Cushman & Wakefield Investors (Finance) Ltd
Pillar 3 Disclosures - December 2008
Content:
1. Regulatory Overview
2. Corporate Background
3. Risk Management
4. Capital Resources
5. Capital Adequacy
6. Pillar 2 Assessment
7. Conclusion
1. Regulatory Overview
The Capital Requirements Directive (“CRD”) created a revised regulatory capital framework across Europe, based on the provisions of the Basel II Capital Accord, governing the amount and nature of capital that credit institutions and investment firms must maintain. The rules are set out in the CRD under three ‘pillars':
Pillar 1: sets out the minimum capital requirements that regulated entities are required to meet;
Pillar 2: requires regulated entities to assess whether additional capital is required to capture risks not covered in Pillar 1 by means of the Internal Capital Adequacy Assessment Process (“ICAAP”); and
Pillar 3: requires disclosure of specified information about the underlying risk management controls and capital position.
In the UK, FSA introduced Pillar 3 by creating Chapter 11 of the Prudential Sourcebook for Banks, Building Society and Investment Firms (“BIPRU”), which details the disclosures that all BIPRU firms are expected to consider.
The rules permit a firm to omit disclosures if the information is not regarded as material, to the extent its omission would be unlikely to change or influence the decision of a user relying on that information for the purpose of making economic decisions.
This document fulfils our disclosure obligation under Pillar 3.
2. Corporate Background
Cushman & Wakefield Investors provides a complete property investment management service in both a discretionary and advisory capacity across Europe, Asia and the US with over £3.3m of assets under management at the end of 2008.
Cushman & Wakefield Investors (Finance) Ltd (“CWIF”) was established to undertake the regulated element of the business and it has been authorised and regulated by the Financial Services Authority (“FSA”) since February 2004. These disclosures relate to CWIF only.
3. Risk Management
CWIF is managed and controlled as an integral part of the overall CWI business in EMEA and the CWI Management Committee is the governing body which has responsibility for determining the business strategy and risk appetite of the business as a whole. This Committee meets quarterly and is composed of senior CWI and C&W LLP staff as well as CWI's non-executive director. In addition CWI senior management meet regularly, both formally and informally, to discuss and review the business and make investment decisions.
The key risks identified by CWIF as well as the management strategies in place for dealing with such risks, have been recorded in a risk register.
The firm operates a straightforward business model of property investment management on behalf of institutional clients and the risk profile is inherently low. The systems, processes and internal control mechanisms are considered adequate and proportionate to the nature, scale and complexity of the firm's activities.
4. Capital Resources
The capital resources of CWIF consist entirely of Tier 1 capital as follows:
· Share Capital; and
· Retained Reserves
Our total capital resources as at 31 December 2008 were £138k.
5. Capital Adequacy
The Cushman & Wakefield Group policy is that regulated entities have sufficient capital to meet regulatory requirements. The CWIF Board assesses on an ongoing basis whether capital is required as a result of any change in the business activities or unforeseen circumstances.
CWIF is categorised as a BIPRU ‘Limited Licence €50k Firm' and the minimum capital resource requirement under Pillar 1 is the higher of:
· the base capital requirement of €50k;
· the sum of its market and credit risk requirements; and
· the fixed overhead requirement
The balance sheet credit risk is from management fees receivable in respect of funds under management along with bank deposits. CWIF uses the standardised approach for credit risk and calculates its credit risk capital requirement as 8% of its risk weighted assets.
CWIF is not exposed directly to market risk as it does not hold principal positions and has limited exposure to currency risk.
Neither credit risk nor market risk are considered material in the context of these Pillar 3 disclosures.
As CWIF is a BIPRU limited licence firm the FSA rules on operational risk capital requirement do not apply and it does not therefore have an operational risk capital requirement.
CWIF's Pillar 1 capital resource requirement is the FOR.
6. Pillar 2 Assessment
Pillar 2 requires regulated entities to assess whether additional capital is required to cover risks not covered in Pillar 1.
Following the ICAAP exercise the Board concluded that the Pillar 2 regulatory capital requirement should consist of an element of business risk, calculated as the exposure that would remain in the event CWIF had no business. It amounts to a small amount of administrative costs that relate directly to CWIF and no additional capital to that held to cover Pillar 1 requirements is considered necessary.
7. Conclusion
In conclusion, our capital resources exceed our capital requirements and we consider the firm is sufficiently capitalised for the risks to which it is exposed.
