basel iii pillar 3 disclosures - amazon s3 · bis bank for international settlements board board of...

of 29

BASEL III PILLAR 3 DISCLOSURES

31 MARCH 2016

of 29

Table of Contents 1. Glossary of Terms........................................................................................................... 3

2. Introduction .................................................................................................................... 4

3. Governance .................................................................................................................... 5

4. Risk Management ........................................................................................................... 7

5. Own Funds ..................................................................................................................... 8

6. Compliance with CRR and the Overall Pillar 2 Rule .................................................... 9

7. Return on Assets ........................................................................................................... 10

8. Principal Risks and Uncertainties................................................................................. 10

9. Remuneration ............................................................................................................... 14

10. Country by Country Reporting under CRDIV ........................................................... 17

11. Leverage Ratio ............................................................................................................. 17

12. Annex 1 Balance Sheet Reconciliation Methodology ................................................. 18

13. Annex 2 Description of the main features of Common Equity Tier 1 and Tier 2

instruments issued ......................................................................................................... 20

14. Annex 3 Disclosure of nature and amounts of specific items on own funds during the

transitional period ......................................................................................................... 21

of 29

1. Glossary of Terms

AFS Available for Sale

BIS Bank for International Settlements

Board Board of Peel Hunt LLP

CCR Counterparty Credit Risk

CEO Chief Executive Officer

CET1 Core Equity Tier 1

CFOO Chief Financial & Operating Officer

CRD IV Capital Requirements Directive, Directive 2013/36/EU

CRR Capital Requirements Regulations, Regulation (EU) 575/2013

DVP Delivery versus Payment

EBA European Banking Authority

Employee Employee of Peel Hunt LLP

EU European Union

EWRMF Enterprise-Wide Risk Management Framework

FCA Financial Conduct Authority

FRN Firm Reference Number

FOP Free of Payment

FSMA Financial Services & Markets Act

HR Human Resources

ICAAP Internal Capital Adequacy Assessment Process

IFPRU Prudential Sourcebook for Investment Firms

LLP Limited liability partnership

Material

Business Unit

A business unit that has had internal capital distributed to it representing at least

2% of the internal capital of the institution

Member Member, both designated and non-designated, of Peel Hunt LLP

NE Non-Executive

NI National Insurance contributions

Peel Hunt Peel Hunt LLP

PH Group Peel Hunt Group of entities whose ultimate parent is Macsco 22 Limited

PHHL Peel Hunt Holdings Limited

Reporting Date The reporting date is 31st March 2016

RTS 604/2014 Regulation (EU) 604/2014 of March 2014 (Regulatory Technical Standard to

identify staff who are material risk takers)

SYSC 19A The Remuneration Code

of 29

2. Introduction

Background

On the 1st of January 2014, CRD IV came into effect. CRD IV is the EU implementation of

the Basel III framework agreed by the Basel Committee on Banking Supervision. The Basel III

framework is a package of reforms to strengthen the capital and liquidity rules of the financial

sector.

The Basel framework consists of three pillars:

Pillar 1 The first pillar defines a minimum required level of regulatory capital a firm must

hold against credit risk, market risk and operational risk.

Pillar 2 The second pillar requires a firm and its supervisors to assess the need to hold capital

against risks not covered by the first pillar.

Pillar 3 The third pillar outlines disclosure requirements about a firm’s capital, risks and risk

management processes.

Scope of Application

Peel Hunt is a full-scope IFPRU 730K investment firm (FRN 530083) and is authorised and

regulated in the UK by the FCA. These disclosures are prepared in accordance with Part Eight

(Articles 431 to 455) of the CRR, Article 492 of the CRR and Articles 89 and 90 of the CRD.

Disclosure Policy

This document sets out the Pillar 3 disclosures of Peel Hunt LLP (“Peel Hunt”), as at 31st

March 2016 (the “reporting date”) in line with the last set of published financial statements.

The disclosures are made on a transitional basis. Transitional provisions apply during the

period from 1st January 2014 to 31st December 2017 as set out in Part Ten of the CRR.

Figures used for regulatory reporting purposes may differ from accounting information

presented in the audited financial statements. A balance sheet reconciliation in accordance

with Article 437(1)a of the CRR is provided in Annex 1.

Peel Hunt’s Pillar 3 Disclosure Policy, which meets the requirements of the CRR, is set out

below.

Frequency and means of disclosure

Peel Hunt’s Pillar 3 disclosures are published on an annual basis, via Peel Hunt’s external

website (http://www.peelhunt.com). The frequency of disclosure will be assessed should

there be a material change in the nature or scale of Peel Hunt’s activities.

http://www.peelhunt.com/

of 29

Verification

These Pillar 3 disclosures have been approved by the Board. These disclosures are not

subject to audit except where they are prepared under accounting requirements for

publication in the financial statements.

