regarded as confidential or proprietary. The CRR defines proprietary as if
sharing that information with the public would undermine its competitive position. It may
include information on products or systems which, if shared with competitors, would render an
institution’s investments therein less valuable.
Information is regarded as confidential if there are obligations to customers or othercounterparty relationships binding the institution to confidentiality. Under the light of theabove, the Group avoided to disclose such confidential information in this report.
Frequency
The Group’s policy is to publish the disclosures required on an annual basis. The frequency of
disclosure will be reviewed should there be a material change in approach used for the
calculation of capital, business structure or regulatory requirements.
Medium and location of publication
Institutions may determine the appropriate medium, location and means of verification tocomply effectively with the disclosure requirements. In this respect, the Pillar III disclosures
are published on:• www.gbebrokers.com• www.gbeprime.com
Verification
The Pillar III disclosures are subject to internal review and validation prior to being submitted
to the Board for approval. The Pillar III disclosures have been reviewed and approved by the
Board. In addition, the Remuneration disclosures have been reviewed by the Risk Manager.
1.4. Risk management objectives and policies
To ensure effective risk management, the Group has adopted the Three Lines of Defence
model, with clearly defined roles and responsibilities.
First Line of Defence: Managers are responsible for establishing an effective control
framework within their area of operation and identifying and controlling all risks so that they
are operating within the organisational risk appetite and are fully compliant with policies andwhere appropriate defined thresholds. First Line of Defence acts as an early warning
mechanism for identifying (or remedying) risks or failures.
Second Line of Defence: The Risk Management Function is responsible for proposing to theBoard appropriate objectives and measures to define the risk appetite and for devising the suiteof policies necessary to control the business including the overarching framework and forindependently monitoring the risk profile, providing additional assurance where required. The
Risk Management Function will leverage their expertise by providing frameworks, tools andtechniques to assist management in meeting their responsibilities, as well as acting as a central
coordinator to identify enterprise wide risks and make recommendations to address them.
12Pillar III Disclosures Report 2020
Integral to the mission of Second Line of Defence is identifying risk areas, detecting
situations/activities, in need of monitoring and developing policies to formalise risk
assessment, mitigation and monitoring.
Third Line of Defence: Comprises by the Internal Audit Function which is responsible forproviding assurance to the Board on the adequacy of design and operational effectiveness of thesystems of internal controls. Internal Audit undertakes on-site inspections/visits to ensure thatthe responsibilities of each Function are discharged properly (i.e. soundly, honestly andprofessionally) as well as reviews the relevant policies and procedures. Internal Audit works
closely with both the First and Second Lines of Defence to ensure that its findings andrecommendations are taken into consideration and followed, as applicable.

1.4.1. Risk Management Framework
Managing risk effectively in a Group operating in a continuously changing risk environment
requires a strong risk management culture. As a result, the Group has established an effective
risk oversight structure and the necessary internal organisational controls to ensure that theGroup undertakes the following:••••

The adequate risk identification and management
The establishment of the necessary policies and procedures
The setting and monitoring of the relevant limits andCompliance with the applicable legislation

The Board meets on a regular basis, and receives updates on risk and regulatory capital mattersfrom management. The Board reviews regularly (at least annually) written reports concerningcompliance, risk management and internal audit policies, procedures and work as well as theGroup’s risk management policies and procedures as implemented by Management.
As part of its business activities, the Group faces a variety of risks, the most significant of
which are described further below. The Group holds regulatory capital against three allencompassing main types of risk: credit risk, market risk and operational risk.
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Pillar III Disclosures Report 2020
Recovery PlanCySEC has issued the Circular C351 on 05 February 2020 in order to provide guidance to Full
Scope CIFs with respect to the ‘Preparation and Submission of Recovery Plans by CIFS’, fallwithin the scope of Law 20(I)/2016.
As per section 5(1) of the Law 20(I)/2016, certain institutions should be subject to simplified
obligations in relation to recovery planning. CySEC published its Directive (Directive DI20-01)
stating the criteria for CIFs to determine whether a CIF falls under simplified or full scope
obligations in regard to recovery planning. Moreover and according to paragraph 4 of the
Directive DI20-01, CIFs that fulfil the simplified obligations criteria for the purpose of
preparing their recovery plans, shall draw a recovery plan which shall include at least thecontent and details referred to in Form 20-01 and submit the relevant Form to CySEC every
two years by 30 September at the latest.
According to the latest available Audited Financial Statements, the CIF is subject to thesimplified obligations and as such has complied with the said reporting obligation bysubmitting the Form 20-01 to CySEC by 30 September 2020. The CIF will update the contentsof the Form and submit it to CySEC by 30 September 2022.
Resolution Plan
The Central Bank of Cyprus (‘CBC’) acting as the National Resolution Authority for all credit
institutions and Cyprus Investment Firms (CIFs) pursuant to 22(I)/2016 is responsible fordrafting of resolution plans of the aforementioned entities. For the purpose of preparation andimplementation of the resolution plans, the CIF was requested by CBC to submit the
information set out in Annex I of the Regulation 2018/1624 (‘CIR’), by 30 April each year withreference date 31st December of the previous year.
The CIF is required to submit the relevant 2021 Data Collection templates with reference
period the year 2020 to CBC in XBRL format. Furthermore, and as per the Article 7 of the
CIR, the CIF is also required to submit additional information in excel format each year withreference date the end of previous calendar year. Both submissions shall be made via EDX
platform of the CBC by 30 April 2021.
In this respect, the CIF shall ensure that the resolutions templates and the additional
information template will be completed and submitted in XBRL format and excel format
respectively, via EDX platform by the designated deadline.
1.4.2. Risk Statement
The Group's activities expose it to a variety of risks, and in particular to credit risk, market risk,
operational risk, compliance risk, regulatory risk, reputational risk, group risk, strategic risk,
liquidity risk, conduct risk etc. The Group, through its operations, has significant exposure to
the economies and financial markets.
Even though the global economy has recorded growth in the latest year after overcoming thelatest economic recession, the overall future economic outlook of the economy remains
unstable due to the recent developments on the outbreak of Coronavirus (COVID-19).

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Pillar III Disclosures Report 2020
Following the outbreak of COVID-19 in Cyprus, the Firm has taken the required measures toensure that its employees have access to its technology infrastructures necessary for thecompletion of their tasks and that additional system for critical functions are being provided.
In this respect, the Business Continuity Plan has been amended accordingly. Moreover, theGroup is closely monitoring the impact of COVID-19 on its financial position in order to beable to take proactive measures.
Risk Strategy
The risk strategy of the Group is the responsibility of the Board, which formulates it and is
responsible for monitoring its implementation. This is achieved through the development ofrisk management processes and procedures as well as through an assessment of the risks
undertaken and the effectiveness of the risk management framework, given the Group’sbusiness model. One important characteristic of the Group’s risk strategy is the alignment withthe strategic and operational targets that are set by the Board. The risks that arise from theimplementation of the Group’s strategic and business plans are regularly analysed in order toensure the adequacy of the relevant policies, procedures and systems.
Following the outbreak of COVID-19 in Cyprus, the Group is following the local government
guidelines in its response to the virus. During the year 2020, the Group concentrated theirefforts on monitoring and assessing the impact of the COVID-19 as well as ensuring business
continuity. In this respect, it has taken the required measures to ensure that its employees haveaccess to its technology infrastructures necessary for the completion of their tasks and that
additional system for critical functions are being provided, as per the updated BusinessContinuity Plan.
Risk Appetite
Risk appetite is the level and type of risk a firm is able and willing to assume in its exposuresand business activities, given its business objectives and obligations to stakeholders. Risk
appetite is generally expressed through both quantitative and qualitative means and should
consider extreme conditions, events and outcomes. In addition, risk appetite should reflectpotential impact on earnings, capital and funding/liquidity.
The Group has a low-risk appetite in respect to investing and to managing business andoperational activities.
According to Financial Stability Board (FSB) an appropriate risk appetite framework (RAF)should enable risk capacity, risk appetite, risk limits, and risk profile to be considered forbusiness lines and legal entities as relevant, and within the group context. The Risk appetite
framework is defined as the overall approach, including policies, processes, controls, andsystems through which risk appetite is established, communicated, and monitored. It includes arisk appetite statement, risk limits, and an outline of the roles and responsibilities of thoseoverseeing the implementation and monitoring of the RAF. The RAF should consider material
risks to the financial institution, as well as to the institution’s reputation vis-à-vis policyholders,
depositors, investors and customers. The RAF aligns with the institution's strategy.
The Group is assessing its risk appetite in respect to investing and to managing business andoperational activities while the Risk Appetite Statement is prepared by the Risk Manager andapproved by the Board of Directors.
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Pillar III Disclosures Report 2020
Table 2: Risk Appetite areas
Indicator
Own Funds
Common Equity Tier 1 Ratio4
Tier 1 Ratio4
Total Capital Ratio4
Leverage Ratio
Liquidity Coverage Ratio
Return on Assets
Retained Earnings / Total Equity
Concentration of Funds5

Normal 1≥€3,000≥10.50%≥12.00%≥14.00%≥5.00%≥110.00%≥5.00%≥10.00%≤10.00%Warning 2<€3,000k<10.50%<12.00%<14.00%<5.00%<110.00%<5.00%<10.00%>10.00%Limit 3
€730k
7.00%
8.50%
10.50%
3.00%
100.00%0.00%
5.00%
25.00%

Notes
1. The level of the indicator is within the acceptable limits as per the Group’s risk appetite.
2. The Group should take proactive actions in order to ensure that the level of the indicator willremain above the acceptable limits.
3. The level of the indicator falls below the acceptable limits and as such the Group should
proceed with the required actions in order to restore the level of the said indicator to thenormal predefined levels.
4. Capital Buffers + ICAAP add-on + 1.50% as per the paragraph 18 of the Law 20(I)/2016 havebeen taken into consideration for Normal and Warning thresholds.
5. Large exposure on a single counterparty or a group of connected counterparties limit inaccordance with Article 392 of CRR i.e. all exposures more than 10% of eligible capital.

