Circular D4/EB/1001: Adaptation of the Regulation on Own Funds

COMMISSION BANCAIRE ET FINANCIERE Prudential Supervision of Investment Firms CBF Avenue Louise 99, B-1050 Brussels telephone +32(2)535.22.11 - fax +32(2)535.23.08 Brussels, July 3, 2001 D4/EB/1001 CIRCULAR LETTER TO BROKERAGE FIRMS Regulation on Own Funds of Brokerage Firms

Madam, Sir,

We enclose herewith the Order of the Banking and Financial Commission of May 8, 2001, amending the Orders of December 5, 1995 concerning the regulations on own funds of credit institutions and brokerage firms. This amending order was approved by the Minister of Finance and the Minister of the Economy by ministerial order of June 12, 2001, published in the Belgian Official Gazette on June 15, 2001.

This amending order supplements the Order of the Banking and Financial Commission of July 4, 2000, which transposed, inter alia, into Belgian regulations Directive 98/31/EC of June 22, 1998, amending Directive 93/6/EEC on the adequacy of own funds of investment firms and credit institutions. It adapts Articles 76.3 (insertion of a reference to scenario analysis for the treatment of options on base products), 79 (extension of its scope to options on base products), and 82 (inclusion of risk on base products among market risks).

An updated coordinated version of the regulations on own funds of credit institutions and brokerage firms (unofficial coordination) can be consulted on the website of the Banking and Financial Commission (www.cbf.be) and will also be published as a brochure.

A copy of this letter is sent to your commissioner(s).

Please accept, Madam, Sir, the expression of our distinguished sentiments.

The President, E. WYMEERSCH.

ORDER AMENDING THE ORDERS OF THE BANKING AND FINANCIAL COMMISSION OF DECEMBER 5, 1995 CONCERNING THE REGULATIONS ON OWN FUNDS OF CREDIT INSTITUTIONS AND BROKERAGE FIRMS

THE BANKING AND FINANCIAL COMMISSION,

Having regard to the Law of March 22, 1993, on the status and supervision of credit institutions, in particular Articles 43 and 80;

Having regard to the Law of April 6, 1995, on secondary markets, the status of investment firms and their supervision, on placement intermediaries and advisors, in particular Articles 90, 91 and 95;

Having regard to Directive 98/31/EC of June 22, 1998, amending Directive 93/6/EEC on the adequacy of own funds of investment firms and credit institutions;

Having regard to the opinion of the National Bank of Belgium;

Having regard to the consultation of Euronext Brussels, as well as the consultation of credit institutions and brokerage firms, represented by their professional associations;

Considering that the Orders of the Banking and Financial Commission of December 5, 1995, concerning the regulation on own funds of credit institutions and concerning the regulation on own funds of brokerage firms, must undergo certain technical adaptations of a very limited nature, affecting exclusively Articles 76.3, 79, and 82, in order to extend their scope to base products and thereby bring them into compliance with the aforementioned European directive,

ORDERS:

Article 1 In the Orders of the Banking and Financial Commission of December 5, 1995, as amended by the Order of the Banking and Financial Commission of July 4, 2000, concerning the regulation on own funds of credit institutions and concerning the regulation on own funds of brokerage firms (hereinafter 'the regulation'), the modifications set out in Article 2 below are made.

Article 2 § 1. In Article 76.3 of the regulation, the text of § 3, para. 6 is replaced by the following text:

"When the institution does not convert its options into underlying base products on the basis of delta and does not use the scenario analysis method provided for in Article 79, the net position for each option is subject to a requirement equal to that of the underlying base product of the option. This requirement is limited, with regard to a purchased option, to the market value of that option."

§ 2. In Article 79 of the regulation, 1° the text of § 1 is replaced by the following text:

"With the prior agreement of the Banking and Financial Commission, an institution may use, for its options portfolio and the hedging positions related thereto, the scenario analysis method described in this article, by derogation from the provisions provided for in Chapters V, VI, VIII, and VIIIbis.";

2° the text of § 3, para. 4, 4° is replaced by the following text:

"base products, for each base product separately.";

3° in § 4, para. 2, 4th dash, the words "other precious metals" are replaced by "base products".

§ 3. In Article 82 of the regulation, § 1, 3°, "VIII" is replaced by "VIIIbis".

Article 3 This Order shall enter into force on May 31, 2001.

Brussels, May 8, 2001.

The President, E. Wymeersch.