Non-material, proprietary or confidential information

Peel Hunt does not seek any exemption from disclosure on the grounds of materiality or on

the basis of proprietary or confidential information.

3. Governance

Peel Hunt operates its governance structure through the Board and a series of board level

committees, as detailed below.

Board

The Board meets on a quarterly basis and is chaired by the Non-Executive Chairman. The

Board is committed to the principles of good corporate governance and is responsible for

providing oversight and management of the profitable development of Peel Hunt in line with its

current approved strategic plans and objectives. The Board is also responsible for managing

Peel Hunt’s risks and setting the tone and influence of the culture of risk management within

Peel Hunt.

As at the reporting date, the Board comprised three Designated Members, two independent

Non-Executives and the Non-Executive Chairman.

Board-level Committees

The following committees report directly to the Board:

Management Committee

The Management Committee, which comprises eight members, including the designated

members of Peel Hunt, meets monthly and is chaired by the Chief Executive. The Board

has delegated authority to the Management Committee to implement the approved business

strategy within Peel Hunt’s risk appetite, to deal with day to day operational matters, to

review performance against the business plan and to manage the core activities of Peel Hunt.

Remuneration Committee

See section 9.1.

Risk Committee

The Risk Committee, which comprises an independent Non-Executive, the Non-Executive

Chairman, the Head of Risk Management, the Head of Compliance and the Operational

Risk Manager, meets on a monthly basis and is chaired by an Independent Non-Executive.

of 29

The Board has delegated authority to the Risk Committee to identify, measure, monitor and

manage all risks within Peel Hunt through the use of a suitable risk management framework

(including stress tests). The Risk Committee is also responsible for reporting on key risks to

the Board.

Audit Committee

The Audit Committee, which comprises two independent Non-Executives and the Non-

Executive Chairman, meets on a quarterly basis and is chaired by an independent Non-

Executive. The Board has delegated responsibility to the Audit Committee to

independently review the effectiveness of the internal control framework and to ensure that

Peel Hunt applies accurate financial reporting and sound internal control principles, in line

with the rules and guidelines set by the FCA. Both internal and external auditors are also

invited to attend the Audit Committee.

Number of directorships held by members of the Board

The Board consists of Designated Members and Non-Executives. The individuals who served

throughout the year, except where noted, were as follows. Directorships held within the same

group are counted as a single directorship and those in non-commercial organisations are

excluded:

Name Position Held at Peel Hunt Executive

Directorships

Non-

Executive

Directorships

Simon Hayes* Chief Executive 1 2

Steven Fine* Managing Partner 1 0

Sunil Dhall* Chief Financial and Operating Officer 1 0

Darren Carter Non-Executive Chairman 0 2

Mike Walker Non-Executive 2 3

Paul Clegg Non-Executive 2 2

*Designated member

Adequacy of Risk Management arrangements

The Board considers that it has in place adequate systems and controls with regard to the

Partnership’s strategy and an appropriate set of systems and controls, properly resourced and

skilled, to avoid or minimise loss.

Recruitment and Diversity

Current and future requirements of Peel Hunt, including equality and diversity, are considered

as part of the recruitment and retention process. Board and committee membership is

considered with reference to a range of criteria including relevant knowledge, skills and

experience.

of 29

4. Risk Management

Overall responsibility for the establishment of the risk framework and risk appetite of Peel Hunt

lies with the Board. The Board sets the culture and conduct of Peel Hunt, which is fundamental

to how it embeds its controls across the range of services and activities it provides, and approves

the Individual Capital Adequacy Assessment Process ("ICAAP") (see Section 6), Business Plan

and Enterprise Wide Risk Management Framework ("EWRMF"). These documents and

processes incorporate more detailed analysis of each risk identified and the risk management

framework.

Within the framework established by the Board, the Risk Committee implements the

principles, policies and limits of the framework and identifies its risk appetite for each risk type.

Peel Hunt undertakes a quarterly top-down review of the key risks identified to ensure that the

list of key risks is complete and appropriately controlled as well as determining which of those

risks should be subject to capital modelling. The Risk Committee is supported by the New

Products and Activities Committee, Underwriting Committee and Risk Review Committee in

managing and monitoring the risk framework and any risk issues.

Peel Hunt has adopted the 'three lines of defence' model in embedding the EWRMF across the

organisation. The model distinguishes between functions that own and manage risks, functions

overseeing risks and functions providing independent assurance.

First - The first line of defence comprises of front office staff, business management and

operational management, who own the risks and controls and have responsibility and

accountability for identifying, assessing, managing, monitoring and reporting risks within their

sphere of responsibility.

