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

rue du Congrès 12-14 | 1000 Bruxelles t +32 2 220 54 81 | f +32 2 220 54 96 | www.cbfa.be Prudential supervision of credit institutions and investment firms Communication to securities firms CORRESPONDING TO OUR REFERENCE YOUR REFERENCE DATE cpb.ebd@cbfa.be 24 March 2005

Dear Sir, Dear Madam,

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

1. The regulation on own funds of securities firms provides for several standards limiting 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 control of the completeness of this table, it has been decided that Table 10.90 must now (i.e., for each periodic reporting from 31/03/2005 onwards) also mention:

• each counterparty for which the total gross risks, i.e., without taking into account guarantees and before application of weighting coefficients (column 80), reach or exceed 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 in the first instance also be mentioned. Risks to which a legally valid netting applies continue to be included for their net amount (in case 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, these mainly involve placements of 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 concentration risk 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 of Table 10.90 contained until now 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 always to indicate identically the code and name of the counterparty.

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 of Table 10.90 is adapted as follows* :

• Column 60 Applicable weighting to the counterparty in accordance with Articles 80 and 81 of the regulation.
• Column 80 Must be mentioned, per counterparty, the total gross risks, i.e., without taking into account guarantees 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, the launch of a “Global Check” will, if applicable, generate for the concerned counterparty the following error message ‘In table 1090 col.100 does not have to be reported (>=10 % of line 400 from tab 10.20)”. Please do not take this message into account.

2. Annual reporting The Commission reminds you that it wishes to receive a complete version of the annual accounts (as they have been 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 until now reminded annually on the occasion of the sending of the uniform letter regarding the determination of your contribution to the operating costs of the CBFA; we ask you to transmit these documents henceforth systematically, 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 the 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