Capital and Liquidity Adequacy

Ensuring Financial Resilience through Accurate Capital Management

Firms are mandated to hold sufficient regulatory capital, the exact amounts of which are determined by specific formulaic criteria tailored to the firm's nature. This encompasses various types of organizations, such as Systemically Important Financial Institutions (SIFIs), Non-SIFIs under the pertinent investment firm regulations, Collective Portfolio Management (CPM) entities, Electronic Money Institutions (EMIs), and Payment Service Providers.

Regulatory bodies prioritize financial robustness, scrutinizing both the quality and quantity of a firm's capital. It is imperative for firms to persistently monitor their capital to align with the operational breadth, intricacy, and any shifts in the business model. Adjustments could stem from changes in activities, organizational restructuring, mergers and acquisitions, asset disposals, or amendments in regulatory permissions, ensuring that capital reserves accurately mirror the business's scale and scope.

Precision in capital calculation is vital to ensure a firm is adequately capitalized at all times. A shortfall in financial resources could signal governance lapses, prompting regulatory bodies to require a firm to bolster its financial reserves well above the baseline requirements.

Reinforcing Financial Stability through Strategic Liquidity Management

In today's economic landscape, the necessity for companies to sustain adequate liquidity has become critical to demonstrate their financial stability.

An increasing number of companies are now obliged to meet minimum liquidity standards, with the requirement for each entity to perform a comprehensive internal analysis to identify the necessary level of liquidity to support ongoing operations and cushion risks during a potential wind-down phase. Importantly, it extends beyond just calculating liquidity needs; firms must also hold high-quality liquid assets ready to manage foreseeable requirements.

Regulatory agencies are intensifying their focus on how companies manage liquidity, especially in the wake of global challenges such as the pandemic. This heightened scrutiny includes the possibility of enforcing additional liquid asset requirements. In response to fluctuating economic conditions, regulators are emphasizing the importance of effective liquidity management and a company's capacity to fulfill its financial commitments timely. Companies might be expected to submit regular reports on their liquidity status or provide ad-hoc updates as requested by regulatory bodies.

Our Commitment:

• Assess the eligibility of capital (own funds), alongside the firm's requirements and foundational calculations, at any phase of the process—be it during initial authorization, variation of permission, or as part of regular operations.
• Offer guidance on capital planning strategies, including preparations for acquisitions or significant alterations to business strategy.
• Deliver remediation services to address any compliance breaches or issues effectively.
• Develop financial forecasts to support a firm's continuous evaluation or specific applications as needed.

We are dedicated to providing holistic support to ensure firms meet their capital requirements efficiently and effectively.

Our comprehensive support includes:

• Conducting thorough evaluations of a firm’s liquidity assessments, or managing the assessments on their behalf. This service is available at all stages, including initial authorization, variation of permissions, or as an ongoing necessity.
• Offering remediation assistance for any identified needs, ensuring that firms address and rectify issues effectively.
• Developing financial forecasts to aid in a firm’s continuous assessments or applications, whenever necessary.

By providing these services, we aim to enhance firms’ liquidity management strategies, ensuring they remain robust and responsive to both regulatory requirements and market dynamics.

Our offerings encompass:

• Analyzing the implications of prudential regulations on your business operations.
• Generating preliminary calculations for regulatory capital and liquidity assets.
• Delivering comprehensive breakdowns of our calculations, including applicable regulations and methodologies.
• Offering recommendations for corrective measures, should they be necessary.
• Aiding in the establishment or enhancement of prudential monitoring processes, to confirm ongoing adherence to capital and liquidity standards.
• Crafting or refining financial projections to incorporate your firm’s regulatory capital and liquidity obligations.

Through these services, we aim to bolster your firm's compliance with prudential requirements, ensuring financial stability and regulatory conformity.