Regulation on Significant Risk Concentrations of Supervised Entities in a Financial Conglomerate

Evidentiary Data Collection of Registers of Regulations Regulation on Significant Risk Concentrations of Supervised Entities in a Financial Conglomerate Official Gazette of the Republic of Slovenia, No. 32/07 ID: PRAV8100 EVA: 2007-1611-0046 SOP: 2007-01-1708 Adopted: 15 March 2007 Published: 9 April 2007 Effective from: 10 April 2007 Type of Act: Regulation Lead Authority: Ministry of Finance Adopting Authority: Ministry of Finance Forms The electronic edition of the Official Gazette is the official edition from 1 January 2006. Prior to this date, official editions were published in paper form. Text

Pursuant to the first paragraph of Article 28 of the Financial Conglomerates Act (Official Gazette of the Republic of Slovenia, No. 43/06), the Minister of Finance issues

REGULATION

on significant risk concentrations of supervised entities in a financial conglomerate

1. GENERAL PROVISIONS

Article 1

(content of the regulation)

This Regulation determines:

• the definition of possible types of risk concentrations or exposures at the level of the financial conglomerate,
• the definition of significant risk concentrations,
• the obligations of the coordinator and other supervisory authorities regarding the implementation of supervision of significant risk concentrations in the financial conglomerate,
• the method and deadlines for reporting on significant risk concentrations.

Article 2

(meaning of terms)

The terms used in this Regulation have the same meaning as in the Financial Conglomerates Act (Official Gazette of the Republic of Slovenia, No. 43/06; hereinafter: FCA).

Article 3

(definition of types of risk concentrations or exposures)

(1) Possible types of risk concentrations referred to in Article 5 of the FCA are identified primarily as exposures to:

• counterparties, either to an individual person or to a group of connected persons,
• individual industrial, technological, or service sectors,
• similar businesses and service providers, and
• a specific geographical area (e.g., higher exposure to natural disasters, economic crises, political instability).

(2) For the purposes of this Regulation, two or more persons who are connected to each other such that they represent a single risk (group of connected persons) are also considered as an individual person, and therefore this group is treated as an individual person.

2. SIGNIFICANT RISK CONCENTRATIONS AND OBLIGATIONS OF THE COORDINATOR

Article 4

(significant risk concentrations)

(1) Significant risk concentrations are considered to be the exposures of entities in the financial conglomerate (aggregated state) to the counterparty referred to in the first indent of the first paragraph of Article 3 of this Regulation, which reach or exceed 5% of capital at the level of the financial conglomerate, calculated in accordance with the Regulation on the Calculation of Supplementary Capital Requirements for Supervised Entities and on the Calculation of Adjusted Capital Requirements for Non-Supervised Entities in a Financial Conglomerate (Official Gazette of the Republic of Slovenia, No. 8/07; hereinafter: Regulation on the Calculation of Supplementary Capital Requirements).

(2) Notwithstanding the first paragraph of this Article, the coordinator may, in consultation with other participating supervisory authorities and the entity referred to in the first paragraph of Article 28 of the FCA, in accordance with the first paragraph of Article 29 of the FCA and Annex II to Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomeram, amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L No. 35, of 11 February 2003, p. 1), by decision determine significant risk concentrations, where it defines in particular:

a) the type of risk concentration referred to in the first paragraph of Article 3 of this Regulation;

b) the base from which the reporting threshold is determined (e.g., capital, sum of premiums, balance sheet total, technical reserves);

c) the threshold, i.e., the percentage of the base referred to in point b) of this paragraph or the amount of risk concentration or exposure to be reported.

Article 5

(obligations of the coordinator and other supervisory authorities)

(1) In defining significant risk concentrations referred to in Article 4 of this Regulation, the coordinator and other participating supervisory authorities take into account the specificity of the group regarding the services it provides, its structure, capital and risk management procedures referred to in Article 32 of the FCA, and internal control systems referred to in Article 33 of the FCA.

(2) Regarding appropriate capital and risk management procedures, the coordinator must, based on the second paragraph of Article 34 of the FCA, verify in particular whether the following are provided in the financial conglomerate:

• appropriate systems (procedures) for identifying risks,
• appropriate systems for measuring or assessing risks, possibly including correlation analyses,
• appropriate systems for monitoring risks, including risk reporting,
• appropriate systems for managing and controlling risks, including the setting of limits on risk concentrations,
• appropriate systems for testing extreme but plausible different scenarios and situations in crisis conditions.

(3) For the purpose of achieving the objectives of supplementary supervision of risk concentrations at the level of the financial conglomerate, supervisory authorities may, in accordance with the first paragraph of Article 29 of the FCA, require the submission of other evidence for the qualitative monitoring of risk concentrations for a specific financial conglomerate (e.g., description of business or contract, interest rates, fees - commissions, payment terms, guarantees, other special conditions or explanations).

(4) In accordance with the first paragraph of Article 29 of the FCA, supervisory authorities may set quantitative or other limits on risk concentrations at the level of the financial conglomerate.

3. REPORTING ON SIGNIFICANT RISK CONCENTRATIONS AND ENTRY INTO FORCE

Article 6

(obligation to provide, calculate, and report)

(1) Entities in the financial conglomerate must provide the entity referred to in the first paragraph of Article 28 of the FCA with all data and information that it needs to fulfill its obligations under this Regulation and the FCA.

(2) The entity obliged to report to the coordinator on significant risk concentrations at the level of the financial conglomerate pursuant to the first paragraph of Article 28 of the FCA must submit a report on significant risk concentrations to the coordinator and provide it with appropriate data as of the last day of each half-year.

(3) The report referred to in the preceding paragraph must be submitted in written form. Unless otherwise determined by decision under the second paragraph of Article 4 of this Regulation, the report must include in particular:

• significant risk concentrations at the level of the financial conglomerate that reach or exceed the threshold from the first or second paragraph of Article 4 of this Regulation, with a separate display of exposures to individual persons and to groups of connected persons or other types of risk concentrations referred to in the first paragraph of Article 3 of this Regulation;
• the value of the exposure referred to in the first indent of this paragraph in thousands of EUR;
• the share (in %) of the exposure referred to in the first indent of this paragraph in relation to the capital of the financial conglomerate, calculated in accordance with the Regulation on the Calculation of Supplementary Capital Requirements, or another base referred to in point b) of the second paragraph of Article 4 of this Regulation.

(4) The coordinator may, by decision for a specific financial conglomerate, more precisely define the form and content of the report referred to in the preceding paragraph.

(5) The deadline for submitting reports is no later than 30 April of the current year for the state as of 31 December of the previous year, and no later than 30 September for the state as of 30 June of the current year.

(6) Upon the request of the coordinator, a report must also be submitted for the state as of the date and within the deadline determined by the coordinator.

Article 7

(submission of the first report)

The entity referred to in the second paragraph of Article 6 of this Regulation must submit the first report based on Article 6 of this Regulation for the state as of 31 December 2007.

Article 8

(entry into force of the regulation)

This Regulation enters into force on the day following its publication in the Official Gazette of the Republic of Slovenia.

No. 400-01-1/2004/

Ljubljana, 16 March 2007

EVA 2007-1611-0046

dr. Andrej Bajuk l.r. Minister for Finance