Second - The second line of defence comprises the Risk Management and Compliance

functions, who review, challenge and monitor the implementation of effective risk management

practices by the first line. It also independently provides reporting and escalation of risk issues

throughout Peel Hunt.

Third - The third line of defence, Internal Audit, through a risk based approach, provides

assurance to Peel Hunt’s senior management and the Audit Committee, on how effectively Peel

Hunt assesses and manages its risks, including the manner in which the first and second lines of

defence operate. This assurance covers all elements of the risk management framework, i.e. risk

identification, risk assessment, reporting and response to escalation of risk related information.

The Risk Management department designs and deploys the EWRMF across Peel Hunt. The

Risk Management department maintains a register of the key risks and catalogues them by their

risk categories. Day to day management of risk and its mitigation is the responsibility of the

business.

The Risk Management department is responsible for ensuring that the market, credit and

operational risks assumed are in line with the risk appetite (see Section 8), the associated risk

management policies, which describe the roles and responsibilities in relation to the risk

identification, assessment, management, monitoring and reporting of these risks, are

of 29

appropriately enforced and provides an independent assessment of Peel Hunt's risks and is

responsible for the challenge and review of risk assessments including assessments conducted by

the First Line and for the aggregated reporting and escalation of risk issues to the Risk

Committee and Board.

5. Own Funds

Own Funds are the capital resources of Peel Hunt. To be able to absorb losses it is necessary to

hold sufficient quantity and quality of capital resources in accordance with the CRR.

Tier 1 Regulatory Capital

The Partnership’s Own Funds as at 31 March 2016 are summarised below:

Own Funds as at 31 March 20162015 £’000s

Common Equity Tier 1 (“CET1”)

capital

Partnership capital 39,140

Retained earnings 2

Audited interim profits 2,192

Deductions (453)

40,881

Total Own Funds 40,881

Tier 1 Capital

As at 31st March 2016, Common Equity Tier 1 capital comprises partnership capital of

£39,140k, retained earnings of £2k, audited interim profits of £2,192k and other reserves

and deductions of £(453)k, all of which are eligible CET 1.

During the financial year, additional partnership capital of £6m was added to Tier 1 capital

to replace the Firm’s subordinated loan of £6m (Tier 2 capital) that was repaid during the

year.

Deductions from Tier 1 Capital

The deductions from Tier 1 capital comprises £ (324)k in relation to intangible assets and

£(129)k in relation to non-significant investments.

Tier 2 Capital

The Firm repaid a £6m subordinated loan during the financial year of which £5.1m was

eligible as Tier 2 capital as at March 2015. As noted in 5.1.1, this Tier 2 capital was replaced

by £6m of Tier 1 partnership capital.

of 29

Own Funds – balance sheet reconciliation & specific items of Own Funds

during the transitional period

A balance sheet reconciliation in accordance with Article 437(1)a of the CRR is provided in

Annex 2. A separate disclosure of the specific items of Own Funds in accordance with

Article 437(1)d is provided in Annex 4.

Main features of Common Equity Tier 1, Additional Tier 1 and Tier 2

instruments issued by institutions

A description of the main features of capital instruments issued by Peel Hunt in accordance

with Article 437(1)b of the CRR is provided in Annex 3.

6. Compliance with CRR and the Overall Pillar 2 Rule

Internal Capital

The purpose of the ICAAP is to assess the amount of capital Peel Hunt considers adequate to

cover all of the risks to which it is exposed.

The Board and senior management are closely involved in this process and overall at the risk

governance and strategy level. Along with the Finance and Risk Management functions, they

ensure that the ICAAP process is fully integrated into the on-going decision-making of Peel

Hunt.

Approach to assessing adequacy of Internal Capital

In order to maintain an appropriate capital base at all times, Peel Hunt

reviews and updates its assessment of the major sources of risk to which it is exposed;

carries out regular formal assessments of its capital resources, in relation to those risks,

Peel Hunt’s Risk Appetite and its regulatory capital requirements; and

conducts stress and scenario tests.

of 29

Pillar 1 Capital Requirements

Peel Hunt’s Pillar 1 capital requirements are summarised below:

As at 31 March 2016 Risk

weighted

assets

Own funds

requirement

£’000s £’000s

Credit risk 17,057 1,365

Market risk : positions 95,720 7,658

Market risk : foreign

exchange

1,971 158

Settlement risk 6,073 485

Operational risk 85,432 6,835

206,252 16,501

7. Return on Assets

The return on assets, defined as net profit divided by total balance sheet assets in accordance

with Article 90 of the CRD, is 6.74% [26,064 ÷ 386,718]

8. Principal Risks and Uncertainties

The senior management of Peel Hunt is committed to operating sound governance to ensure all

risks are monitored, managed and controlled not only within business lines and support areas, but

also through involvement of senior management through clear and concise reporting to key

committees and ultimately to the Board.

