Entitledeuropean Communities (Capital Adequacy of Investment Firms) Regulations, 2006

• Jurisdiction: Ireland
• Citation: IR SI 660/2006
• Year: 2006

STATUTORY INSTRUMENTS
S.I. No. 660 of 2006
entitled
European Communities (Capital Adequacy of Investment Firms) Regulations 2006
Made by the Minister for Finance
EUROPEAN COMMUNITIES (CAPITAL ADEQUACY OF INVESTMENTS FIRMS) REGULATIONS 2006
Table of Contents
PART 1 PRELIMINARY AND GENERAL REGULATION 1. Citation and commencement. 2. Interpretation. 3. Application of certain provisions of CRD Regulations (CI) to investment firms. PART 2 INITIAL CAPITAL 4. Initial capital for investment firms. 5. Initial capital for local firms. 6. Coverage for investment firms referred to in paragraph (c) of definition of “investment firm”. 7. Coverage for investment firms referred to in Regulation 6 that are also registered under Directive 2002/92/EC. 8. Initial capital for investment firms that do not fall within Regulations 4 to 7. 9. Mergers. PART 3 TRADING BOOK 10. What constitutes trading book. PART 4 OWN FUNDS 11. Own funds of investment firms and credit institutions. 12. Exceptions to Regulation 11(9). 13. Illiquid assets. 14. Investment firms granted waiver under Regulation 20. 15. Provisions applicable to institutions which use Chapter 3 of Part 4 of the CRD Regulations (CI). PART 5 MINIMUM OWN FUNDS REQUIREMENTS FOR CREDIT RISK Chapter 1 Provisions Against Risks 16. Own funds required. 17. Risk-weighting of certain debt securities. 18. Exemptions for investment firms that do not hold client money. 19. Investment firms to hold own funds equivalent to one quarter of preceding year's fixed overheads. Chapter 2 Application of Requirements on Consolidated Basis 20. Bank may waive certain consolidation requirements. 21. Provisions supplementary to Regulation 20. 22. Exceptions to Regulation 3(6). 23. Further exceptions to Regulation 3(6). Chapter 3 Calculation of Consolidated Requirements 24. Offsetting of trading book and foreign exchange and commodities positions between institutions of group. 25. Application of Regulation 10 of CRD Regulations (CI). Chapter 4 Monitoring and Control of Large Exposures 26. Application of Part 6 of CRD Regulations (CI) to large exposures. 27. Exposures to individual clients which arise on trading book. 28. Overall exposures to individual clients or groups. 29. Circumstances in which limits set out in Regulations 57 to 60 of CRD Regulations (CI) may be exceeded. 30. Establishment of certain procedures. Chapter 5 Valuation of Positions for Reporting Purposes 31. Trading book positions to be subject to certain prudent valuation rules. Chapter 6 Risk Management and Capital Assessment 32. Risk management and capital assessment. Chapter 7 Reporting Requirements 33. Reporting requirements. PART 6 COMPETENT AUTHORITIES AND SUPERVISION Chapter 1 Competent Authority 34. Designation of Bank as competent authority. Chapter 2 Supervision 35. Application of Part 9 of CRD Regulations (CI). 36. Cooperation between competent authorities. PART 7 DISCLOSURES 37. Disclosures. PART 8 MISCELLANEOUS Chapter 1 Exposures to third-country investment firms 38. Exposures to third-country investment firms, etc. to be treated as exposures to institutions. Chapter 2 Transitional Provisions 39. Transitional provisions - general. 40. Transitional provisions - large exposures. 41. Transitional provisions - disapplication of Regulation 19(d) of CRD Regulations (CI). 42. Transitional provisions - specific risk model recognition prior to 1 January 2007. 43. Transitional provisions - exemptions for certain investment firms. Chapter 3 Final Provisions 44. Application of Regulations 1(3) and 82(8) to (14) of CRD Regulations (CI).
