Decree No. 139 / 2005 Coll.
Ordinance on the use of techniques and tools for the efficient management of assets of the standard fund
Valid
Order
Effective from 01.07.2005
Text versions:
01.07.2005
15.04.2005
139
DECLARATION
of 30 March 2005
on the use of techniques and tools for the efficient management of the assets of the standard fund
According to Section 139 (e) and (g) of Act No. 189 / 2004 Coll., on Collective Investment (hereinafter referred to as "the Act"), the Securities Commission provides:
Subject matter
This decree regulates
(a) the types, limits and manner of use of techniques and instruments which the standard fund may use for the efficient management of assets (hereinafter referred to as "techniques and tools");
(b) a procedure for assessing the degree of risk associated with the investment;
(c) the manner in which the information obligation on types of financial derivatives not admitted to trading on the markets referred to in Article 26 (1) (a) of the Act is fulfilled, which has a standard fund of assets, the risks associated with them and the quantitative restrictions and methods chosen to assess the risks associated with operations using those financial derivatives; and
(d) the method of applying the limits laid down for the distribution and limitation of the risk associated with the investment of a special fund of funds in securities issued by a collective investment fund to a collective investment fund whose assets are divided into several sub-funds.
Definition of terms
For the purposes of this decree:
(a) repos or reverse repos;
(b) a repo of the transfer of securities for cash with a current commitment to take over those securities at a specified date for an amount equal to the original funds and interest; repo is a classic repo, sale with a simultaneous buy-back agreement, provision of a loan of securities secured by cash,
(c) reverse repo of the acquisition of securities for cash with a current commitment to transfer those securities at a specified date for an amount equal to the transferred funds and interest; reverse repo is classic reverse repo, purchase with simultaneous repurchase agreement, acceptance of a loan of securities secured by cash,
(d) zone And the Member States of the European Economic Area, the other States that are members of the Organisation for Economic Cooperation and Development, and the States that have concluded a credit agreement with the International Monetary Fund under General Arrangements to Borrow,
(e) zone B by States not included in zone A;
(f) a bank in the State of the zone A person authorised to receive deposits from the public and to grant loans on the basis of an authorisation granted by an authority of a State situated in zone A; a branch of such a person operating in zone B State shall be treated as a bank in zone A State,
(g) a bank in the State of the zone B a person authorised to receive deposits from the public and to grant loans on the basis of an authorisation granted by an authority of a State situated in zone B; a branch of such a person operating in zone A State shall be treated as a bank in zone B State,
(h) the central government and its authorities and persons, established or hired by the government, serving public purposes whose liabilities are fully guaranteed by an unconditional, explicit and unlimited guarantee of the State;
(i) delta equivalent to the product of the fair value of the underlying instrument and delta option;
(j) the delta option the ratio of the change in the fair value of the option and the change in the fair value of the underlying instrument concerned; it is the first derivative of the fair value of the option according to the fair value of the underlying; and
(k) a highly liquid asset of an asset whose conversion into cash does not last more than 5 working days and the price achieved corresponds to the fair value of the asset.
Types of techniques and tools
The techniques and instruments are repurchase transactions and financial derivatives.
General methods of using techniques and tools
Techniques and tools may be used if:
(a) the purpose of their use is to reduce the risk from the investment of the Fund, to reduce costs or to obtain additional revenue for the standard fund, provided that the risk to be taken is proven to be low;
(b) are economically proportionate to the purpose referred to in (a) and the standard fund is able to justify their choice; and
(c) the liabilities of the standard fund resulting from their application are always fully covered by the assets of the standard fund.
Limits for the use of financial derivatives
(1) A standard fund may use a financial derivative if:
(a) its underlying instrument is only an investment security with the exception of a provisional sheet, an instrument for the money market, deposit, financial derivative, security issued by a standard fund, financial index, interest rate, foreign exchange rate and foreign currency;
(b) the negotiation of a financial derivative can be properly documented;
(c) comply with the rules laid down in paragraphs 2 and 3;
(d) the underlying financial derivative instrument is consistent with the investment policy and the risk profile of the fund; and
(e) the conditions laid down in paragraph 4 are met if the derivative is covered by Paragraph 26 (1) (g) of the Act ("over-the-counter derivative").