The Risk Appetite framework has been designed to create links to the strategic long-term plan,
capital planning and the risk management framework.
The Board approves the Group’s corporate strategy, business plans, budget, long term plan and
ICAAP. The Group employs mitigation techniques defined within the policies, to ensure risks
are managed within Risk Appetite.
1.4.3. Risk Culture
Risk culture is a critical element in the Group’s risk management framework and procedures.
Management considers risk awareness and risk culture within the Group as an important part ofthe effective risk management process. Ethical behaviour is a key component of the strong risk
culture and its importance is also continuously emphasised by the management.
The Group is committed to embedding a strong risk culture throughout the business where
everyone understands the risks they personally manage and are empowered and qualified totake accountability for them. The Group embraces a culture where each of the business areas isencouraged to take risk–based decisions, while knowing when to escalate or seek advice.

1.4.4. Capital Requirements
Regulatory Capital Buffers

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Pillar III Disclosures Report 2020
CRD IV is transposed into national laws, which allows national regulators to impose additional
capital buffer requirements. Based on the provisions of the Macroprudential oversight ofInstitutions Law of 2015 which came into force on 1 January 2016, the Central Bank of Cyprus(the “CBC”) is the designated Authority responsible for setting the macroprudential buffers thatderive from the CRD IV.
Further to the above, the Macroprudential Authority has decided to activate the capitalconservation buffer (the “CCB”) having exercised its power. The CCB was phased-in
gradually, starting from 1 July 2016 at 0.625% and increasing by 0.625% every year thereafter,
until being fully implemented (2.5%) on 1 January 2019. The Group is obliged to maintain a
2.5% CCB in addition to the CET1 capital maintained for the year 2020 to meet the own funds
requirement imposed by Article 92 of the CRR.
In accordance with the provisions of this law, the CBC sets, on a quarterly basis, theCountercyclical Capital Buffer (the “CCyB”) level in accordance with the methodology
described in this law. The CCyB is effective as from 1 January 2016 and is determined by the
CBC ahead of the beginning of each quarter. According to paragraph 52(2) of the Directive, theMacroprudential Authority may exempt small and medium sized CIFs from holding an
institution specific CCyB, in addition to their CET 1 Capital. However, CySEC with an email
dated 25 May 2020 informed the CIFs that CBC decided not to exempt small and medium sized
CIFs from the obligation to maintain countercyclical capital buffer. The Group is obligated tomaintain an institution specific CCyB equivalent to its total risk exposure amount multiplied by
the weighted average of the countercyclical buffer rates. The CBC has set the level of the
CCyB rate for Cyprus at 0% for 2020.
At present and following COVID-19 pandemic crisis, the countries that have adopted a positive
countercyclical capital buffer rate are as shown in the table below:
Table 3: Countercyclical Capital Buffer Rate per Country
Current Rate
Country
Date fromCCyB Rate
Bulgaria
01 April 2020
0.50%
Czech Republic
01 July 2020
0.50%
Hong Kong
16 March 2020
1.00%
Luxembourg
01 January 2021
0.50%
Norway13 March 2020
1.00%
Slovakia
01 August 2020
1.00%
Source: European Systemic Risk Board & BIS Website – Updated on 15 March 2021
The institution specific CCyB rate of the Group for 31 December 2020 was zero.
The Macroprudential Oversight of Institutions Law, 2015, also requires the maintenance ofadditional capital buffer by the systemically important credit institutions and investment firms
either at the national level, or at the EU level, referred to as Other Systemically Important
Institutions (“O-SII”).
The O-SII capital buffer reflects the cost for an institution of being systemically important andreduces the moral hazard from the support of the institution from the state and the taxpayers
and compensates for the higher risk it represents for the national financial system and the17Pillar III Disclosures Report 2020
potential consequences of its failure. The Group is not obliged to maintain a O-SII capital
buffer as it is not a O-SII institution.
1.4.5. Upcoming Regulatory Changes – IFR & IFD
The European Parliament on 16 April 2019 has adopted a new, comprehensive regulatory
regime for investment firms: the Investment Firm Directive ("IFD") and Investment Firm
Regulation ("IFR") are intended to replace the existing applicable regulation for investment
firms.
While small and "non-interconnected" firms in particular will benefit from less regulation, thelegislation for "systemically relevant" investment firms means no less than equal treatment withcredit institutions in the sense of a level playing field – accordingly, they will fall entirely under
the previous regulatory framework (i.e. CRR). As a result, all other investment firms will nolonger be subject to the CRD/CRR framework, which is primarily intended for banks.
The new regulatory regime applies to ALL investment firms authorised and supervised under
the MiFID II. The main regulatory changes in the prudential framework by IFR and IFD:a.
New Classification of Investment Firmsb.
Initial Capital Requirement and Compositionc.
Capital Requirements (K-Factors)d.
Concentration Risk Requiremente.
Liquidity Requirementsf.
Disclosures Requirementsg.
Reporting Requirements
Other Supervisory RequirementsAccording to the new prudential regulatory framework theInitial Capital Requirements and classification for investment firms will be amended.
Specifically, investment firms will be classified into three different categories (Class1, Class 2
and Class 3) based on their size and business operations. Moreover, the initial capitalrequirements will be amended (€750k, €150k and €75k) and it will be decided based on theinvestment services an entity is authorised to offer.
Further to the above, the regulatory capital ratio requirements will not be applicable anymore
and investment firms will be requested to comply with the following at all times:a) CET 1 should constitute at least 56% of capital requirements;b) Tier 1 should constitute at least 75% of capital requirements;c) Tier 1 and Tier 2 should constitute at least 100% of capital requirements
CET1, Tier 1 and Tier 2 will be calculated in accordance with the eligibility criteria of thecapital instruments as per the provisions of the CRR.
As regards the capital requirements calculation, Class 1 Investment Firms will continue
calculate their overall capital requirements in accordance with the provisions of the existing
regulation. However, Class 2 Investment Firms will be requested to maintain own funds of atleast the higher between a) Initial Capital, b) K-Factors requirement and c) Fixed Overheads
requirement while Class 3 Investment Firms’ capital requirements will be calculated as thehigher between only a) Initial Capital and b) Fixed Overheads requirement.

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Pillar III Disclosures Report 2020
K-factors methodology which is applicable for Class 2 Investment Firms will replace thecurrent credit risk, market risk and operational risk approach in order to calibrate the capitalneeded to meet the risks of the investment firm. Class 3 firms are not required to calculate theircapital based on the K-factor formula while they need to calculate the K-factors for
categorisation purposes.
Capital requirement from applying K-factors formula (pursuant to Article 15 of the IFR) is thesum of Risk to Customer (RtC), Risk to Market (RtM) and Risk to Firm (RtF). The K-Factors
are calculated as shown below:
Table 4: K-Factors as per IFR&IFD
Risk to Client (RtC)
Risk to Market (RtM)
Risk to Firm(RtF)
Sum of:Higher of:
Sum of:• K-AUM: Assets Under• K-NPR: Net Position Risk
• K-TCD: Trading
Management(calculated in accordance toCounterparty Default
CRR) or• K-ASA: Client Assets• K-CON: Concentration
Safeguarded and• K-CMG: Clearing Member
risk based on large
Administered
Guarantee
exposures• K-CMH: Client Money• K-DTF: OperationalHeldrisks from Daily
Trading Flow
• K-COH: Client Orders
Handled
*K-AUM, K-ASA, K-CMH, K-COH and K-DTF relate to the volume of activity. The volumes
should be multiplied by the corresponding coefficients set out in IFR in order to determine theown fund requirement.
Further to the above, the CIF has already assessed the requirements under the new prudential
regulatory framework and concluded that it will be classified as Class 2 Investment Firm and assuch it will be requested to maintain own funds of at least the higher between a) the initial
capital requirement, b) the K-Factors requirement and c) Fixed Overheads requirement.
1.5. Declaration of the Management Body
The Management Body is required to proceed with an annual declaration on the adequacy of
the Group’s risk management framework and ensure that the risk management arrangements
and systems of financial and internal control in place are in line with the Group’s risk profile.
The risk management framework is designed to identify, assess, mitigate and monitor all
sources of risk that could have a material impact on the Group’s operations. The Board
considers that it has in place adequate systems and controls with regard to the Group’s size, risk
profile and strategy and an appropriate array of assurance mechanisms, properly resourced andskilled, to avoid or minimise loss.

