# Commission Delegated Regulation (EU) 2017/390 of 11 November 2016 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services (Text with EEA relevance), Article 6: Capital requirements for business risk

Extent: E+W+S+N.I.

1. The capital requirements of a CSD for business risk shall be whichever of the following is higher:
(a) the estimate resulting from the application of paragraph 2, minus whichever of the following is the lowest:
(i) the net income after tax of the last audited financial year;
(ii) the expected net income after tax for the current financial year;
(iii) the expected net income after tax for the previous financial year where audited results are not yet available;
(b) 25 % of the CSD's annual gross operational expenses referred to in paragraph 3.
2. For the purposes of point (a) of paragraph 1, a CSD shall apply all of the following:
(a) estimate the capital necessary to cover losses resulting from business risk on reasonably foreseeable adverse scenarios relevant to its business model;
(b) document the assumptions and the methodologies used to estimate the expected losses referred to in point (a);
(c) review and update the scenarios referred to in point (a) at least annually.
3. For the calculation of a CSD's annual gross operational expenses, the following shall apply:
(a) the CSD's annual gross operational expenses shall consist of at least the following:
(i) total personnel expenses including wages, salaries, bonuses and social costs;
(ii) total general administrative expenses, and, in particular, marketing and representation expenses;
(iii) insurance expenses;
(iv) other employees' expenses and travelling;
(v) real estate expenses;
(vi) IT support expenses;
(vii) telecommunications expenses;
(viii) postage and data transfer expenses;
(ix) external consultancy expenses;
(x) tangible and intangible assets' depreciation and amortisation;
(xi) impairment and disposal of fixed assets;
(b) the CSD's annual gross operational expenses shall be determined in accordance with one of the following:
(i) International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 of the European Parliament and of the Council;
(ii) Council Directives 78/660/EEC, 83/349/EEC and 86/635/EEC;
(iii) generally accepted accounting principles of a third country determined to be equivalent to IFRS in accordance with Commission Regulation (EC) No 1569/2007 or accounting standards of a third country the use of which is permitted in accordance with Article 4 of that Regulation;
(c) the CSD may deduct tangible and intangible assets' depreciation and amortisation from annual gross operational expenses;
(d) the CSD shall use the most recent audited information from their annual financial statement;
(e) where the CSD has not completed business for one year from the date it starts its operations, it shall apply the gross operational expenses projected in its business plan.

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Source: https://www.legislation.gov.uk/eur/2017/390/article/6 (the official version)
Page: https://openlegislation.uk/eu-regulation-2017-390/article-6
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.