(2) The standard fund reduces risks from the use of financial derivatives by:
(a) where the financial derivative is to be settled by the standard fund by the delivery of the underlying, it shall hold the underlying at the time of the negotiation and throughout the contract in its portfolio; for monetary hedge derivatives having the characteristics of a hedging derivative under the special legal provision governing account1), the holding of a highly liquid asset is sufficient;
(b) where a financial derivative is to be settled by the standard fund by the delivery of funds, it shall, at the time of the negotiation and throughout the duration of the contract, hold funds or a highly liquid asset at a value corresponding to the settlement price of the financial derivative in question;
(c) it shall not use the underlying instrument, funds or highly liquid asset to cover one financial derivative except in the cases referred to in paragraph 3 to cover another financial derivative; at the same time does not use the securities and funds that are the subject of the transactions referred to in Section 7 to cover the financial derivative.
(3) If the case is referred to in paragraph 2 (b) and another financial derivative is agreed
(a) another counterparty to close a financial derivative position and those financial derivatives are settled on the same day, holding funds for the purpose of reducing the risk from the use of financial derivatives only up to the difference in their settlement prices;
(b) with the same counterparty for the purpose of closing a financial derivative position and the settlement date of such financial derivatives do not differ by more than a week, holding funds for the purpose of reducing the risk from the use of financial derivatives only up to the difference in their settlement prices.
(4) Additional conditions for the use of an over-the-counter derivative are that
(a) the counterparty is an institution under Article 26 (1) (g) (2) of the Act, the core capital of which is at least EUR 40 million, and the standard fund is satisfied that it is of sufficient integrity; and
(b) the counterparty agrees to settle the financial derivative before its maturity at the request of the standard fund and to settle the corresponding fair value of the financial derivative.
Limits for the open position of financial derivatives
(1) The open position of a standard fund of financial derivatives calculated in accordance with paragraphs 2 to 4 must not exceed 100% of the value of the standard fund's equity at any time as a result of the negotiation of a financial derivative. Where the limit is exceeded as a result of market price movements, the standard fund shall adjust its open position from financial derivatives without undue delay to meet the limit.
(2) The short position is calculated as the value of the liability resulting from the derivative, as indicated in the off-balance sheet account, with a fair value valuation within the time limits set in Paragraph 82 (1) of the Law.
(3) Derivatives that have the features of a hedging derivative under a special legal provision governing account1) are not subject to the calculation of an open position on financial derivatives.
(4) The open position of a standard fund on financial derivatives shall be calculated as the sum of all short positions on derivatives and the value of credit risk of derivatives under Article 26 (1) (f) of the Act (hereinafter referred to as "stock exchange derivatives") and over-the-counter derivatives calculated under Article 9 (2) and (3).
(5) For the purposes of this provision, a derivative is also a derivative contained in an investment security or money market instrument.
Limits for the closure of repurchase transactions
(1) A standard fund may carry out repurchase transactions where:
(a) repos may be duly documented;
(b) the counterparty is the institution referred to in Article 26 (1) (g) (2) of the Act and the standard fund is satisfied of its sufficient boldness;
(c) securities subject to repurchase agreements correspond to the investment policy and the risk profile of the fund.
(2) Standard fund
(a) for the duration of the repurchase transaction, it shall not sell or lend securities that are its object before the counterparty has exercised its right to buy or return the securities or, where appropriate, before the date for the repurchase or repayment expires;
(b) for the duration of the repo transaction, purchase only highly liquid assets for the money received from that repo transaction which are subsequently not used for further repurchase transactions;
(c) ensure that the total volume of repurchase transactions covered by money market instruments, bonds or similar securities representing the right to repayment of a debt or securities issued by a collective investment fund does not exceed 30% of the value of the assets of the standard fund;
(d) ensure that the total volume of repurchase transactions involving shares or similar securities representing a share of the company does not exceed 10% of the value of the assets of the standard fund;
(e) ensure that the value of the funds received is not lower than the fair value of the securities in question at the trade date;
(f) ensure that the value of the funds provided does not exceed the fair value of the securities in question at the trade date; and
(g) in the case of reverse repo transactions, the securities in question are held by or entrusted to a third party independent of the counterparty by custody or other custody; the standard fund shall ensure contractually that the counterparty's inability to fulfil its obligations cannot affect the ability to satisfy itself on the securities provided under the repurchase agreement.
