Chapter 3 of the VFA rulebook (“Rulebook”) and the VFA rulebook glossary (“Glossary”) have been updated on the 21st May 2019.

The Rulebook has been amended in relation to sub-section 2, section 3, and title 3, relating to the ongoing obligations for VFA service license holders to retain own funds.

The amendment was included to clarify that for purposes of determining the own funds requirement applicable to the VFA service license holders the following shall not apply:

  1. the threshold exemptions from deductions from common equity tier 1 items, as referred to in Article 48 of Regulation (EU) No 575/2013;
  2. the deduction of holdings of common equity tier 1, as referred to in Articles 46, 60 and 70 of Regulation (EU) No 575/2013;
  3. the trigger event referred to in Article 54(1)(a) of Regulation (EU) No 575/2013, which trigger event occurs when the common equity tier 1 capital ratio of an institution falls below a particular threshold.  The trigger event shall instead be specified by the VFA service licence holder in the terms of the additional tier 1 instrument as specified within the applicable provisions to Chapter 3; and
  4. the aggregate amount of additional tier 1 which is required to be written down or converted upon the occurrence of a trigger event as referred to in Article 54(4)(a) of Regulation (EU) No 575/2013. The amount to be written down or converted shall be the full principal amount of the additional tier 1 instrument as specified within the applicable provisions to Chapter 3.

An additional amendment to Chapter 3 also relates to an insertion within the provisions applicable to own fund requirements which states that a VFA service license holder shall, where determining the own funds requirements in accordance with the Rulebook, apply the applicable provisions set out in Regulation (EU) No 575/2013.

In conjunction with the amendments made to the Rulebook, the Glossary has also been updated on 21 May 2019 to include the following definitions, which complement the amendments made to the Rulebook:

  1. Common Equity Tier 1 or CET 1 Capital: shall have the same meaning as assigned to it within Chapter 2 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service licence holder;
  2. Additional Tier 1 Capital: shall have the same meaning as assigned to it within Chapter 3 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook, the terms ‘institution’ or ‘investment firm’ as defined under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service license holder;
  3. Tier 2 Capital: shall have the same meaning as assigned to it within Chapter 4 of Title 1 of Part Two of Regulation (EU) No 575/2013. Provided that solely for the purposes of the VFA rulebook, the terms ‘institution’ or ‘investment firm’ as defined under Article 4 of Regulation (EU) No 575/2013 shall also refer to a VFA service licence holder; and
  4. Regulation (EU) No 575/2013: refers to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.