Based on Section 3:18a(1) of the Wft DNB periodically evaluates (in accordance with the technical criteria of Article 98 of the CRD) the business operations of investment firms within the meaning of the CRR having their registered office in the Netherlands that engage in investment services or investment activities in the Netherlands, as well as the liquidity and solvency of these firms. For this purpose, proprietary traders are obliged to submit to DNB annually on the last business day of the third quarter at the latest an Internal Capital Adequacy Assessment Process (ICAAP) document. For 2018, this means that proprietary trading firms must have submitted their ICAAP document to DNB by 28 September 2018 at the latest.
For guidance in compiling the ICAAP document, DNB refers to the ICAAP Policy Rule for investment firms and investment institutions under the Financial Supervision Act (Government Gazette 2015, 21650; Beleidsregel ICAAP beleggingsondernemingen en beleggingsinstellingen Wft 2015, Stcrt. 2015, 21650), the supplementary guidance on ICAAP on the web portal Open Book on Supervision, as well as the European Banking Authority's Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). DNB takes this guidance into account while assessing ICAAP documents.
Furthermore, DNB wants to point out that if the investment firm is subject to consolidated supervision by DNB, both the licensed entity and its financial holding company may have capital add-on requirements imposed on the basis of the ICAAP/SREP. If this applies to your firm, DNB will ask you to submit the ICAAP document on risk premiums for Pillar 1 and Pillar 2 both on a solo and on a consolidated basis.
When evaluating the ICAAP documents for 2018, DNB will devote extra attention to the following items:
- Compliance risk: how does the institution prepare for new legislation and how vulnerable is it to legislative changes? Which new legislation is expected to play a role in your opinion?
- Market risk: how vulnerable is the institution to prolonged low volatility?
- Cyber risk: how vulnerable is the institution to cybercrime?
The focal points for the assessment of the 2019 ICAAP documents have not yet been decided.
After completing the SREP, DNB will set a capital add-on requirement for the investment firm (and also on a consolidated basis, where applicable) in a so-called SREP decision. This capital requirement under Pillar 2 is decided for each investment firm individually and applies until a new SREP decision is taken.