(3) The amount of the risk associated with the counterparty (hereinafter referred to as "credit risk") from repurchase transactions determined in accordance with Paragraph 10 may not exceed:
(a) 10% of the value of the assets of the standard fund if the counterparty is a bank established in a Member State of the European Union or a bank established in a State which is not a Member State of the European Union, provided that that State requires compliance with the prudential rules which the Securities Commission considers to be equivalent to those required by a Member State of the European Union2); or
(b) 5% of the value of the assets of the standard fund where the counterparty is a person other than the bank referred to in (a).
Market risk measurement method
(1) As a procedure for measuring market risk associated with investment, the standard fund will use the risk value method (VAR).
(2) Standard fund for measuring market risk using the risk value method
(a) in the case of interest rate risk, it shall take into account risk factors corresponding to interest rates in each currency in which the standard fund has significant interest positions, taking into account that the structure of the yield curve is based on generally accepted methods and, for significant interest positions, the yield curve is divided into at least six time segments; the risk arising from non-parallel movements of different yield curves is also taken into account,
(b) in the case of equity risk, takes into account risk factors corresponding to each market referred to in Article 26 (1) (a) of the Act where the standard fund has significant equity positions;
(c) for monetary risk, take into account risk factors corresponding to the positions of the standard fund in each foreign currency;
(d) the value at risk shall be calculated monthly;
(e) uses a confidence level of 99%;
(f) uses a holding period of 1 month;
(g) calculate historical volatility over the period of the last 12 months, with the period being renewed at least once every 3 months;
(h) restores data sets containing market conditions parameters at least every 3 months;
(i) use a method based mainly on variant matrix models or historical simulation;
(j) calculate the risk value for each type of risk and overall for the assets of the standard fund.
(3) The standard fund carries out an estimate of the maximum loss in stress situations by the value-at-risk method, in particular in crisis developments in interest rates, stock markets and exchange rates (hereinafter "stress testing") at least every 3 months to assess the effects of extremely adverse market conditions on the Fund. For the purposes of stress testing, the standard stress scenario fund shall establish stress scenarios taking into account the risk characteristics of the fund, in particular the factors most vulnerable to the change of which the fund is most vulnerable, and shall regularly review the validity of stress scenario assumptions in view of changing market conditions or changing fund conditions.
Credit risk measurement for derivatives
(1) A credit risk must be identified by the standard fund in the case of over-the-counter derivatives in order to ensure compliance with the limits under Section 28 (5) of the Act.
(2) The credit risk of exchange derivatives is only ascertained by the standard fund if the relevant market referred to in Section 26 (1) (a) of the Act does not guarantee settlement, daily valuation of positions and the replenishment of variable margins. The credit risk of exchange derivatives shall be determined by the standard fund as for over-the-counter derivatives.
(3) The credit risk of an over-the-counter derivative is determined by the standard fund as the sum of the off-balance-sheet risk-weighted assets of derivatives, which are determined as the product of the credit equivalent of the off-balance-sheet asset of an over-the-counter derivative and of the respective counterparty risk weight, in accordance with the table set out in Annex 1 to this Regulation.
(4) The credit equivalent of an over-the-counter derivative shall be determined as the sum of the current fair value of the over-the-counter derivative and the potential future exposure equal to the product of the conversion factor according to the table set out in Annex 2 to this Regulation and the nominal value of the off-balance-sheet asset of the derivative. If the current fair value of an over-the-counter derivative is negative, it shall be considered zero for the purpose of this calculation.
(5) For credit equivalents relating to:
(a) deposits, fixed-term loans, deposits and delta-equivalent loans;
(b) bond claims and fixed-term shares; and
(c) delta equivalent of debt claims and options shares;
the standard fund shall use the issuer's relevant risk weight according to the table set out in Annex 1 to this Regulation and the credit equivalent of these off-balance-sheet assets shall be 1,00 as the product of the nominal value of the underlying asset or delta equivalent of the debt claim and shares from options and conversion factor.