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Pillar III Disclosures Report 2020
2. CORPORATE GOVERNANCE
The systems of risk management and internal control include risk assessment, management or
mitigation of risks, including the use of control processes, information and communication
systems and processes for monitoring and reviewing their continuing effectiveness.
The risk management and internal control systems are embedded in the operations of the Groupand are capable of responding quickly to evolving business risks, whether they arise fromfactors within the Group or from changes in the business environment.
2.1. The Board of Directors
The Board has the overall responsibility for the establishment and oversight of the Risk
Management Framework. The Board satisfies itself that financial controls and systems of risk
management are robust. The number of directorships held by Executive and Non-Executive
Directors in the Group do not exceed the maximum number allowed.
The Group has in place the Internal Operations Manual which lays down the activities,
processes, duties and responsibilities of the Board, Committees, Senior Management and staff
constituting the Group. It also implements and maintains adequate risk management policies
and procedures which identify the risks relating to the activities, processes and systems, andwhere appropriate, set the level of risk tolerated by the Group. The Group adopts effective
arrangements, processes and systems, in light of that level of risk tolerance, where applicable.
2.2. Number of Directorships held by members of the Board
The number of directorships which may be held by a member of the Board shall take into
account individual circumstances and the nature, scale and complexity of the Group’s activities.
Unless representing the Republic, members of the Board of a CIF that is significant in terms of
its size, internal organisation and the nature, the scope and the complexity of its activities shallnot hold more than one of the following combinations of directorships at the same time:••

One executive directorship with two non-executive directorships;
Four non-executive directorships.

Furthermore, directorships in organisations which do not pursue predominantly commercial
objectives such as non-profit or charitable organisations shall not count for the purposes of theabove guidelines.
The table below discloses the number of directorships held by members of the management
body in entities of the Group as at 31 December 2020.

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Pillar III Disclosures Report 2020
Table 5: Number of Directorships held
Director

Entity Name

Niklas Neubauer

GBE Brokers Ltd

Christos Domazos*

GBE Brokers Ltd

Rifat Sayim

GBE BeteiligungsGmbH/ GBE
BeteiligungsHolding GmbH

Andreas Psindros

GBE Brokers Ltd

Olga Kvasova

GBE Brokers Ltd

Function
Executive
Director
Executive
Director
Executive
Director
Non-Executive
Director
Non-Executive
Director

Number of
Executive
Directorships

Number of
NonExecutive
Directorships

2

-

1

-

3

-

1

2

-

1

*The CIF submitted to CySEC on 15 January 2021 a notification about the replacement of Mr. Chistos
Domazos with Mr. Kyriakos Karoullas for the position of Executive Director.

2.3. Policy on Recruitment
Recruitment into the Board combines an assessment of both technical capability andcompetency skills referenced against the Group’s leadership framework. Members of the Board
possess sufficient knowledge, skills and experience to perform their duties. The overallcomposition of the Board reflects an adequately broad range of experiences to be able tounderstand the Group’s activities, including the main risks to ensure the sound and prudent
management as well as sufficient knowledge, of the legal framework governing the operations.
2.4. Policy on Diversity
The Group is committed to promote a diverse and inclusive workplace at all levels, reflective of
the communities in which it does business. It approaches diversity in the broadest sense,
recognizing that successful businesses flourish through embracing diversity into their businessstrategy, and developing talent at every level in the organisation. For this purpose, the Grouptakes into consideration various aspects such as broad industry experience, knowledge,
independence, gender, age, cultural and educational background, for the Board appointments.
2.5. Information flow on risk to the management body
Risk information flows up to the Board directly from the business departments and control
functions. The Board ensures that it receives on a frequent basis, at least annually written
reports regarding Internal Audit, Compliance, Money Laundering and Terrorist Financing and
Risk Management issues and approves the ICAAP report as shown in the table below:

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Pillar III Disclosures Report 2020
Table 6: Information flow on risk to management bodyNo.
Report Name
Owner of Report
RecipientFrequency
SeniorRisk Manager’s
1
Risk Manager
Management,
Annually
ReportBoard, CySEC
SeniorPillar I – CRDIV
2
Risk Manager
Management,
Quarterly
CoRep Forms
Board, CySECICAAP (Pillar 2)
Senior3
Risk Manager
Annually
ReportManagement, Board
Senior4 Pillar 3 Disclosures Risk Manager
Annually
Management, Board
Senior
5 Risk Register
Risk Manager
Annually
Management, Board
Senior
6 Compliance Report Compliance Officer Management,
Annually
Board, CySEC
SeniorInternal Audit
7
Internal Auditor
Management,
Annually
ReportBoard, CySEC
Anti-money
Anti-money
Senior8 laundering
laundering
Management,
Annually(AMLCO) ReportCompliance Officer Board, CySEC
SeniorAudited Financial
9External Auditor
Management,
Annually
Statements
Board, CySEC
Form 144-14-11
Senior‘Prudential
10
Risk Manager
Management,
Annually
Supervision
Board, CySEC
Information’
SeniorForm 20-01
11
Risk Manager
Management,
Every Two Years(Recovery Plan)*
Board, CySEC
SeniorResolution
Management,
12 Templates
Risk Manager
Annually
Board, Resolution(XBRL)**
Authority (CBC)*Directive DI20-01 of the Cyprus Securities and Exchange Commission on the establishment ofsimplified obligations as to the content and details of the recovery plans of CIFs**Starting from the year 2021
Furthermore, the Group believes that the risk governance processes and policies are of at mostimportance for its effective and efficient operation. The processes are reviewed and updated on
an annual basis or when deemed necessary.

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Pillar III Disclosures Report 2020
3. OWN FUNDS
Own Funds (also referred to as capital resources) is the type and level of regulatory capital thatmust be held to enable the Group to absorb losses. The Group is required to hold own funds insufficient quantity and quality in accordance with CRD IV which sets out the characteristics
and conditions for own funds.
The Group throughout the year under review managed its capital structure and madeadjustments to it in light of the changes in the economic and business conditions and the risk
characteristics of its activities.
During the year, the Group complied fully with all capital and liquidity requirements andoperated well within the regulatory requirements. The Total Capital Ratio of the Group as at 31
December 2020 was 25.17% which is above the minimum regulatory capital of 10.50% (8% +buffers).
The Group’s Combined Buffer Requirement consists of the following:• Regulatory capital requirement of the level of 8%,• Capital Conservation Buffer (“CCB”) of the level of 2.50%,• Countercyclical Capital Buffer (“CCyB”) of the level of 0.00003%.
3.1. Tier 1 & Tier 2 Regulatory Capital
Institutions shall disclose information relating to their own funds. Furthermore, institutions
shall disclose a description of the main features of the Common Equity Tier 1 (CET1) and
Additional Tier 1(AT1) instruments and Tier 2 (T2) instruments issued by the institution.
The Group’s regulatory capital comprises fully of CET1 capital while it has not issued any AT1
or T2 capital. The composition of the capital base and capital ratios of the Group and its
subsidiary are shown in the following table:
Table 7: Composition of the capital base and capital ratios

CET1 capital before regulatory adjustments
Capital instruments and the related share premium accounts
Retained earnings
CET1 capital: regulatory adjustments
Additional deductions of CET1 Capital due to Article 3 of
the CRR (ICF Contribution)*
CET1 capital
AT1 capital
T1 = CET1 + AT1
Tier 2 (T2) capital
Total capital (TC = T1 + T2)

CIF(Solo)€000

Group(Consolidated)
€000

1,016
3,652

100
6,995

(76)

(76)

4,502
4,502
4,502

7,019
7,019
7,019

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Pillar III Disclosures Report 2020
Risk weighted assets
Credit risk
Market risk
Operational risk
Credit Valuation Adjustment risk
Total risk weighted assets

€000
2,038
12,116
11,180132
25,466€000
4,232
12,116
11,406132
27,887

Capital ratios and buffers%%
Common Equity Tier 1
17.68%
25.17%
Tier 117.68%
25.17%
Total Capital
17.68%
25.17%
Institution specific buffer requirement (CET1 requirementin accordance with article 92 (1)(a) plus capital
7.00%
7.00%
conservation and countercyclical buffer requirements),
expressed as a percentage of risk exposure amount)of which: capital conservation buffer requirement
2.50%
2.50%
of which: counter cyclical buffer requirement
0.000001%
0.00003%
CET 1 Ratio to meet buffers**
10.68%
18.17%* According to the Circular C334 (Treatment of the additional cash buffer of Investors
Compensation Fund (‘ICF’) in the own funds calculation), CIFs should deduct the additional Cash
Buffer of 3 per thousand of the eligible funds and financial instruments of their clients as at theprevious year calculated according to paragraph 11(6) of the Directive DI87-07 (operation of the
ICF).
**Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets).
The figures below illustrate the capital requirements and buffers and the risk weighted exposures
breakdown for the Group for the year ended 31 December 2020.

