Financial Services (Investment and Fiduciary Services)
FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT FIRMS) REGULATIONS 2007
in the third indent in the second column of the second row, “final” is omitted;
in the first column of the third row, “step 3 or 4” is substituted by step 4
9. Investment firms which mark to market and manage the interest rate risk on the derivative instruments covered in paragraphs 4 to 7 on a discounted cash flow basis may use sensitivity models to calculate the positions referred to in those paragraphs and may use them for any bond which is amortised over its residual life rather than via one final repayment of principal. Both the model and its use by the investment firm shall be approved by the Authority. These models should generate positions which have the same sensitivity to interest rate changes as the underlying cash flows. This sensitivity shall be assessed with reference to independent movements in sample rates across the yield curve, with at least one sensitivity paragraph in each of the maturity bands set out in Table 2 of paragraph 20. The positions shall be included in the calculation of capital requirements according to the provisions laid down in paragraphs 17 to 32.
10. Investment firms which do not use models under paragraph 9 may, with the approval of the Authority, treat as fully offsetting any positions in derivative instruments covered in paragraphs 4 to 7 which meet the following conditions at least–
the positions are of the same value and denominated in the same currency;
the reference rate (for floating rate positions) or coupon (for fixed rate positions) is closely matched; and
the next interest-fixing date or, for fixed coupon positions, residual maturity corresponds with the following limits:
less than one month hence: same day;
between one month and one year hence: within seven days; and
over one year hence: within 30 days.
11. The securities
transferor of securities or guaranteed in a repurchase agreement and the
relating to title to of securities in a
securities lending shall include these securities in the calculation of requirement under this Schedule provided that such securities criteria laid down in regulation 7.
its capital meet the
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Repealed Subsidiary 2007/002