(6) A standard fund may conclude a final offsetting contract (3) with a counterparty with which it has negotiated an over-the-counter derivative if:
(a) the contract provides that, in the event of counterparty default, reciprocal claims are replaced by a single claim equal to the difference in the fair value of the individual derivatives covered by the agreement;
(b) the contract defines the specific facts which are the default of the counterparty; in particular, the declaration of bankruptcy or compensation may be such;
(c) there is no other contract between the parties to the final settlement agreement that would significantly impede, restrict or exclude its application; and
(d) it has at its disposal, at the time of conclusion of the contract, the statement of the person authorised to provide legal services that provides long-term services in this field, confirming that, in the event of a counterparty's failure, the replacement referred to in point (a) will take place under the applicable legal order; This condition may not be met if a similar statement already exists and is available to a specialised person dealing with the creation of professional rules for final settlement.
(7) Where the standard fund complies with paragraph 6, it shall specify one credit equivalent for all over-the-counter derivatives agreed with the counterparty covered by the final settlement contract. This credit equivalent is equal to the sum of net fair value and potential future exposures. The net fair value is equal to the sum of the fair values of derivatives agreed with the partner. If the net fair value is negative, the standard fund considers it zero for the purpose of calculating the credit equivalent. The potential future exposure shall be determined by the standard fund according to the formula:
PCENET = 0.4. PCEGROSS + 0.6. NGR. PCEGROSS,
where
PCegross is the sum of the product of off-balance-sheet assets of derivatives and conversion factors according to the table in Annex 2 to this Decree; and
NGR is a share,
(a) the numerator of which is the net fair value of the derivatives covered by the final settlement agreement with the counterparty, whereby, if that value is negative, the standard fund considers it zero for the purposes of this calculation, and the denominator is the sum of the positive fair values of the derivatives; or
(b) the numerator of which is the sum of the net fair values of derivatives subject to bilateral final settlement agreements with all counterparties and the denominator is the gross fair value of such derivatives with all counterparties which is equal to the sum of the positive fair values of derivatives with all counterparties.
(8) The credit risk of an over-the-counter derivative calculated in accordance with paragraphs 3 to 7 may be reduced by the standard fund by the value of the investment instruments provided for collateral (collateral), provided that:
(a) the collateral is valued daily at market price;
(b) the collateral is exposed to a very low market risk and is highly liquid;
(c) the collateral is held or entrusted to a third party, independent of the counterparty, with the standard fund legally ensuring that the default of the counterparty cannot affect the ability to satisfy itself from the collateral.
Credit risk measurement from repurchase transactions
(1) The credit risk arising from repurchase transactions is determined as the sum of the product of the corresponding credit equivalents and the relevant counterparty risk weights according to the table in Annex 1 to this Regulation. The credit equivalent shall be determined as the sum of the fair value and the product of the value of the funds or securities provided and the conversion factor as specified in the table set out in Annex 2 to this Decree. If the fair value is negative, the standard fund considers it zero for the purposes of this calculation. The conversion factor shall be chosen by the standard fund depending on whether it has been provided with funds or a security. The fair value of the standard fund shall be determined by:
(a) in the case of repurchase agreements, as the difference between the fair value of the securities provided and the fair value of the money obligation;
(b) in the case of reverse repo transactions, as the difference between the fair value of the monetary claim and the fair value of the securities received.
(2) In the case of repurchase transactions, transfers of instruments shall not change the original position of the transferred interest rate, equity and currency instruments. In the case of reverse repo, the standard fund shall appreciate the loan provided by a lower risk weight from the issuer's risk weights of the accepted security and the borrower, with the acceptance of the accepted security valuing the standard fund with a zero risk weight. In the case of repurchase agreements, the standard fund shall value the security provided by the issuer's risk weight.
Risk concentration and financial derivatives
(1) The fair values of the assets to be acquired in the settlement of financial derivatives are included in the limits under Section 28 of the Act by assigning them to the same type of asset.
(2) In the case of options, the fair value of the asset referred to in paragraph 1, multiplied by the option coefficient, shall be included in the limits under Paragraph 28 of the Act.