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Pillar III Disclosures Report 2020

Capital Requirements

Overall Exposure Breakdown
CVA
0%
Credit Risk
11%

10.50%
CCyB

25.17%

T2

0.00%
2.50%
2.00%

T1

1.50%

CET1

4.50%

CCB

Minimum Regulatory Requirement

Operational
Risk
41%

Counteparty
Credit Risk
4%

FX Risk
32%

Commodity
Risk
TDI Risk
10%0%Equity Risk
2%
Total Capital Ratio

Further to the above and in light of the upcoming amendments to the prudential regulatory
framework (IFR/IFD), the Company has concluded that the Company will be categorised as aClass 2 Investment firm and as such its total capital requirement will be the higher of:a) Fixed Overheads Requirementb) K-factors requirementc) Minimum Initial Capital of €750k
In this respect, the Company has already assessed its capital adequacy position taking into
consideration the above new methodology in order to ensure that the appropriate actions will betaken to ensure compliance with the new prudential requirements.
3.2. Main features of Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments
In order to meet the requirements for disclosure of the main features of these instruments, theGroup discloses the capital instruments’ main features as outlined below:

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Pillar III Disclosures Report 2020
Table 8: Main features of capital instruments
Capital Instruments Main Feature
CET1
Issuer
GBE BETEILIGUNGS-HOLDING GMBH
Regulatory Treatment
Eligible at Solo/(sub-)consolidated/solo
Consolidated
Instrument type
Common Equity
Amount recognized in regulatory capital€100k
Nominal amount of instrument€100k
Issue Price
Various
Accounting classification
Shareholders’ Equity
Original date of issuance
28 March 2017
Perpetual or dated
Perpetual
Original maturity dateNo maturity
Issuer call subject to prior supervisoryNo
approval
Coupons / Dividends
Fixed or floating dividend/coupon
Floating
Coupon rate and any related index
N/A
The Group’s capital resources consist of CET1 Capital. No additional Tier 1 or Tier 2 capital
available.
3.3. Balance Sheet Reconciliation
The following table provides a reconciliation of own funds between the consolidated balance
sheet, as presented in the Consolidated Financial Statements of the Group, and the financial
position of the Group prepared for regulatory purposes.
Table 9: Balance Sheet Reconciliation
EquityShare capital
Retained earnings
Total Equity as per the Audited Financial Statements

€000
100
6,995
7,095

Regulatory Deductions
Additional deductions of CET1 Capital due to Article 3 of the CRR(76)

Total Own funds as per the CoRep Forms

7,019

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Pillar III Disclosures Report 2020
4. COMPLIANCE WITH REGULATORY CAPITAL AND THE OVERALL PILLAR II
RULE
4.1. Internal Capital
The purpose of capital is to provide sufficient resources to absorb unexpected losses over andabove the ones that are expected in the normal course of business. The Group aims to maintaina minimum risk asset ratio which will ensure there is sufficient capital to support the businessduring stressed conditions.
4.2. Approach to assessing adequacy of Internal Capital
The Group has adopted the Pillar I plus approach whereby it determines the minimum capitalrequired under Pillar I methodology and subsequently incorporates in that methodology therisks that are either not covered or are partially covered by Pillar I. Initially an assessment ismade on the general financial position of the Group both from its financial statements and its
Capital Adequacy Returns.
The Pillar I variable capital requirement is the sum of the credit risk and market risk
requirements and the operational risk. In order to validate the adequacy of the above
requirements under the Pillar I calculations, the ICAAP proceeds with the following individual
tests:• The adequacy of the credit and market risk requirements is assessed with reference toall relevant balance sheet items in order to ascertain if there are additional risks that are
not covered by Pillar I• Other risks connected with the balance sheet, such as liquidity risk and concentration
risk, are reviewed in order to establish whether there should be an additional
requirement that might not be covered under Pillar I• The overall capital adequacy is tested by adding together the resulting requirement of
the identified risks.
• The absolute impact of combinations of scenarios, including a severe market downturn,is considered in relation to the financial forecasts of the business to assess the potential
impact on the capital base over a three year period (forward-looking).
• A comprehensive risk assessment is carried out for all risks, categorizing them under arisk profile by attributing the anticipated impact and likelihood of occurrence.
• Finally, additional measures are set for the mitigation of the identified risks as well as
capital allocation.
The ICAAP Report describes how the Group implemented and embedded its ICAAP within its
business. The ICAAP also describes the Group’s Risk Management framework e.g. theGroup’s risk profile and the extent of risk appetite, the risk management limits if any, as well as
the adequate capital to be held against all the risks (including risks other than the Pillar I risks)
faced by the Group.
With regards to the ‘use test’ the following evidence shall be used to support that the ICAAP isembedded within the Firm:• Senior management or board challenge, review and sign-off procedures; including any
relevant notes in minutes from board and risk committee meetings.
• The extent to which the ICAAP is part of the firm’s capital management process,including the extent and use of capital modelling or scenario analysis and stress testing27

Pillar III Disclosures Report 2020
within the firm’s capital management policy. For example, in setting pricing andcharges and the level and nature of future business.
In line with the Basel requirements, the key instruments to help the Group maintain adequate
capitalization on an ongoing and forward-looking basis are:
• A strategic planning process which aligns risk strategy and appetite with commercial
objectives;• A continuous monitoring process against approved risk and capital targets set;
• Regular risk and capital reporting to management; and• An economic capital and stress testing framework which also includes specific stresstests to underpin the Group’s recovery monitoring processes.
Further to the above and upon the implementation of the new prudential framework (IFR/IFD),
the ICAAP report will be reviewed and updated in accordance with the new capitalrequirements.

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Pillar III Disclosures Report 2020
5. PILLAR I CAPITAL REQUIREMENTS
The following tables show the overall Pillar I minimum capital requirement and risk weighted
assets for the Group under the Standardised Approach to Credit Risk, Market Risk and the
Basic Indicator Approach for the Operational Risk.
5.1. Credit Risk
In the ordinary course of business, the Group is exposed to credit risk, which is monitored
through various control mechanisms. Credit risk arises when a failure by counterparties todischarge their obligations could reduce the amount of future cash inflows from financial assets
on hand at the balance sheet date.
The Group has policies to diversify risks and to limit the amount of credit exposure to any
particular counterparty in compliance with the requirements of the Directive. The Group
continuously monitors the fair value calculations, forecast and actual cash flows, and costbudgets so that to ensure that the carrying level of Group’s own funds and consequently the
Capital Adequacy ratio meet the regulatory requirements at all times.
Trade receivables are shown net of any provision made for impairment. The management
believes that no additional credit risk, beyond amounts provided for collection losses, isinherent in the trade receivables. Cash balances are held with high credit quality financial
institutions and the Group has policies to limit the amount of credit exposure to any financial
institution.
5.1.1. Credit risk adjustments
The Group assesses at the balance sheet date whether there is objective evidence that afinancial asset or group of financial assets is impaired. A financial asset or a group of financial
assets is impaired and impairment losses are incurred only if there is objective evidence ofimpairment as a result of one or more events that occurred after the initial recognition of theasset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can be reliably estimated.
Trade receivables are recognized initially at fair value and are subsequently measured atamortized cost using the effective interest method, less provision for impairment. For thosetrading receivables that are 90 days or more past due, in non-accrual status, the Group classifies
them as “in default”, thus an impairment test will emerge. A financial asset is past due if acounterparty has failed to make a payment when contractually due.
Other receivables are recognized initially at fair value and subsequently measured at amortized
cost, using the effective interest method, less provision for impairment. A provision for
impairment of other receivables is established when there is objective evidence that the Groupwill not be able to collect all amounts due according to the original terms of receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy
or delinquency in payments are considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset's carrying amount and the present
value of estimated future cash flows, discounted at the original effective interest rate. When areceivable is uncollectible, it is written off against the allowance account for other receivables.
Subsequent recoveries of amounts previously written off are credited in the statement of29

Pillar III Disclosures Report 2020
comprehensive income. None of the derivative financial instruments is either past due or
impaired.
IFRS 9 Impairment
IFRS 9 introduced a new model for recognition of impairment losses – the expected credit
losses (“ECL”) model. The new rules require that entities will have to record an impairment
loss equal to the 12-month ECL for financial assets that have not suffered a significant increasein credit risk since initial recognition. Where there has been a significant increase in credit risk
since initial recognition, impairment is measured using lifetime ECL rather than 12-month
ECL. Entities must calculate probability of default (“PD”), losses given default (“LGD”) and
exposures at default (“EAD”) to estimate expected credit loss provisioning amounts. The model
includes operational simplifications for lease and trade receivables which require lifetime
losses to be calculated.
The Group has the following types of financial assets that are subject to the expected credit loss
model: cash and cash equivalents The Group provides for credit losses against loans to relatedparties, receivables, other receivables, and cash and cash equivalents. The loss allowance was
not reflected on the position as it is the Group's policy not to adjust for immaterial amounts.
The first €100.000 has been deducted from the calculation in case of EU banks under the
Deposit Guarantee Scheme.
5.1.2. Credit Risk – Risk Weighted Assets
The minimum capital requirement for Credit risk is calculated by exposure using a factor of
8%. The following table shows the risk-weighted exposure amounts and the corresponding
minimum capital requirements as at 31 December 2020 for the Group, broken down by
exposure class.
Table 10: Exposure classes as at 31 December 2020
Risk Weighted Assets
Exposure class€000
936
Institutions
248
Corporates
753
Retail2,295
Other Items
4,232
Total

Capital Requirements
€000
75
20
60
184
339

The Regulation requires disclosure for additional asset classes. These have not been shown in
the table above as these are nil as at the reporting period.

