Reporting by securities firms: Table 10.90 (large exposures) and annual reporting

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Dear Sir, Dear Madam,

Subject: Reporting by securities firms: Table 10.90 (large exposures) and annual reporting

1. The regulation on the own funds of securities firms provides for several limitation standards regarding risk concentration (Articles 83 and 84 of the regulation). Compliance with these standards is verified notably via Table 10.90 (Large exposures), which in principle includes all large exposures reaching, after weighting, 10% or more of own funds.

In order to simplify the verification of the completeness of this table, it has been decided that Table 10.90 must henceforth (i.e., for each periodic reporting from 31/03/2005 onwards) also mention:

• each counterparty for which the total gross risks, namely without taking into account collateral and before application of weighting coefficients (column 80), reaches or exceeds the threshold of 10% of the securities firm's own funds. This means notably that guaranteed risks referred to in Article 80, § 5, 8° must also be mentioned initially.
  Risks to which a legally valid netting applies continue to be included for their net amount (in the event that they reach the threshold);

• the risks referred to in Article 80, § 5, 5° of the regulation on own funds, i.e., risks (not subject to the concentration limit) on subsidiaries, the parent company, or its other subsidiaries when these are subject to adequate consolidated supervision.
  Concretely, this mainly concerns placements by the securities firm with the credit institution of the group to which the securities firm belongs.

These risks, to be included henceforth in Table 10.90, will not, as in the past, be subject to the risk concentration limitation standards since these can, if applicable, be mentioned with a weighting coefficient of 0% in column 60 (Weighting) (in accordance with Art. 80, § 5, 5°).

The commentary for Table 10.90 previously contained for column 60 a reference to the weighting in accordance with Article 16 of the regulation; this reference must be replaced by a reference to Articles 80 and 81 of the regulation. Given that several weightings may apply to the same counterparty, depending on the nature of the different risk elements (for example, claims on a bank guaranteed by the State at 0%, an ordinary claim on the same bank at 20%, and shares of this bank at 100%), it is necessary to include, in accordance with the instructions, the risks related to this counterparty on as many lines as there are different weightings, ensuring that the code and name of the counterparty are always indicated identically.

To determine the weighted volume of risks (cf. Art. 16 of the regulation), the usual weighting coefficients remain applicable.

In light of the above, the commentary for Table 10.90 is adapted as follows*:

• Column 60
  Weighting applicable to the counterparty in accordance with Articles 80 and 81 of the regulation.
• Column 80
  Must be mentioned, per counterparty, the total gross risks, namely without taking into account collateral and before application of weighting coefficients, when this total of risks reaches or exceeds the threshold of 10% of the securities firm's own funds (code 010).

Pending an adaptation of the reporting control program, launching a “Global Check” will, if applicable, generate the following error message for the concerned counterparty: ‘In table 1090 col.100 does not have to be reported (>=10 % of line 400 from tab 10.20)”. Please disregard this message.

2. Annual reporting

The Commission reminds you that it wishes to receive a complete version of the annual accounts (as filed with the Balance Sheet Central) with mention of the filing date, the management report (prepared by the directors or managers), and the auditor’s report. The sending of these documents was previously reminded to you annually upon the sending of the standard letter regarding the determination of your contribution to the CBFA's operating costs; we ask you to transmit these documents systematically henceforth, no later than 30 days after the general meeting.

We thank you for your cooperation.

A copy of this is sent to your auditor, another copy will be sent by email to the person responsible for accounting and financial reporting at the CBFA.

Rudi Bonte,
Member of the Management Committee.

(*) An updated version of this commentary can be found as Annex 2 (modified) in Circular D4/EB/2001/3 of 10/12/2001 to securities firms: see http://www.cbfa.be/fr/bo/circ/pdf/d4_eb_2001_3_annex2.pdf