Regulatory Alerts2014-10-09
Calculation of Own Funds Requirements Based on Fixed Costs
The Norwegian Financial Supervisory Authority issued Circular 10/2014 to establish the standardized methodology for financial institutions, including securities firms and AIF managers, to calculate their own funds requirements based on fixed costs. The circular mandates a specific formula involving revenue, pre-tax profit, and agent fees, while allowing for the deduction of variable costs and defining thresholds for significant operational changes that trigger capital requirement adjustments. It replaces the previous 2002 circular and requires firms to notify the authority of significant changes with supporting documentation such as board-approved budgets and auditor certifications.
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