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Pathfinder volume 12, issue 6

July 2010


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Credit institutions: disclosures in times of stress

CSSF circular 10/466 on disclosures in times of stress was published on 29 June 2010. The circular is applicable to all credit institutions under Luxembourg law and to the branches of non-EU credit institutions. Its aims to draw credit institutions’ attention to the publication by the Committee of European Banking Supervisors (CEBS) on 26 April 2010 of « Principles for disclosures in times of stress (lessons learnt from the financial crisis) ».

These principles do not introduce any new requirements in terms of disclosures, they aim to encourage credit institutions to increase the quality of information to provide, as required by IFRS, Pillar 3, listing rules or other regulations to which institutions may be subject.

CEBS principles are the following:

A – General principles

Financial institutions should :

  • Provide timely and up to date information.
  • Provide disclosures on areas of uncertainty (e.g. Estimates).
  • Provide comprehensive and meaningful information that fully describes their financial situation.
  • Seek to early adopt new disclosure regulations.
  • Specify whether and to what extent information has been reviewed or verified by external auditors.

In addition, disclosures should allow comparisons over time and between institutions.

B – Content

Financial institutions should:

  • Provide sufficient information on the business model underlying the activities under stress and their significance (explanation of how activities contribute to an institution’s value creation process).
  • Provide clear and accurate information regarding the impacts under stress have on results and on risk exposures.
  • Provide information regarding impacts on the institution’s financial position.
  • Provide information on the management of the risks involved in activities under stress.
  • Provide detailed information with regard to critical accounting issues.
C – Presentational issues
  • Ensure that disclosures regarding activities under stress can be easily located.
  • Provide information at an appropriate level of granularity (disaggregate information on items that do not share similar characteristics).
  • Strike an appropriate balance between quantitative information and narrative information.
  • Continue to develop an educational approach.
  • Clearly specify when not exposed to particular activities under stress where this information is likely to be decision-useful for users.

Management companies subject to Chapter 13: periodical information

CSSF circular 10/467 concerning 1) Electronic transmission of financial information to be transmitted to the CSSF on a periodic basis by management companies subject to Chapter 13 of the Law of 20 December 2002 relating to undertakings for collective investment; 2) Modifications to certain periodic tables was published on 1 July 2010.

CSSF circular 03/108 detailed neither the mode nor the channel of transmission of statistical data of management companies subject to Chapter 13. This circular, in addition of the aforementioned circular, requires, starting from the reporting of 30 September 2010 (transmission deadline: 20 October at the latest), electronic transmission of data as well as the use of new secure transmission channels for periodic financial data.

This circular introduces also an obligation to provide final tables that accurately reflect the figures audited by the Authorised Statutory Auditor at the close of each financial year.

The following table presents the reporting deadlines for electronic reporting by the management companies subject to Chapter 13 of the Law of 20 December 2002:

Tables to be communicated Reporting deadline: quarterly Reporting deadline: year end
Financial position (Table SG 1A) 20 of month following reference’s date one month after the ordinary general meeting that approved the annual accounts
Profit and loss account (Table SG 1B)
Table on the management of UCIs (Table SG 1C)
Table relating to other activities (Table SG 2)
Table on staff (Table SG Staff)


The encryption specifications applicable to prudential reporting files of management companies are identical to those detailed in CSSF Circular 08/334 “Encryption specifications for reporting firms”. Management companies shall now communicate all prudential reporting through “e-file” or “SOFIE”. The technical details may be found on the CSSF website under the heading “Legal reporting/File transport and data protection”.

The CSSF reminds that management companies with foreign branches shall be required to provide versions of the following periodic tables:

  • Version “L” - Figures of the Luxembourg registered office only;
  • Version “N” - Overall figures including the registered office and all branches, and
  • Version “S” - Figures of each branch separately.

Minor changes have also been made to the quarterly reporting tables annexed to CSSF Circular 03/108, management companies must thus download the new reporting formats which appear on the CSSF’s reporting website on 30 September 2010.

CoREP

CSSF circular 10/475 amending CSSF circular 06/273, as amended, defining capital ratios pursuant to Article 56 of the Law of 5 April 1993 on financial services, as amended: 1) Implementation of CRD II Directives (2009/27/EC, 2009/83/EC et 2009/111/EC); 2) Other amendments to CSSF circular 06/273, as amended, was published on 20 July 2010.

The consolidated version of CSSF circular 06/273, as amended by the provisions of this circular, will be available on the CSSF website in the coming weeks.

This circular will enter into force on 31 December 2010.

The main changes are related to :

Pillar I:
  • Own funds definition and treatment of hybrid capital instruments
  • Capital requirements and risk management for securitisation positions
  • Technical amendments (credit risk outside the trading book, credit risk mitigation)
  • Prudential supervision of cross-border banking groups
Pillar II:
  • Reinforcement of risk governance and risk management practices
  • Strengthening of the requirements related to liquidity risk management and measurement

FATF statements

CSSF Circular 10/469 on FATF statements concerning 1) jurisdictions whose anti-money laundering and combating the financing of terrorism regime has substantial and strategic deficiencies; 2) jurisdictions whose anti-money laundering and combating the financing of terrorism regime is not satisfactory was published on 7 July 2010.

The CSSF resumes the conclusions of the two documents issued by the Financial Action Task Force (FATF) at its plenary meeting of June 2010.

The FATF states that certain jurisdictions have substantial and strategic shortcomings in their anti-money laundering and terrorist financing regimes. The new list shall be as follows:

  • Iran
  • Democratic People's Republic of Korea
  • São Tomé and Príncipe.

The FATF states that the following jurisdictions have unsatisfactory anti-money laundering and terrorist financing regimes: Angola, Antigua and Barbuda, Azerbaijan, Bolivia, Ecuador, Ethiopia, Greece, Indonesia, Kenya, Morocco, Burma/Myanmar, Nepal, Nigeria, Pakistan, Paraguay, Qatar, Sri Lanka, Sudan, Syria, Thailand, Trinidad et Tobago, Turkey, Turkmenistan, Ukraine and Yemen.

This Circular repeals CSSF Circular 10/445 of 26 March 2010.

Commercial and companies register fees

Grand-Ducal regulation of 11 June 2010 amending the Grand-Ducal regulation of 23 January 2003, as amended, implementing the Law of 19 December 2002 on the commercial and companies register and on the accounting records and annual accounts of undertakings was published in the Mémorial A 101 on 5 July 2010.

This regulation amends the fees for the following services:

  • Electronic consultation of a complete file,
  • Certificates, and
  • Consultation of the European Business Register (EBR).

Amendments to the market abuse law

Law of 26 July 2010 amending the Law of 9 May 2006 on market abuse and completing the transposition of Directive 2003/6/EC of 28 January 2003 on insider dealing and market manipulation (market abuse) was published in the Mémorial A 119 on 28 July 2010.

The changes are not intended to change the substance of the Luxembourg legislation on market abuse. They are limited to the conferral of powers to the CSSF under the provisions of Article 12(2), point c) and 14(1) of Directive 2003/6/EC.

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