The Capital Requirements Directive (“CRD”) is the framework for implementing Basel II in the European Union. Basel II implements a risk sensitive framework for the calculation of regulatory capital. This was implemented in the United Kingdom through changes to the Financial Conduct Authority (“FCA”) Handbook of Rules and Guidance, and specifically through the creation of the General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”), specifically BIPRU 11.
The framework consists of three pillars:
The Pillar 3 disclosure of Albar Capital Limited (“Albar” or the “Firm”) is set out below. The regulatory aim of the disclosure is to improve market discipline.
Albar makes Pillar 3 disclosures annually, via its public website, https://albarcapital.com/. The information contained in this disclosure is accurate as at 31st December 2018. It has not been audited by Albar’s external auditors and does not constitute any form of financial statement.
Certain information relating to BIPRU 11.5 has been omitted on the basis that it has been deemed to be immaterial or proprietary/confidential. The Firm regards information as material in the disclosure if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions. The Firm regards information as proprietary/confidential if sharing that information with the public would undermine its competitive position. Proprietary/confidential information may include information on products or systems which, if shared with competitors, would render the Firm’s investments therein less valuable. Further, the Firm must regard information as confidential if there are obligations to customers or other counterparty relationships binding the Firm to confidentiality.
The Firm is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. The Firm is categorised by the FCA, for capital purposes, as a collective portfolio management investment (“CPMI”) firm. It is an investment management firm. The Firm began actively trading in January 2018. The Firm is not required to prepare consolidated reporting for prudential purposes.
As a CPMI firm, Albar has an initial capital requirement of €125k and an ongoing capital resource requirement which comprises the greater of:
Plus, for the latter two items (ii and iii above), whichever is the applicable of:
Albar calculates the credit risk applicable to its non-AIFM activities under the simplified approach.
The Firm has deemed the sum of market risk and credit risk to be the higher of these values and this is therefore used for the purposes of the Pillar 1 calculation.
As Albar does not deal as a principal and holds no current assets other than cash, in sterling or foreign currency, the Firm’s non-trading book market risk requirement is the Foreign Currency Position Risk Requirement for which the Firm multiplies the sum of the absolute values of its ‘open currency position’ by 8%.
The Firm’s ICAAP includes an assessment of the design and performance of the internal controls in place to mitigate risks, the probability of the risk occurring, the potential financial and reputational impact, and the adequacy of the Firm’s capital base.
The ICAAP is the process through which Albar determines that it is able to identify and manage its key risks on an on-going basis and ensure that it has sufficient capital in respect of such risks. The process is forward looking and is an integral part of the management of the Firm. The Chief Operating Officer (“COO”) is responsible for the ICAAP within Albar and consulted with the Firm’s Chief Executive Officer (“CEO”) and other appropriate members of staff to ensure the accuracy of his findings.
The Firm’s Management Committee formally reviews and approves a finalised ICAAP document on at least an annual basis (or more frequently if there are material changes to the Firm’s business model and risk exposures). The Management Committee, as part of its review of the ICAAP, sets the Firm’s risk appetite, confirms that the Firm’s key material risks have been considered and assessed, and validates the stress testing scenarios.
The main features of the Firm’s Capital Resources are as follows:
|Tier 1 capital less innovative tier 1 capital||753|
|Tier 2 capital||0|
|Tier 3 capital||0|
|Total capital resources, net of deductions||753|
Due to the nature, size and complexity of the Firm, Albar does not have an independent risk management function. The Operating Committee is responsible for the management of risk within the Firm and the individual responsibilities of its members are clearly defined. The Operating Committee report to the Firm’s governing body on a frequent basis regarding the risks. Albar has clearly documented policies and procedures, which are designed to minimise risks to the Firm and all staff are required to confirm that they have read and understood them.
Albar undertakes an ICAAP at least annually, which is the process through which Albar determines that it is able to identify and manage its key risks on an on-going basis and that it has sufficient capital in respect of such risks. The process is forward looking and is an integral part of the management of the Firm.
Following the completion of the ICAAP, the Firm has concluded that its Tier 1 capital is sufficient to cover its Pillar 1 and Pillar 2 requirements.
Albar must comply with the remuneration rules as set out in Article 14 of the Alternative Investment Fund Managers Directive (“AIFMD”) and SYSC 19B of the FCA Handbook (“the AIFM Remuneration Code”), as well as SYSC 19C (“the BIPRU Remuneration Code”). The purpose of these Remuneration Codes is to ensure that firms have risk focused remuneration policies, which are consistent with and promote effective risk management and do not expose themselves to excessive risk. The Firm has reviewed all existing employment contracts to ensure they comply with the Codes.
The Executive Committee are responsible for setting the Remuneration Policy Statement for all staff and the Compliance Officer also reviews the Remuneration Policy Statement. No external consultants have been engaged on remuneration matters.
The Remuneration Codes can (subject to certain conditions being met) be applied in a proportionate way. As such the Executive Committee has determined that it is not proportionate for the Firm to apply the following detailed rules in setting the Firm’s Remuneration Policy:
Variable remuneration is not based solely on the financial performance of the individual. The Management Committee also considered the individuals’ overall (non-financial) performance to the whole team and the overall results of the fund/firm. The performance of an individual is assessed over the entire year.
During the year ended 2018 there were eight Code Staff. Aggregate fixed/variable remuneration expenditure in respect to Code Staff was £2,237,503 of which £682,383 was fixed, comprising base compensation plus benefits.
© Albar Capital Limited. All rights reserved. Albar Capital Limited is a limited company, registered in England and Wales, with Registration Number 10854444. Albar Capital Limited is authorised and regulated in the United Kingdom by the Financial Conduct Authority.