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Pillar III Disclosures Report 2020

5.1.3. Credit Risk – Analysis of Average exposures and total amount of exposures after
accounting offsets
The Group and its significant subsidiary shall disclose the total amount of exposures after
accounting offsets and without taking into account the effects of credit risk mitigation and theaverage amount of the exposures over the period broken down by different types of exposures
as follows:
Table 11: Analysis of Average Exposures
Original exposure amountExposure class
€000
5,057
Institutions
1,639
Corporates
2,739
Retail2,295
Other Items
11,730Total

Average Exposure
€000
6,196
994
1,843
801
9,833

The Regulation requires disclosure for additional asset classes. These have not been shown in
the table above as these are nil as at the reporting period.
5.1.4. Credit Risk – Risk Weighted Assets by Geographical distribution of the exposure
classes
The Group shall disclose the geographical distribution of the exposures, broken down insignificant areas by material exposures classes. The geographical distribution of the exposure
classes are as follows:31

Pillar III Disclosures Report 2020
Table 12: Geographical distribution of the exposure classes
UnitedExposure
Cyprus Germany
Austria Guernsey Other
Total
Kingdom
class
€000
€000
€000
€000
€000
€000
€000
1,362
403
561
2,429
302
5,057
Institutions
4
194
906
18
283
235
1,639
Corporates
1
2,108
15
255
360
2,739
Retail2,295
2,295
Other Items
3,662
2,705
1,481
2,703
283
896
11,730Total
The Regulation requires disclosure for additional asset classes. These have not been shown in
the table above as these are nil as at the reporting period.

Geographical Distribution of the Exposures

4,000
Retail2,000

Institution-2,000-4,0005.1.5. Credit Risk – Distribution of exposures by industry
The Group shall disclose the distribution of the exposures by industry or counterparty type,broken down by exposure classes, including specifying exposure to SMEs, and further detailed
if appropriate as follows:
Table 13: Exposures by industry
Banking/Financial
Exposure
services
class€000
Institutions
5,057
Corporates
1,629
RetailOther Items
0
Total
6,686

PrivateIndividuals
€000
2,739
2,113
4,852

Other

Total

€000
10
0
183
193

€000
5,057
1,639
2,739
2,295
11,730

The Regulation requires disclosure for additional asset classes. These have not been shown in
the table above as these are nil as at the reporting period.

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Pillar III Disclosures Report 2020
Other Exposure by Industry
2%
Private Individuals
24%

Banking/Financial
services
74%

5.1.6. Residual maturity broken down by exposure classes
The Group shall disclose the residual maturity breakdown of all the exposures, broken down by
exposure classes, as follows:
Table 14: Residual maturity broken down by exposure class
Residual Maturity
Residual Maturity
Total≤ 3 months> 3 months
Exposure Class
€000
€000
€000
5,057
5,057
Institutions
1,629
10
1,639
Corporates
2,739
0
2,739
Retail2,295
2,295
Other Items
9,425
2,306
11,730Total
The Regulation requires disclosure for additional asset classes. These have not been shown in
the table above as these are nil as at the reporting period.
5.2. Use of ECAIs
The Group shall disclose the names of the nominated External Credit Assessment Institutions(“ECAIs”) and the exposure values along with the association of the external rating with thecredit quality steps. The Group uses external credit ratings from Moody’s. These ratings areused for all relevant exposure classes. The general ECAI association with each credit quality
step is as follows:
Table 15: ECAI Association with each credit quality stepInstitutions
CreditMoody’s
Credit Assessment method
Quality
Corporate Sovereign
RatingMaturity
Maturity 3
Stepmethod> 3 months
months or less1
Aaa to Aa3
20%
20%
20%
20%
2
A1 to A3
50%
50%
50%
20%
3
Baa1 to Baa3
100%
100%
50%
20%
4
Ba1 to Ba3
100%
100%
100%
50%
5
B1 to B3
150%
100%
100%
50%
6
Caa1 and
150%
150%
150%
150%
below

Sovereign
0%
20%
50%
100%
100%
150%

33

Pillar III Disclosures Report 2020
Exposures to unrated institutions are assigned a risk weight according to the credit quality stepto which exposures to the central government of the jurisdiction in which the institution isincorporated, as specified in Article 121 of CRR.
Notwithstanding the general treatment mentioned above, short term exposures to institutions
could receive a favourable risk weight of 20% if specific conditions are met.
The Other Items category includes tangible assets, debtors and prepayments risk weighted at
100%, cash items in the process of collection risk weighted at 20% and cash in hand risk
weighted at 0%.
Exposures to corporate clients were risk weighted by 100% risk factor since they were all
unrated and were incorporated in countries with no credit rating or with credit assessment up tocredit quality step 5.
Table 16: Breakdown of exposures by asset class and risk weight under the Standardised
approach
Risk Weight
Of whichTotal
unrated
Exposure Class
0%
20%
75%
100%
€000
€000
€000
€000
€000
€000
Corporate
1,639
1639
1639
Institutions
5,057
5057
1823
Retail
2,739
2739
2739
Other Items
0
2,295
2295
2295
Total
0
5,057
2,739
3,934
11,7308,496
The table below presents exposure values before and after credit risk mitigation of the Group,
corresponding to Credit Quality Steps (CQS). The values before credit risk mitigation represent
the initial exposure value net of value adjustments while the values after credit risk mitigation
represent exposures taking into account the eligible financial collateral funded and unfundedcredit protection.
Table 17: Exposures before and after credit risk mitigation as at 31 December 2020
Exposure values before
Exposure values after credit
Credit Quality Step
credit risk mitigation
risk mitigation
€000
€000
CQS 2
2,429
2,429
CQS 4
805
805
Unrated
8,496
4,994
Total
11,7308,229
5.3. Securitisations
The Group is not an active participant in the origination of securitisations (meaning pooled
assets with trenched risk), and accordingly detailed Pillar III disclosures are not made.

34

Pillar III Disclosures Report 2020
5.4. Counterparty Credit Risk
Counterparty Credit Risk (“CCR”) may be defined as the risk that the counterparty to atransaction could default before the final settlement of the transaction's cash flows. Suchtransactions relate to contracts for financial derivative instruments, repurchase agreements andlong settlement transactions.
The Group takes margin cash deposits as funded credit protection (collateral) for derivatives
and uses the Financial Collateral Comprehensive Method for calculation of the funded credit
protection.
The Group’s counterparty credit risk as at 31 December 2020 was €353k. The table below
shows the analysis of CCR by exposure type:
Table 18: Counterparty Credit Risk broken down by contract type as at 31 December
2020
Type ofcontract
Interest rate
FX rates &Gold
Equities
Precious
metals except
gold
Commodities
other than
precious
metals
Total€000

ExposureAmountbefore
CRM€000

ExposureAmount
after
CRM
€000

(0)

0

-

453

(2,409)167,425

186

(718)

81

Positive
Fair
Value

Negative
Fair
Value

Notional
Value

Risk
Weighted
AssetsCapitalRequirements

€000

€000

€000

€000

-

-

-

-

2,127

755

421

34

38,577

2,501

703

537

43

(23)

6,106

509

237

117

9

30

(47)

398

70

10

8

1

751

(3,197)

212,506

5,207

1,706

1,082

87

Counterparty Policies with respect to wrong-way risk exposures
Wrong-way risk occurs when the exposure to a particular counterparty is positively correlatedwith the Probability of Default (‘PD’) of the counterparty itself or where there is an adverse
correlation between counterparty’s PD and the mark-to-market value of the underlying
transaction. A wrong-way trading situation can be defined as the condition where the exposure
to the counterparty increases, while the counterparty’s financial situation and its ability to payon the transaction diminishes.
As part of the credit review process, basic assumptions are established regarding correlations
for a given trading product.
The management of wrong-way risk is integrated within the Group’s overall credit risk
assessment approach and is subject to a framework for identification and treatment of wrongway risk, which includes governance, processes, roles and responsibilities, methodology,
scenarios, reporting, review and escalation.

35

Pillar III Disclosures Report 2020
A conservative treatment for the purpose of calculating exposure profiles is applied to material
trades with wrong-way risk features. The wrong-way risk framework applies to OTC, securities
financing transactions and centrally cleared trades. If material correlation is identified, thecollateral is deemed ineligible for regulatory risk calculations and risk is measured on an
uncollateralised basis.
The risk is not currently measured as it is not anticipated to be significant given the existence of
cash collateral/margin for almost all derivative transactions, which significantly reduces
Counterparty Credit Risk.
5.5. Market Risk
Market risk can be defined as the risk of losses in on and off-balance sheet positions arisingfrom adverse movements in market prices. From a regulatory perspective, market risk stems
from all the positions included in banks' trading book as well as from commodity and foreignexchange risk positions in the whole balance sheet.
As per the requirements of the Regulation, the Group shall disclose the own funds requirements
for Market Risk exposures.
The Group benefits from a number of factors that reduce the volatility of its revenue andprotect it from significant changes in market conditions such as its product range. This
diversification leads to a significant reduction in the Group’s exposure to price risk. The
Group’s exposure to risk price at any point in time depends primarily on short-term market
conditions and client activities during the trading day, hence the exposure at each reporting date
may not be representative of the price risk exposure faced by the Group over the year.
The following table discloses the Group’s market risk as 31 December 2020
Table 19: Market Risk Exposure
Market Risk Weighted Assets€000

Traded Debt Instruments

22

Equity427

Foreign Exchange

8,894

Commodities*

2,773

Total Market Risk Exposure

12,116

Total Market Risk Requirements
969*Crypto assets are treated as commodities instruments as per the provision of Circular C417
5.5.1. Foreign Exchange Risk
The Group’s reporting currency is Euro. Foreign currency risk arises when future commercial
transactions and recognized assets and liabilities are denominated in a currency that is not theGroup's functional currency.
The Group is exposed to Foreign currency risk arising from various currency exposures.
Furthermore, funds deposited by clients may not always be maintained in the originallydeposited currency but may instead be converted to other currencies on the basis of the36