(3) The limits of Section 28 of the Act do not include positions on financial derivatives whose underlying is an index published by the Securities Commission in a way that allows remote access. This index is
(a) it consists of a sufficient number of issuers of shares and bonds and meets the limits on the diversification of risk under Section 28 (9) of the Act;
(b) established or authorised by the market operator referred to in Article 26 (1) (a) of the Act to which it relates; and
(c) published in the manner in which the index shares or bonds are published.
Information obligations
(1) The standard fund shall inform the Securities Commission within 1 month of the end of the calendar semester of:
(a) the values of the individual short positions referred to in Article 6 in over-the-counter derivatives at the end of the calendar month for the calendar half-year;
(b) counterparties to over-the-counter derivatives for the calendar half-year;
(c) the risk value for each type of risk and overall for the assets of the standard fund calculated at the end of the calendar month for the calendar half-year;
(d) the credit risk value of over-the-counter derivatives at the end of the calendar month for the calendar half-year;
(e) an open position of over-the-counter derivatives at the end of the calendar month for the calendar half-year; and
(f) the quantitative restrictions and methods chosen to assess the risks associated with the techniques and instruments for the efficient management of the portfolio.
(2) The standard fund shall report to the Securities Commission in electronic form in the form of a data report4) drawn up in accordance with the standardised data form, the model of which is Annex 3 to this Regulation.
(3) The report shall be sent by the standard fund in electronic form to the Securities Commission by e-mail, on the recording medium or on the basis of connection via a fixed telecommunications circuit (5). The report shall be accompanied by a guaranteed electronic signature (6) based on a qualified certificate issued by an accredited certification service provider (7).
Application of Fund Special Fund Limits
Where a foreign collective investment fund is divided into several sub-funds, for the purposes of calculating the limits under Article 55 of the Act, a single collective investment fund is a target fund as a whole and not only its individual sub-fund.
Efficacy
This Decree shall take effect on 1 July 2005.
Chairman:
Ing. Hollmann, MBA v. r.
Příloha č. 1
Annex No 1 to Decree No 139 / 2005 Coll.
Risk weights of assets
| riziková váha | druh aktiva | |
|---|---|---|
| 0 | 1. | pokladní hodnoty |
| 2. | pohledávky za | |
| a) pojištěné Exportní garanční a pojišťovací společností, a.s., podle § 8 odst. 1 písm. a) zákona č. 58/1995 Sb., o pojišťování a financování vývozu se státní podporou (dále jen „zákon o pojišťování a financování vývozu se státní podporou“), nebo pojištěné jinou osobou, pokud rizikovou váhu 0 přiznává pojištění poskytovanému touto osobou příslušný zahraniční orgán bankovního dohledu, | ||
| b) za Českou exportní bankou, a.s., které jsou zaručeny zárukou státu podle § 8 odst. 1 písm. b) zákona o pojišťování a financování vývozu se státní podporou, | ||
| c) za Fondem národního majetku, které jsou zaručeny zárukou státu podle § 24 odst. 2 zákona č. 171/1991 Sb., o působnosti orgánů České republiky ve věcech převodů majetku státu na jiné osoby a o Fondu národního majetku České republiky, ve znění pozdějších předpisů, | ||
| d) za Českou konsolidační agenturou, | ||
| 3. | pohledávky za Evropskými společenstvími, | |
| 4. | pohledávky za centrálními bankami států | |
| 5. | pohledávky za | |
| 6. | pohledávky za centrálními bankami států zóny B denominované a splácené v národní měně osoby, pokud nedošlo k restrukturalizaci státního dluhu daného státu | |
| 7. | reálné hodnoty | |
| 8. | aktiva, která jsou odečitatelnou položkou podle § 7 vyhlášky č. 262/2004 Sb., o pravidlech pro výpočet kapitálové přiměřenosti obchodníka s cennými papíry, který není bankou, na individuálním základě, ve znění vyhlášky č. 383/2004 Sb. (dále jen „vyhláška o kapitálové přiměřenosti obchodníka s cennými papíry na individuálním základě“) a smí být | |