I, BRIAN COWEN, Minister for Finance, in exercise of the powers conferred on me by section 3 of the European Communities Act 1972 (No. 27 of 1972), as amended by the European Communities (Amendment) Act 1993 (No. 25 of 1993), and for the purpose of giving effect to Directive 2006/49/EC of 14 June 2006 of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions (recast)1 , hereby make the following Regulations:
PART 1 Preliminary and General
	Citation and commencement.	1. (1) These Regulations may be cited as the European Communities (Capital Adequacy of Investment Firms) Regulations 2006.
(2) These Regulations shall come into operation on 1 January 2007.
	Interpretation.	2. (1) In these Regulations, except where the context otherwise requires -
“Bank” means the Central Bank and Financial Services Authority of Ireland within the meaning of the Central Bank Act 1942 (No. 22 of 1942) as amended by the Central Bank and Financial Services Authority of Ireland Act 2003 (No. 12 of 2003);
“capital” means own funds;
“clearing member” means a member of the exchange or the clearing house which has a direct contractual relationship with the central counterparty (market guarantor);
“competent authority” -
(a) in relation to the State, means the Bank, and
(b) in relation to any other Member State, means the body or bodies charged by law in the Member State with the supervision of investment firms;
“convertible” means a security which, at the option of the holder, may be exchanged for another security;
“CRD Regulations (CI)” means the European Communities (Capital Adequacy of Credit Institutions) Regulations 2006 (S.I. [.] of 2006);
“credit institutions” means institutions as defined in Article 4(1) of Directive 2006/48/EC;
“delta” means the expected change in an option price as a proportion of a small change in the price of the instrument underlying the option;
“Directive 2006/48/EC” means Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast)2 ;
“EU parent investment firm” means a parent investment firm in a Member State which is not a subsidiary of another institution authorised in any Member State, or of a financial holding company set up in any Member State;
“financial instruments” means any contract that gives rise to both a financial asset of one party and a financial liability or equity instrument of another party;
“initial capital” means the items referred to in Regulation 3(1)(a) and (b) of the CRD Regulations (CI);
“institutions” means credit institutions and investment firms;
“investment firms” means institutions as defined in Article 4(1) of Directive 2004/39/EC of 21 April 2004 of the European Parliament and of the Council on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC3 , which are subject to the requirements imposed by that Directive, excluding:
(a) credit institutions,
(b) local firms,
(c) firms which are only authorised to provide the service of investment advice or receive and transmit orders from investors without holding money or securities belonging to their clients, or both, and which for that reason may not at any time place themselves in debit with their clients;
“local firm” means a firm dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets or which deals for the accounts of other members of those markets and which are guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such firms is assumed by clearing members of the same markets;
“original own funds” means the sum of the items referred to in subparagraphs (a) and (b) of Regulation 3(1) of the CRD Regulations (CI) less the sum of the items referred to in subparagraphs (a),(b) and (c) of Regulation 3(2) of the CRD Regulations (CI);
“over-the-counter (OTC) derivative instruments” means the items falling within the list in Annex IV to Directive 2006/48/EC other than those items to which an exposure value of zero is attributed under point 2 of Annex III to that Directive;
“own funds” means own funds as defined in Directive 2006/48/EC;
“parent investment firm in a Member State” means an investment firm which has an institution or financial institution as a subsidiary or which holds a participation in such entities, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company set up in the same Member State;
“recast Directive (IF)” means Directive 2006/49/EC of 14 June 2006 of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions (recast);
“recognized third-country investment firms” means firms meeting the following conditions:
(a) firms which, if they were established within the Community, would be covered by the definition of “investment firm”,
(b) firms which are authorised in a third country, and
(c) firms which are subject to and comply with prudential rules considered by the Bank as at least as stringent as those laid down in the recast Directive (IF);
“regulated market” means a market as defined in Article 4(14) of Directive 2004/39/EC;
“repurchase agreement” and “reverse repurchase agreement” mean any agreement in which an institution or its counterparty transfers securities or commodities or guaranteed rights...