Capital Adequacy

How cash and shares in transit should be treated when completing the CoRep templates?

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a) Cash in transit - Please refer to paragraph 82, Annex VI, Part C: ‘Cash items in the process of collection shall be assigned a 20% risk weight’ and shall be classified under Other Items. 
b) Shares in transit - Here the treatment is based on the accounting treatment followed by the CIF which in all cases must be consistent. There are two alternatives: 
(i) If shares in transit are booked at the trade date and are recorded as an asset then the calculation of the credit risk will depend on which asset class the shares are classified i.e.: 
• Unlisted shares – High Risk items and 150% Risk Weight, 
• Listed shares – Other Items and 100% RW and 
• Shares issued by institutions - RW 100% and reported in the Institutions CoRep template either listed or unlisted. 
(ii) If shares in transit are booked as receivable then again depending on the counterparty that this receivable relates to, they will be classified in one of the asset classes appropriate and receive the relevant risk weight. 

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Annex VI, Part C of Directive DI144-2007-05 for the capital requirements of Investment Firms

Exposures in the form of deposits in Cypriot banks up to €100,000 may be exempted from the limitations of paragraph 6(1) since they are protected by the Deposit Protection Scheme of the Central Bank of Cyprus?

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No because this plan refers to the establishment and operation of the Deposit Protection Fund which cannot be considered a government guarantee.

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Paragraph 11(c), Part IV of Directive DI144-2007-06 for the large exposures of Investment Firms.

The net finance income/(cost) and foreign exchange gain/(loss) must be included in the calculation of the indicator as other income?

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Yes, since assets & liabilities management is an integral part of running an Investment Firm.

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Point 5, Table 1, Paragraph 6, Part 1, Annex Χ, Part C of Directive DI144-2007-05 for the capital requirements of Investment Firms.

If the CIF's auditors review interim profits in accordance with the International Standard on Review Engagements 2410 'Review of interim financial information performed by the independent auditor of the entity', can these profits be included in CIF's unconsolidated own funds?

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No they cannot. Interim profits can be included provided that these profits have been audited by certified auditors and it is proved to the satisfaction of the Commission that the amount thereof has been evaluated in accordance with the principles set out in the International Financial Reporting Standards and is net of any foreseeable charge or dividend. More specifically, the certified auditors' report must state whether the interim financial statements give a true and fair view of the financial position of the CIF.

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Paragraph 2(1)(b), Chapter 1, Part B of Directive DI144-2007-05 for the capital requirements of Investment Firms

The salaries of employees providing investment services should be included in the expenses for investment services (item 2 of Table 1 of paragraph 6) or in the operating expenses (paragraph 7)?

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The salaries of employees providing investment services should be included in the operating expenses (paragraph 7).

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Paragraphs 6 and 7, Part 1, Annex Χ, Part C of Directive DI144-2007-05 for the capital requirements of Investment Firms.