Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services (Text with EEA relevance) (c. 390)

TITLE I U.K. CAPITAL REQUIREMENTS FOR ALL CSDS REFERRED TO IN ARTICLE 47 OF REGULATION (EU) No 909/2014

Article 6 U.K. Capital requirements for business risk

1. The capital requirements of a CSD for business risk shall be whichever of the following is higher:

(a) the estimate resulting from the application of paragraph 2, minus whichever of the following is the lowest:

(i)

the net income after tax of the last audited financial year;

(ii)

the expected net income after tax for the current financial year;

(iii)

[X1 the expected net income after tax for the previous financial year where audited results are not yet available;]

(b) 25 % of the CSD's annual gross operational expenses referred to in paragraph 3.

2. For the purposes of point (a) of paragraph 1, a CSD shall apply all of the following:

(a) estimate the capital necessary to cover losses resulting from business risk on reasonably foreseeable adverse scenarios relevant to its business model;

(b) document the assumptions and the methodologies used to estimate the expected losses referred to in point (a);

(c) review and update the scenarios referred to in point (a) at least annually.

3. For the calculation of a CSD's annual gross operational expenses, the following shall apply:

(a) the CSD's annual gross operational expenses shall consist of at least the following:

(i)

total personnel expenses including wages, salaries, bonuses and social costs;

(ii)

total general administrative expenses, and, in particular, marketing and representation expenses;

(iii)

insurance expenses;

(iv)

other employees' expenses and travelling;

(v)

real estate expenses;

(vi)

IT support expenses;

(vii)

telecommunications expenses;

(viii)

postage and data transfer expenses;

(ix)

external consultancy expenses;

(x)

tangible and intangible assets' depreciation and amortisation;

(xi)

impairment and disposal of fixed assets;

(b) the CSD's annual gross operational expenses shall be determined in accordance with one of the following:

(i)

International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 of the European Parliament and of the Council(1);

(ii)

Council Directives 78/660/EEC(2), 83/349/EEC(3) and 86/635/EEC;

(iii)

generally accepted accounting principles of a third country determined to be equivalent to IFRS in accordance with Commission Regulation (EC) No 1569/2007(4) or accounting standards of a third country the use of which is permitted in accordance with Article 4 of that Regulation;

(c) the CSD may deduct tangible and intangible assets' depreciation and amortisation from annual gross operational expenses;

(d) the CSD shall use the most recent audited information from their annual financial statement;

(e) where the CSD has not completed business for one year from the date it starts its operations, it shall apply the gross operational expenses projected in its business plan.

Editorial Information

X1 Substituted by Corrigendum to Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services (Official Journal of the European Union L 65 of 10 March 2017).

(1)

Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (OJ L 243, 11.9.2002, p. 1).

(2)

Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies (OJ L 222, 14.8.1978, p. 11).

(3)

Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54(3)(g) of the Treaty on consolidated accounts (OJ L 193, 18.7.1983, p. 1).

(4)

Commission Regulation (EC) No 1569/2007 of 21 December 2007 establishing a mechanism for the determination of equivalence of accounting standards applied by third country issuers of securities pursuant to Directives 2003/71/EC and 2004/109/EC of the European Parliament and of the Council (OJ L 340, 22.12.2007, p. 66).