| 9. | pohledávky zajištěné zástavním právem k dluhopisům, vkladním listům podle § 9 odst. 13 vyhlášky o kapitálové přiměřenosti obchodníka s cennými papíry na individuálním základě | |
| 10. | pohledávky za vládami územních celků států | |
| 0,20 | 1. | pohledávky za bankami se sídlem ve státech |
| 2. | pohledávky za bankami se sídlem ve státech | |
| 3. | pohledávky za mezinárodními finančními institucemi, | |
| 4. | pohledávky za vládami územních celků států | |
| 5. | pohledávky za orgány územní samosprávy států | |
| 6. | pohledávky za obchodníky s | |
| 7. | pohledávky za uznanými clearingovými centry a uznanými burzami se sídlem ve státech | |
| 8. | finanční nástroje v procesu inkasa. | |
| 0,50 | Všechna ostatní aktiva, která nejsou uvedena výše, zejména | |
| 1. | kapitálové investice do bank a finančních institucí,8) které nejsou odečitatelnou položkou podle § 7 vyhlášky o kapitálové přiměřenosti obchodníka s cennými papíry na individuálním základě, | |
| 2. | kapitálové investice do právnických osob kromě bank a finančních institucí, | |
| 3. | pohledávky za bankami se sídlem ve státech | |
| 4. | pohledávky za právnickými osobami kromě bank a obchodníků s | |
| 5. | pohledávky za | |
| 6. | pohledávky za centrálními bankami států | |
| 7. | pohledávky za vládami územních celků států | |
| 8. | pohledávky za bankami se sídlem ve státech | |
| 9. | pohledávky za bankami se sídlem ve státech | |
| 10. | pohledávky za právnickými osobami – finančními institucemi8), kterým nepřísluší riziková váha 0,2. | |
Příloha č. 2
Annex No 2 to Decree No 139 / 2005 Coll.
Conversion factors of derivatives
Příloha č. 3
Annex 3 to Decree No 139 / 2005 Coll.
Short position reporting form for over-the-counter derivatives, counterparties for over-the-counter derivatives, credit risk values and risk values
1) Paragraph 70 (5) of Decree No. 501 / 2002 Coll., implementing certain provisions of Act No. 563 / 1991 Coll., on Accounting, as amended, for entities that are banks and other financial institutions, as amended by Decree No. 473 / 2003 Coll. and Decree No. 545 / 2004 Coll.
2) Paragraph 28 (5) of Act No. 189 / 2004 Coll., on Collective Investment.
3) § 197 of Act No. 256 / 2004 Coll., on Capital Market Business.
4) § 2 (d) of Act No. 227 / 2000 Coll., on Electronic Signature, as amended by Act No. 440 / 2004 Coll.
5) Paragraph 2 (16) of Act No. 151 / 2000 Coll., on Telecommunications and on the Amendment of Other Acts, as amended by Act No. 225 / 2003 Coll.
6) § 2 (b) of Act No. 227 / 2000 Coll., as amended by Act No. 440 / 2004 Coll.
7) Article 11 of Act No. 227 / 2000 Coll., as amended by Act No. 226 / 2002 Coll. and Act No. 440 / 2004 Coll.
8) Act No. 21 / 1992 Coll., on Banks, as amended.
(9) For derivatives that are settled on certain specified dates and where settlement conditions are such that the fair value of derivatives on those dates is zero, the residual maturity shall be considered as the time until the following such date. For these derivatives, for interest rate instruments with a residual maturity over one year, the conversion factor cannot be less than 0,005. The reason for this lower limitation is that although the above characteristics of derivatives limit the potential price movements of long-term derivatives to the nearest settlement date, such derivative nevertheless represents a long-term liability and thus a greater risk than a short-term remaining maturity derivative. The lower limit ensures that the capital requirement for such a derivative is never zero.
10) For interest rate swaps of the type variable interest rate / variable interest rate in one currency, the credit equivalent calculation is based only on the measurement of the fair value of the instrument and conversion factors are considered zero.
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Regulation Information
| Citation | Decree No. 139 / 2005 Coll., on the use of techniques and tools for efficient management of the assets of the standard fund |
|---|---|
| Regulation Type | Order |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 15.04.2005 |
|---|---|
| Effective from | 01.07.2005 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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