Pillar III Disclosures Report 2020
management’s decisions. This may expose the Group to Foreign currency risk. The Group's
management monitors the exchange rate fluctuations on a continuous basis and acts
accordingly.
If the sum of the Group’s overall net foreign-exchange position and its net gold position
exceeds 2% of its total own funds, the Group calculates own funds requirements for foreignexchange risk. The own funds requirement for foreign exchange risk is the sum of its overall
net foreign-exchange positions and its net gold position in the reporting currency, multiplied by
8%.
The foreign exchange risk in the Group is effectively managed by setting and controlling
foreign exchange risk limits, such as through the establishment of maximum value of exposure
to a particular currency pair.
The Group’s foreign exchange risk capital requirement is €711k based on the latest relevant
calculations of the Group’s capital requirements, as at 31st of December 2020.
Closely Correlated Currencies
Following the EBA’s Final draft Implementing Technical Standards on Closely Correlated
Currencies under Article 354 (3) of CRR, the Group may apply lower own funds requirements
against positions in relevant closely correlated currencies as those are disclosed by EBA. In thisrespect, for the calculation of the foreign exchange risk for matched positions on closely
correlated currencies, a capital requirement of 4% instead of 8% is used.
The Group’s matched positions in closely correlated currencies for the period up to 31
December 2020 were €1,368k. In this respect, please find below the analysis of the Group’s
exposure to Foreign Exchange Risk as at 31 December 2020:
Table 20: Foreign Exchange Risk

Short

2%
total
own
funds

Matched

Own
Funds
Requirements

Total
Risk
ExposureAmount

Long

Short

8,653

140

925

13,666

1,368

711

8,894

7,749

-

6,381

1,368

55

-

-

-

904
-

925

7,285
-

Net Positions
Long
TOTAL
16,107POSITIONS
Currencies closely
9,980
correlatedof which:
8,612
reporting currency
All other currencies 5,202
925
Gold

Positions Subject To
Capital Charge

583
74

5.5.2. Position Risk
The position risk is the risk involved with a certain trading position, commonly incurred due tothe changes in price. The CIF calculates its capital requirements for position risk as the sum of
the own funds requirements for the general and specific risk of its positions in debt and equity
instruments.
37

Pillar III Disclosures Report 2020
Equities
Equity Risk is the risk that the fair value of a financial instrument fluctuates as a result ofchanges in market prices other than due to the effect of transactional foreign currency
exposures or interest rate risks.
The sum of the absolute values of all the net long positions and all its net short positions is its
overall gross position. The CIF calculates, separately for each market, the difference between
the sum of the net long and the net short positions. The sum of the absolute values of thosedifferences is its overall net position. The specific risk on this individual equity can be ignored
if the stock-index future in question is exchange traded and represents a relevant appropriately
diversified index.
The CIF multiplies its overall gross position by 8% in order to calculate its own funds
requirement against specific risk. The own funds requirement against general risk are the CIF's
overall net position multiplied by 8%
As at 31 December 2020, the market risk capital requirements, due to position risk in equities,
amounted to €427k.
Table 21: Capital requirements for position risks in equities
Total Exposure
Equities in Trading Book
€000
General Risk
326
Specific Risk
101
Total
427

Capital requirements
€000
26
8
34

Traded Debt Instruments
Position Risks in Traded Debt Instruments (“TDI”) arising from the investments on Fixed
Income instruments such as bonds. The position risk on a traded debt instrument shall be
divided into two components in order to calculate the capital required against it:a. Specific risk— this is the risk of a price change in the instrument concerned due tofactors related to its issuer andb. General risk — this is the risk of a price change in the instrument due to a change in thelevel of interest rates.
Net positions shall be classified according to the currency in which they are denominated andshall calculate the capital requirement for general and specific risk in each individual currency
separately. The capital requirement for general market risk for traded debt instruments is
calculated under the maturity-based approach. The instruments’ net positions shall be grouped
into the three zones (maturity bands) according to the residual time to maturity and whether
their coupon is above/below 3%.
As at 31 December 2020, the market risk, due to position risk in traded debt instruments,
amounted to €22k.

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Pillar III Disclosures Report 2020
5.5.3. Commodities Risk
The risk of the unexpected changes in commodities prices. These commodities are split into
precious metals (except gold), base metals, agricultural products and other energy products (oilgas). The CIF calculates its capital requirement with respect to commodities risk using the
Simplified Approach. Each position in commodities or commodity derivatives is expressed interms of the standard unit of measurement. The spot price in each commodity is expressed in
the reporting currency.
The capital requirements for each commodity are calculated as the summation of the following:••

15% x net position (long or short) x spot price for the commodity
3% x gross position (long plus short) x spot price for the commodity

The overall capital requirements for commodities risk are the sum of capital requirements foreach commodity. The Group’s Commodities risk for the year was €2,773k
Table 22: Capital requirements for Commodities risk
Category

Net short€000

Net Long€000

Precious Metals
Cryptos
Other
Total

20
20

1,095
93
151
1,246

CapitalRequirements
€000
197
20

Risk Exposure
Amount
€000
2,463
93
58

222

2,773

5.5.4. Interest Rate Risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes
in market interest rates. The Group is exposed to interest rate risk in relation to its bankdeposits and from the interest charged on the derivative financial instruments that remain open
overnight.
The Group's income and operating cash flows are substantially independent of changes inmarket interest rates as the Group has no significant interest-bearing assets and liabilities. The
bank balances held in current accounts have no significant interest.
The Group's management monitors the interest rate fluctuations on a continuous basis and acts
accordingly.
5.6. Operational Risk
Operational risk means the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. Operational risk includes legal risk but excludes
strategic and reputational risk.
The following list presents some event-type categories, included in operational risk, with someexamples for each category:39

Pillar III Disclosures Report 2020

Internal Fraud• misappropriation of assets;• tax evasion;• intentional mismarking of positions;• bribery.

External Fraud• theft of information;• hacking damage;• third-party theft;• forgery.

Employment Practices andWorkplace Safety• discrimination;• workers compensation;• employee health;• safety.

Clients, Products, &Business Practice• market manipulation;• antitrust;• improper trade.

Damage to physical assets• damage to physical assets from a natural
disaster, e.g. earthquake.

Business Disruption &Systems Failures• utility disruptions;• software failures;• hardware failures.

Execution, Delivery, &Process Management• data entry errors;• accounting errors;• failed mandatory reporting;• negligent loss of Client assets.

The Group manages operational risk through a control-based environment in which processes
are documented and transactions are reconciled and monitored. This is supported by continuous
monitoring of operational risk incidents to ensure that past failures are not repeated.
Furthermore, the Group has in place policies and processes whose implementation assists withthe evaluation and management of any exposures to operational risk.
The Group has implemented an operational risk management framework designed to ensurethat operational risks are assessed, mitigated and reported in a consistent manner consisting of,inter alia, the following components:• Maintaining a four-eye structure and implementing board oversight over the strategic
decisions made by the heads of departments;• A IT Disaster Recovery Plan has been designed in order to be used in the event of aforce majeure affecting the Group’s internal systems and databases; and40

Pillar III Disclosures Report 2020
•
•
•
•
•

Maintenance of Risk Registers in the Context of the ICAAP;
A Business Continuity Plan has been implemented which helps protect all of theGroup’s information databases including data, records and facilities.
The majority of actions occurring in the Group’s systems are automated and therefore it
is less likely that a human error will occur;
Review of risks and controls as part of the Internal Audit function;
Regular review and updating of the Group’s policies;

Following the outbreak of COVID-19 in Cyprus, the Firm has taken the required measures toensure that its employees have access to its technology infrastructures necessary for thecompletion of their tasks and that additional system for critical functions are being provided.
In this respect, the Business Continuity Plan has been amended accordingly. For the calculationof operational risk in relation to the capital adequacy reports, the Group uses the Basic
Indicator Approach (BIA). Under the BIA, the own funds requirement for operational risk isequal to 15% of the average over three years of the relevant indicator. Based on the relevant
calculations the Group’s exposure to Operational Risk, as at 31 December 2020, was €11,406k
as provided by the table below:
Table 23: Operational Risk capital requirements
Basic Indicator Approach
Relevant Indicator
Average
Operation Risk Exposure Amount
Own Funds Requirement

Audited year
2018
€’000
3,862

Audited year
2019
€’000
6,296
6,083
11,406
912

Audited year
2020
€’000
8,092

Under the Basic Indicator Approach, the capital requirement for operational risk is equal to
15% of the average of three years of the above relevant indicator, resulting to €912k capitalrequirements.
5.7. Credit Valuation Adjustment Risk
Credit Valuation Adjustment (CVA) means an adjustment in the mid-market valuation of theportfolio of transactions with a counterparty. This adjustment reflects the current market valueof the credit risk of the counterparty to the Group. The Group calculates CVA risk for
Securities financing transactions, for transactions with qualifying central counterparties andtransactions with financial counterparties. The Group uses the standardised method in order tocaptures the credit risk of derivative counterparties not already included in Counterparty Credit
Risk (CCR) (i.e. the potential loss on derivatives due to increase in the credit spread of thecounterparty).
Table 24: Credit Valuation Adjustment (CVA)
Credit Valuation Adjustment
Standardised Method

Exposure Value
€'000

Risk
Exposure€'000

CapitalRequirement
€'000

466

455

11

41

Pillar III Disclosures Report 2020
6. LEVERAGE RATIOThe Group shall disclose the Leverage Ratio and how it applies the definition of Tier 1 Capital.
The leverage ratio is a supervisory tool for the European Union, which it is in line withinternational agreements. Moreover, it is a supplementary non-risk based ratio that aims inmonitoring the excessive built-up of leverage on the balance sheet of institutions. The leverage
ratio is expressed as a percentage of Tier 1 Capital over the total leverage exposure measure.
The total leverage exposure measure is defined as the sum of exposure values of all assets andall off-balance sheet items not deducted when calculating Tier 1 Capital. The Leverage
Exposure measure includes:••••

All On-balance sheet assets;
Derivative exposures;
Securities Financing Transaction exposures;
Other non-trading book exposures.

