The MFSA has published amendments to VFA Service Providers Rulebook specifically with regards to the ongoing obligations for VFA Service Providers to retain own funds.
Amendments and Clarifications
The amendments to VFA Service Providers Rulebook aim at clarifying the situation of own funds requirements for VFA Services Providers. When determining own funds requirement of VFA Service Providers, the following shall not be applicable:
- the threshold exemptions found in Article 48 of Regulation (EU) No 575/2013 referring to deductions from common equity tier 1 items;
- the deduction of holdings of common equity tier 1, as referred to in Articles 46, 60 and 70 of Regulation (EU) No 575/2013;
- the trigger event referred to in Article 54(1)(a) of Regulation (EU) No 575/2013, which occurs when the common equity tier 1 capital ratio of an institution falls below a particular threshold. The trigger event shall instead be specified by the VFA Service Provider in the terms of the additional tier 1 instrument as specified within the applicable provisions to Chapter 3; and
- the aggregate amount of additional tier 1 which is required to be written down or converted upon the occurrence of a trigger event as referred to in Article 54(4)(a) of Regulation (EU) No 575/2013. The amount to be written down or converted shall be the full principal amount of the additional tier 1 instrument as specified within the applicable provisions to Chapter 3.
Additionally, when determining the own funds requirement VFA Service Providers shall apply the provisions of Chapter 6 of Title 1 in Part Two of Regulation (EU) No 575/2013.
The Rulebook Glossary
Further to the amendments to VFA Service Providers Rulebook, the Rulebook Glossary has also been updated on 21 May 2019 to include the following definitions:
- Common Equity Tier 1 or CET 1 Capital: shall have the same meaning as assigned to it within Chapter 2 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service licence holder;
- Additional Tier 1 Capital: shall have the same meaning as assigned to it within Chapter 3 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook, the terms ‘institution’ or ‘investment firm’ as defined under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service license holder;
- Tier 2 Capital: shall have the same meaning as assigned to it within Chapter 4 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook, the terms ‘institution’ or ‘investment firm’ as defined under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service licence holder; and
- Regulation (EU) No 575/2013: refers to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.
The MFSA has published amendments to VFA Service Providers Rulebook specifically with regards to the ongoing obligations for VFA Service Providers to retain own funds.
Amendments and Clarifications
The amendments to VFA Service Providers Rulebook aim at clarifying the situation of own funds requirements for VFA Services Providers. When determining own funds requirement of VFA Service Providers, the following shall not be applicable:
- the threshold exemptions found in Article 48 of Regulation (EU) No 575/2013 referring to deductions from common equity tier 1 items;
- the deduction of holdings of common equity tier 1, as referred to in Articles 46, 60 and 70 of Regulation (EU) No 575/2013;
- the trigger event referred to in Article 54(1)(a) of Regulation (EU) No 575/2013, which occurs when the common equity tier 1 capital ratio of an institution falls below a particular threshold. The trigger event shall instead be specified by the VFA Service Provider in the terms of the additional tier 1 instrument as specified within the applicable provisions to Chapter 3; and
- the aggregate amount of additional tier 1 which is required to be written down or converted upon the occurrence of a trigger event as referred to in Article 54(4)(a) of Regulation (EU) No 575/2013. The amount to be written down or converted shall be the full principal amount of the additional tier 1 instrument as specified within the applicable provisions to Chapter 3.
Additionally, when determining the own funds requirement VFA Service Providers shall apply the provisions of Chapter 6 of Title 1 in Part Two of Regulation (EU) No 575/2013.
The Rulebook Glossary
Further to the amendments to VFA Service Providers Rulebook, the Rulebook Glossary has also been updated on 21 May 2019 to include the following definitions:
- Common Equity Tier 1 or CET 1 Capital: shall have the same meaning as assigned to it within Chapter 2 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service licence holder;
- Additional Tier 1 Capital: shall have the same meaning as assigned to it within Chapter 3 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook, the terms ‘institution’ or ‘investment firm’ as defined under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service license holder;
- Tier 2 Capital: shall have the same meaning as assigned to it within Chapter 4 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook, the terms ‘institution’ or ‘investment firm’ as defined under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service licence holder; and
- Regulation (EU) No 575/2013: refers to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.