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Pathfinder - Deloitte monthly regulatory update - December 2013


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Alternative investment fund managers

Commission delegated Regulation of 17 December 2013 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards determining types of alternative investment fund managers – European Commission 17/12/2013

Under the AIFM Directive, AIFMs have to follow specific rules depending on the type of AIF concerned: open-ended or closed-ended.

An AIFM of an open-ended AIF is considered as an AIFM which manages an AIF the shares or units of which are, at the request of any of its shareholders or unitholders, repurchased or redeemed prior to the commencement of its liquidation phase or wind-down, directly or indirectly, out of the assets of the AIF and in accordance with the procedures and frequency set out in its rules or instruments of incorporation, prospectus or offering documents.

An AIFM of a closed-ended AIF shall be an AIFM which manages an AIF other than of the type described above.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Capital requirement (CRD/CRR) and liquidity coverage ratio (LCR)

Final draft technical standards EBA/RTS/2013/07 on the determination of the overall exposure to a client or a group of connected clients in respect of transactions with underlying assets - European Bank Authority 05/12/2013

The RTS establish:

  • the methodology for the calculation of the value of exposures to transactions with underlying assets,
  • the procedure used to determine the contribution of underlying exposures to overall exposures to clients and groups of connected clients, and
  • the conditions under which the structure of the transaction does not constitute an additional exposure.

Further when the value of the exposure is sufficiently small, there is no need to apply the look-through approach.

The final draft standards have been sent to the European Commission for their adoption as EU Regulations.

Guidelines EBA/GL/2013/01 on retail deposits subject to different outflows for the purpose of liquidity reporting - European Bank Authority 06/12/2013

The aim of these guidelines is to establish the criteria for identifying retail deposits subject to different outflow during the following 30 days for the purpose of liquidity reporting. Retail deposits subjects to different outflows should be allocated to three different categories, depending on their underlying risk. Institutions should report the amounts of retail deposits allocated to each of the three categories together with their own estimates of expected outflows under stress conditions.

These guidelines will be implemented by national competent authorities within three months.
National competent authorities must notify the EBA by 6 February 2014 if they comply or intend to comply or provide the reasons for non-compliance.

Final draft technical standards EBA/RTS/2013/11 on criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile under Article 94(2) of Directive 2013/36/EU - European Bank Authority 16/12/2013

These draft RTS set out criteria for the identification of categories of staff who have a material impact on the institution’s risk profile (‘Identified Staff’) in accordance with the requirements of Article 92(2) of the CRD:

  • the identification criteria are a combination of qualitative and appropriate quantitative criteria,
  • the qualitative criteria identify staff within the management body, senior management and other staff with key functions or managerial responsibilities over other identified staff within institutions,
  • the quantitative criteria are different in nature: one is based on total remuneration in absolute terms (staff earning more than EUR 500 000 in the preceding financial year), and one is defined in relative terms (0.3% of staff with the highest remuneration).

These draft RTS has been submitted to the European Commission for adoption. They will enter into force after their publication in the Official Journal of the European Union. The EBA will review the development of identification practices and the exclusion of staff in the course of 2015.

Final draft technical standards EBA/RTS/2013/09 on own funds - European Bank Authority 13/12/2013

The key objectives of the draft RTS are:

  • to achieve greater harmonisation and increased conservatism in the way deductions of investments in financial sector entities as well as own capital instruments are applied;
  • to set criteria for broad market indices so as to avoid that the interest rate/dividend paid by institutions on floating rate capital instruments increases when the credit standing of the institution decreases;
  • to harmonise the calculation of minority interests to be included in regulatory capital.

Final draft technical standards EBA/ITS/2013/11 on metrics for monitoring additional liquidity - European Bank Authority 18/12/2013

These final draft implementing technical standards “ITS” set out five metrics to assess the liquidity risk profile of institutions.

  • contractual maturity ladder;
  • concentration of counterbalancing capacity by issuer/counterparty;
  • concentration of funding by counterparty and product type;
  • prices for various lengths of funding;
  • roll-over of funding.

The final standards have been sent to the European Commission for their adoption as EU Regulations. The proposed application date is 1 July 2015.

Discover the other topics of this newsletter in the attached PDF.

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