The Basel Committee has set a benchmark of 3% for a minimum Leverage ratio.
As at 31 December 2020, the leverage ratio of the Group was 59.84% on a consolidated basis.
The table below provides a breakdown of total leverage ratio exposures for the group.
Table 25: Leverage Ratio
Leverage Ratio Exposure
Exposure Values
Derivatives: Replacement cost associated with all derivatives
transactions
Derivatives: Add-on amounts for PFE associated with all derivatives
transactions
Other assets: On-balance sheet items (excluding derivatives, SFTs
and fiduciary assets, but including collateral)
Total exposures

11,730Capital and regulatory adjustments
Tier 1 Capital

7,019

LEVERAGE RATIO

59.84%

€000
751
4,456
6,523

The Group monitors leverage closely in order to ensure that any possible excess of the
Leverage Limit will be identified and managed promptly. The Group’s leverage ratio is well
above the minimum ratio of 3%.

42

Pillar III Disclosures Report 2020
7. OTHER RISKS
7.1. Concentration Risk
Concentration Risk includes large individual exposures and significant exposures to companies
whose likelihood of default is driven by common underlying factors such as the economy,geographical location, instrument type etc. Concentration risk was partly addressed throughdiversification of counterparties, namely banking institutions.
The Group’s experience in the collection of trade receivables has never caused debts which are
past due and have to be impaired. The Group has a policy in place to monitor debts overdue by
preparing debtors ageing reports.
Large Exposures
The Group shall disclose any additional capital requirements derived from large exposures in
the Group’s trading book.
A large exposure is defined as the total exposure of a firm to a client or group of connectedclients, whether in the banking book or trading book or both and its value is equal to or exceeds
10% of its eligible capital.
Where the amount of €150 million is higher than 25 % of the institution's eligible capital thevalue of the exposure, after taking into account the effect of credit risk mitigation in accordancewith Articles 399 to 403 shall not exceed a reasonable limit in terms of the institution's eligible
capital. That limit shall be determined by the institution in accordance with the policies andprocedures referred to in Article 81 of Directive 2013/36/EU, to address and control
concentration risk. This limit shall not exceed 100 % of the institution's eligible capital.
Large exposures related to the trading book are subject to additional capital requirements as per
the Article 397 of the CRR. Moreover, the capital charge is associated with the trading book
exposure for each client or group of connected clients exceeding the large exposure limit times
a multiplier which is defined on table 1 of the aforementioned article.
According to Paragraph 61- Limitations on exposures to directors and shareholders of the
Directive, a CIF is not allowed to have exposures to all its directors more than 1% and to all its
shareholders that are not an institution, more than 2% of its eligible capital. Exposures toshareholders and directors are monitored and kept within the limits.
Furthermore, the allowable limits to institutions (100% of the total eligible capital) and to noninstitutions (25% of the total eligible capital) are closely monitored and controlled. As at 31
December 2020, the Group’s exposures were all within the maximum allowable limits.
Upon the implementation of the new prudential framework, Investment Firms under Class 2
shall monitor and control their large exposures in order to ensure that are compliant with the
maximum allowable limits set by Article 37 of the IFR.
7.2. Reputation Risk
Reputation risk is the current or prospective risk to earnings and capital arising from an adverse
perception of the image of the Group on the part of customers, counterparties, shareholders,43Pillar III Disclosures Report 2020
investors or regulators. Reputation risk could be triggered by poor performance, the loss of one
or more of the Group’s key directors, the loss of large customers, poor customer service, fraud
or theft, customer claims, legal action and regulatory fines.
The Group has transparent policies and procedures in place when dealing with possible
customer complaints in order to provide the best possible assistance and service under suchcircumstances. The possibility of having to deal with customer claims is very low as the Group
provides high quality services to customers.
7.3. Strategic Risk
Strategic Risk could occur as a result of adverse business decisions, improper implementationof decisions or lack of responsiveness to changes in the business environment. The Group’s
exposure to strategic risk is moderate as policies and procedures to minimize this type of risk
are implemented in the overall strategy of the Group.
7.4. Business Risk
Business Risk includes the current or prospective risk to earnings and capital arising fromchanges in the business environment including the effects of deterioration in economic
conditions. Research on economic and market forecasts are conducted with a view to minimize
the Group’s exposure to business risk. These are analyzed and taken into consideration when
implementing the Group’s strategy.
7.5. Capital Risk Management
Capital Risk is the risk that the Group will not comply with capital adequacy requirements.
The Group 's objectives when managing capital are to safeguard the Group 's ability to continue
as a going concern in order to provide returns for shareholders and benefits for otherstakeholders. The Group has a regulatory obligation to monitor and implement policies andprocedures for capital risk management. Specifically, the Group is required to test its capitalagainst regulatory requirements and has to maintain a minimum level of capital. This ultimately
ensures the going concern of the Group. Such procedures are explained in the Procedures
Manual.
The Group is further required to report on its capital adequacy quarterly and has to maintain at
all times a minimum total capital adequacy ratio which is set at 8%. The capital adequacy ratio
expresses the capital base of the Group as a proportion of the total risk weighted assets.
Management monitors such reporting and has policies and procedures in place to help meet the
specific regulatory requirements. This is achieved through the preparation on a monthly basisof management accounts to monitor the financial and capital position of the Group.
7.6. Regulatory Risk
Regulatory risk is the risk the Group faces by not complying with relevant Laws and Directives
issued by its supervisory body. If materialized, regulatory risk could trigger the effects ofreputation and strategic risk. The Group has documented procedures and policies based on therequirements of relevant Laws and Directives issued by the Commission; these can be found in
the Procedures Manual. Compliance with these procedures and policies are further assessed andreviewed by the Internal Auditors and suggestions for improvement are implemented by44

Pillar III Disclosures Report 2020
management. The Internal Auditors evaluate and test the effectiveness of the Group’s control
framework at least annually. Therefore the risk of non-compliance is very low.
7.7. Legal and Compliance Risk
Legal and Compliance Risk could arise as a result of breaches or non-compliance withlegislation, regulations, agreements or ethical standards and have an effect on earnings andcapital. Following the replacement of the Law 144(I)/2007 by Law 87(I)/2017 for the purposeof harmonization with MIFID II, several regulatory changes were applied that may cause theexposure to compliance risk. The Group among others is also exposed to legal and compliancerisk arising from inability or inadequate arrangements to comply with the requirements related
to the:• Product Governance (Circular C236, Directive DI87-01),• New rules governing derivatives on virtual currencies (Circular C268),• Commission Delegated Regulation of 8 June 2016 of the European Parliament and of
the Council with regard to regulatory technical standards for the annual publication by
investment firms of information on the identity of execution venues and on the qualityof execution,• Providing Investment Services in CFDs,• European Securities and Markets Authority Decision (EU) 2019/155 of 23 January
2019 renewing the product intervention measures relating to the marketing, distribution
or sale of contracts for differences to retail clients,• 4th AML Directive (Directive (EU) 2015/849)• 5th AML Directive (Directive (EU) 2015/849)• EMIR Refit• Recovery and Resolution Plan (Circular C351, Regulation 2018/1624)
The probability of such risks occurring is relatively low due to the detailed internal proceduresand policies implemented by the Group and regular reviews by the Internal Auditors. The
structure of the Group is such to promote clear coordination of duties and the management
consists of individuals of suitable professional experience, ethos and integrity, who haveaccepted responsibility for setting and achieving the Group’s strategic targets and goals. In
addition, the Board meets at least annually to discuss such issues and any suggestions toenhance compliance are implemented by management.
7.8. IT Risk
IT risk could occur as a result of inadequate information technology and processing, or arise
from an inadequate IT strategy and policy or inadequate use of the Group’s information
technology. Specifically, policies have been implemented regarding back-up procedures,software maintenance, hardware maintenance, use of the internet and anti-virus procedures.
Materialization of this risk has been minimized to the lowest possible level.
7.9. Risk Reporting
The Group maintains a system in place to record any risk event incurred on a special form duly
completed by personnel of each department and is submitted to the Compliance officer andRisk manager when such event occur.

