Newsletter 02/2014
EBA proposes a definition of 'fixed overheads' and capital charge for use of tied agents

This RTS fleshes out the definition of Fixed Overheads - a key determinant of capital for investment firms under Article 97(4) of the Capital Requirements Regulation (CRR). Because of a linkage between legislation focused on this Article, the definition will also be applicable to UCITS Management Companies and AIF Management Companies.

The definition mostly confirms existing understanding of fixed overheads being total non-extraordinary accounting expenses less certain deductions such as depreciation and discretionary staff bonuses.

However the RTS also proposes the inclusion of an add-on for firms which use tied agents.

The thinking behind this is that business carried out through a tied agent exposes an investment firm to risk in the same manner as business carried out by the investment firm itself. Furthermore, there should not be incentives for firms to reduce their capital requirements through the use of these agents. Therefore, a firm should maintain a capital component for tied agents.

As calculating fixed overheads for tied agents in the same manner as for investment firms themselves would pose many practical problems, the use of a fixed percentage of 35% of all fees per tied agent is proposed instead.

Click here to download the draft RTS.

27 February 2014
In This Issue
Central Bank News
Revised Corporate Governance Code for Credit Institutions and Insurance Undertakings
Financial Crime
Central Bank to Regulate Trust and Company Service Providers for AML
Princess Cristina of Spain in Court Over Alleged Money Laundering
Ted Cunningham Pleads Guilty to Money Laundering
Financial Services Ombudsman Can Name and Shame
Insurance News
12 Month Non-Solicitation Period for Insurance Brokers Confirmed
EBA proposes a definition of 'fixed overheads' and capital charge for use of tied agents
EBA publishes standard on classes of instruments eligible for variable remuneration use under CRD IV
Training March - June 2014
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