S.I. No. 660/2006 - European Communities (Capital Adequacy of Investment Firms) Regulations 2006

• (a) the investment firm provides investment services or investment activities related to the financial instruments listed in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39 EC,

• (b) the investment firm does not provide such investment services or undertake such investment activities for, or on behalf of, retail clients,

• (c) breaches of the limits referred to in paragraph (1) arise in connection with exposures resulting from contracts that are financial instruments listed in subparagraph (a) and relate to commodities or underlyings within the meaning of point 10 of Section C of Annex I to Directive 2004/39/EC (MiFID) and are calculated in accordance with Annexes III and IV to Directive 2006/48/EC, or from contracts concerning the delivery of commodities or emission allowances,

• (d) the investment firm -

• (i) has a documented strategy for managing and, in particular, for controlling and limiting risks arising from the concentration of exposures,

• (ii) informs the Bank of this strategy and all material changes to this strategy without delay,

• (iii) makes appropriate arrangements to ensure a continuous monitoring of the creditworthiness of borrowers, in accordance with their impact on concentration risk, and

• (iv) is enabled by these arrangements to react adequately and sufficiently promptly to any deterioration in that creditworthiness.

• (5) Where an investment firm exceeds the internal limits set in accordance with the strategy referred to in paragraph (4)(d), it shall notify the Bank without delay of the size and nature of the excess and the counterparty.

Transitional provisions - disapplication of Regulation 19(d) of CRD Regulations (CI).

41.

• (2) Instead, the capital requirement in relation to those investment firms shall be at least the lower of:

• (a) the capital requirements arising from Regulation 19(d) of the CRD Regulations (CI), and

• (b) 12/88 of the higher of the following:

• (i) the sum of the capital requirements contained in Regulation 19(a), (b) and (c) of the CRD Regulations (CI), and

• (ii) the amount set out in Regulation 19, notwithstanding Regulation 18(5).

• (3) Where paragraph (2)(b) applies, an incremental increase shall be applied on at least an annual basis.

• (4) Applying this Regulation shall not result in a decrease in the overall level of capital requirements for an investment firm, in comparison to the requirements at 31 December 2006, unless such a reduction is prudentially justified by a reduction in the size of the investment firm's business.

Transitional provisions - specific risk model recognition prior to 1 January 2007.

42.

Transitional provisions - exemptions for certain investment firms.

43.

• (2) The exemption under paragraph (1) is available until 31 December 2010 or the date of coming into force of any modifications pursuant to points 2 and 3 of Article 48 of the recast Directive (IF), whichever is the earlier.

Chapter 3 Final Provisions

Application of Regulations 1(3) and 82(8) to (14) of CRD Regulations (CI).

44.

• (2) Regulation 82(8) to (14) of the CRD Regulations (CI) shall apply mutatis mutandis for the purposes of these Regulations subject to the following provisions which shall apply where the discretion referred to in Regulation 82(8) of the CRD Regulations (CI) is exercised:

• (a) references in point 7 of Annex II to the recast Directive (IF) to Directive 2006/48/EC shall be read as references to Directive 2000/12/EC as that Directive stood prior to 1 January 2007, and

• (b) point 4 of Annex II to the recast Directive (IF) shall apply as it stood prior to 1 January 2007.

Footnotes