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Pillar III Disclosures Report 2020
7.10. Liquidity Risk
Liquidity risk is defined as the risk when the maturity of assets and liabilities does not match.
An unmatched position potentially enhances profitability, but can also increase the risk oflosses. The Group has policies and procedures with the object of minimizing such losses.
As a class 2 Investment Firm, the Company will be requested upon the implementation of the
new prudential framework to hold an amount of liquid assets (defined as per the Article 43 of
the IFR) equal to at least one third of the fixed overhead requirement. The Company has
already assessed whether it has adequate liquid assets and took the appropriate measures toensure compliance with the new Liquidity Requirement which will be implemented on 26 June
2021.
7.11. Conduct Risk
Conduct risk is defined as the risk of an action, by an individual, financial institution or theindustry as a whole, which leads to customer detriment or, undermines market integrity. Thiscan bring sanctions and negative publicity. Moreover, EBA has defined conduct risk as thecurrent or prospective risk of losses to an institution arising from inappropriate supply offinancial services including cases of wilful or negligent misconduct. Consequently, conduct
risk arises from failures of designated liquidity providers located in third countries associatedwith the Group.
Additionally, the Group is exposed to negative balances with its Liquidity Providers, in case of
fast-pacing volatile market, where the LP cannot close a position at the stop out limit.
Therefore, the Group may be exposed to conduct risk arising from inadequate agreements with
the Liquidity Providers and/or with the third parties that hold client’s funds.
As part of risk management policy and tools, the Group has procedures in place to diversify its
liquidity providers and monitor their financial position on an on-going basis. The financial
soundness of the liquidity providers is closely monitored and the Group is ready to switch toalternative LPs, if necessary. Furthermore, the receivable/payable amounts with the LPs aremonitored on a daily basis. In particular, the Group examines its existing procedures andarrangements with respect to the products offered and services provided.

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8. REMUNERATION POLICYThe Group have established remuneration policy that aims to set out the remuneration practices
taking into consideration the salaries and benefits of the staff, in accordance with the provisionsof Directive as well as the Circular 031 on remuneration policies and practices, where thesecomply with specific principles in a way and to the extent that is appropriate to the Group’ssize, internal organization and the nature, scope and Group’s remuneration strategy is designed
to reward and motivate the people who are committed to maintaining a long term career with
the Group and performing their role in the interests of the Group.
The design of the Policy is approved by the people who effectively direct the business, after
taking advice from the compliance function, and implemented by appropriate functions topromote effective corporate governance. The people who effectively direct the business are
responsible for the implementation of remuneration policies and practices and for preventing
and dealing with any relevant risks, that remuneration policies and practices can create. The
Board discusses remuneration policy matters at least annually.
Furthermore, the Policy also benefits from the full support of senior management or, whereappropriate, the supervisory function, so that necessary steps can be taken to ensure that
relevant persons effectively comply with the conflicts of interest and conduct of business
policies and procedures. Moreover, the Policy adopts and maintains measures enabling them toeffectively identify where the relevant person fails to act in the best interest of the client and to
take remedial action.
8.1. Remuneration System
The remuneration system and policy is concerned with practices for those categories of staff
whose professional activities have a material impact on its risk profile, i.e. the Senior
Management and members of the Board; the said practices are established to ensure that the
rewards for the “executive management” are linked to the Group’s performance, to provide an
incentive to achieve the key business aims and deliver an appropriate link between reward andperformance whilst ensuring base salary levels are not set at artificially low levels. The
remuneration is a significant method of attracting and retaining key employees whose talent
can contribute to the short and long term success of the business.
The remuneration mechanisms employed by the Group are well known management andhuman resources tools that take into account the employee’s skills, experience andperformance, whilst supporting at the same time the long-term business objectives. One of the
key factors considered is an appropriate link between performance-based variable remunerationwhilst ensuring base salary levels are not set at artificially low levels. Other factors taken into
account are the following:(i)the financial viability of the Group;(ii)
the general financial situation of the state in which the Group operates;(iii) the Employee’s personal objectives (such as personal development), compliance withregulatory requirements (including the “best execution policy” and other protective
policies aiming towards the best interest of the client), systems and controls,commitment and work ethics;
The remuneration system takes into account the highly competitive sector in which the Group
operates, and the considerable amount of resources the Group invests in each member of the47

Pillar III Disclosures Report 2020
staff. The remuneration includes all forms of benefits provided by the Group to its staff and canbe Financial or non-Financial remuneration.
It is noted that the Group has taken into account its size, internal organisation and the nature,
the scope and the complexity of its activities and it does not deem necessary the establishmentof a specific remuneration committee. Decisions on these matters are taken on a Board level
while the remuneration policy is periodically reviewed.
The remuneration varies for different positions/roles depending on each position’s actual
functional requirements, and it is set at levels which reflect the educational level, experience,accountability, and responsibility needed for a staff member to perform each position/role. The
remuneration is also set in comparison with standard market practices employed by the othermarket participants/ competitors. Furthermore, the employee’s personal goals and performance
evaluation in relation to the objectives set up at the beginning of the period and the employee’s
professional conduct with clients are taken into account in order to determine the remuneration.
The total remuneration of staff currently consists of a fixed and a variable component. The
fixed remuneration includes salary, fixed pay allowance and other cash allowances and all are
determined based on the role and position of each employee, taking into account theexperience, seniority, education, responsibility, and market conditions. Fixed remuneration is
also set in comparison with standard market practices employed by the other market
participants/ competitors. The Group’s policy is to offer to all Employees a fixed remunerationthat is above the minimum legal requirements (minimum salary as set by the relevant
Employment laws and directives).
The variable remuneration is a performance-based remuneration which motivates and rewards
staff members based on their results in relation with the targets set in the beginning of the year.
This kind of remuneration is not guaranteed and the BoD has determined a maximum
percentage of variable remuneration relative to the fixed remuneration in order to ensure acompliant ratio between these two kinds of remuneration. Although, the maximum limit on
variable remuneration set at 100% of fixed salary, the limit could be set at 200% uponshareholders’ approval according to the Article 94 of Directive 2013/36/EU.
Furthermore there no remuneration is payable under deferral arrangements (with vested orunvested portions). Finally the Group did not pay any non-cash remuneration for the year underreview, since the does not have non-cash instrument, such as shares or other equivalent noncash instrument, in place.
8.2. Link between the pay and performance
The Group recognises the responsibility that the Staff has in driving its future success anddelivering value for the business and that remuneration is a key component in motivating andcompensating its employees. Furthermore, the overall remuneration policy incorporates anannual variable incentive compensation reflecting individual performance and overall
performance.
The individual performance is assessed during the annual appraisal process, which establishes
objectives for all staff covering both financial and non-financial factors, specific behavioral
competencies including compliance and risk management behaviors with regards to theprocedures.
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Further to the above, the Group implements a performance appraisal method, which is based ona set of Key Performance Indicators, developed for each business unit and its target is topromote the healthy competition amongst personnel, analysis of weak and strong sides of each
employee performance-based and give feedback to the staff member in order to motive them tobe improved. At the most of the times, the performance appraisal takes place in a multiyear
framework in order to ensure that the appraisal process assess employee’s long-term
performance. However, sometimes the performance appraisal is performed on medium andshort-term basis, and the performance indicators of this type of performance appraisal include
quantitative as well as qualitative criteria. The appraisal is being performed as follows:• The Group implements a
performance appraisal
program based on key
performance indicatorsand targets.
• Each department setstargets for which thefunctions, departments
and individuals are
expected to achieve overa specific timeframe.

Performance Checks &Feedbacks• The managers provide
support and feedback to thestaff during the daily
activities, time periods
decided and/or duringformal or informal
performance reviews.
• The aim is to assist the staff
to develop their skills andcompetencies.

SettingTargets• The Group at the end ofeach year evaluates theoverall performance ofthe year using
quantitative andqualitative criteria.
• The performance
review determines thelevel of variable
remuneration to beawarded.

Annual Performance
Evaluation

8.3. Remuneration of Senior Management Personnel and Directors
The remuneration policy is intended to ensure that the business will attract and retain the mostqualified Senior Management Personnel and Directors. As stated above, in the criteria used for
determining the remuneration of the directors are segregated into quantitative and thequalitative criteria.
The quantitative remuneration criteria mostly rely on numeric and financial data such as thebusiness’s performance and the individual performance evaluation and ratings of each memberof the staff whose professional activities affect the risk profile of the firm.
In addition to the quantitative criteria, the Group has put in place qualitative criteria which
include compliance with regulatory requirements and internal procedures, fair treatment ofclients and client satisfaction. Moreover, the remuneration of the non-executive directors isfixed and it is set at a level that is market aligned and reflects the qualification andcompetencies required based on the business’s size and complexity, the responsibilities and thetime that the non-executive directors are expected to consume.
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Pillar III Disclosures Report 2020
The remuneration of the senior management personnel of the Group, including Board areshown in the following tables:
Table 26: Remuneration analysis split by Senior Management and key management
personnel
Senior Management
Key Management
Non-Executive
2020(Executive
personnel
Directors
Directors)
Fixed reward
601,367
306,874
12,296
Variable reward
51,000
Total
652,367
306,874
12,296
Number of2
82
beneficiaries*The variable to fixed remuneration ratio as at 31 December 2020 was 6%.

Companies are required to disclose the number of natural persons that are remunerated €1mln
or more per financial year, in pay brackets of €1mln, including their job responsibilities, thebusiness area involved and the main elements of salary, bonus, long-term award and pension
contribution. Nevertheless, currently there are no natural persons at the Group that are
remunerated €1mln or more per financial year and as such the above disclosure is notapplicable. No sign-on payments have been awarded during 2020, while no severance
payments were paid during the year. Furthermore, aggregate remuneration analyzed bybusiness area for the Group is presented below:
Table 27: Aggregate remuneration analysis by business area
Aggregate Remuneration
Business Area€
Control Functions
755,675
Brokerage Department
71,892
Dealing on Own Accounts Department
37,926
Back Office Department
58,570IT Department
35,178
Total
959,241*Control functions include the Executive Directors and Compliance Department50