The monitoring of risks within Peel Hunt is delegated to the Risk Management and Compliance

departments and the Risk Committee. The Board has also appointed Grant Thornton as its

independent internal auditor. Grant Thornton provides an independent assessment of the

adequacy and satisfactory application of the risk control framework and reports directly to the

Audit Committee.

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the

other party by failing to discharge an obligation.

Peel Hunt quantifies and monitors credit risk by managing counterparty credit exposure on pre-

settlement risk and settlement risk. All counterparty credit exposures arising from Peel Hunt’s

business activities are captured within one of these measures.

Risk Management performs regular reviews on counterparty credit risk exposures and monitors

against counterparty trading limits.

of 29

Peel Hunt is also exposed to credit risk relating to non-trade receivables and other non-trade

debtors. Exposures to this risk are monitored on a monthly basis by reviewing outstanding

balances. During the year, Peel Hunt did not impair any non-trade receivables and other non-

trade debtors; further information related to past due and impaired credit risk exposures can be

found in the financial statements.

Credit Risk: Analysis by Exposure Class

Peel Hunt’s credit risk capital requirements are summarised below:

As at 31 March 2016 Original

exposure

(UK)

Original

exposure

(non-UK)

Risk

weighted

assets

Own funds

requirement

£’000s £’000s £’000s £’000s

Central governments or central

banks

6,266 - 91 7

Public sector entities 160 2 162 13

Institutions 27,382 1,769 10,485 839

Corporates 1,656 681 2,323 186

Retail 175 - 131 11

Other Items 3,779 86 3,865 309

39,418 2,538 17,057 1,365

External Credit Assessment Institutions

Peel Hunt uses external credit assessments from Standard and Poor’s for the purposes of

calculating own funds requirements for credit risk. External ratings are mapped to credit

quality steps and risk weights in accordance with the Standardised Approach.

Credit Risk: Analysis by Credit Rating

As at 31 March 2016 Original

exposure

Risk

weighted

assets

Own funds

requirement

£’000s £’000s £’000s

AAA to A- 15,090 3,835 307

B to BBB- 133 36 3

Unrated 26,733 13,186 1,055

41,956 17,057 1,365

Credit Risk Mitigation

Peel Hunt makes limited use of on-balance sheet netting, in cases where Peel Hunt has

overdrafts with the same counterparty and in the same currency as cash deposited with

institutions. As at the reporting date, £488k of overdraft balances were netted with cash

deposits.

of 29

Counterparty Credit Risk

Counterparty credit risk relates to the risk of incurring losses if a counterparty defaults

before the settlement of a transaction. Exposures, as at the reporting date, comprise

derivative exposures from options, warrants, index futures, and foreign exchange

transactions. In the ordinary course of business, the vast majority of Peel Hunt’s trades settle

on a delivery versus payment (“DVP”) basis through Crest and Euroclear and therefore the

risk of non-settlement is considered to be low.

The mark-to-market method is used to measure exposure values, summarised below:

As at 31 March 2016 Exposure

value

£’000s

Contracts concerning equities 72

72

Settlement Risk

Settlement risk is the risk that at the point of settlement the counterparty defaults or cannot

settle the transaction for some reason. When a trade fails to settle the risk is that a new trade at

an unfavourable price must be made in order to square the position. Settlement Risk can occur

in relation to cash equity and bond trading (normal and extended settlement), and placings or

sub-underwriting commitments undertaken by the Corporate department. Free of Payment

(“FOP”) deliveries represent settlements where the parties agree that the seller first delivers the

security being sold to the buyer. The settlement risk exposure on free deliveries for securities

sold is the full market value of the security underlying the trade. See section 6.3 for details as at

31st March 2016.

Exposures in Equities not included within the trading book

As at 31st March 2016, Peel Hunt did not hold any available for sale (“AFS”) equity

investments in the non-trading book.

Exposure to Interest Rate Risk on positions not included within the

trading book

Peel Hunt is not a credit institution, and does not have any significant off-balance-sheet assets

or liabilities. Non-trading book risk arising from changes in interest rates on variable rate

borrowing and cash deposits is not significant.

Market Risk

Market risk is the risk that Peel Hunt’s earnings or capital, or its ability to meet business

objectives, will be adversely affected by changes in the level or volatility of market rates or

prices such as interest rates, equity prices and foreign exchange rates.

of 29

Peel Hunt controls market risk using strict aggregate trading and individual position limits for

the Execution and Trading businesses. Risk Management review trading risk directly from the

trading systems and is responsible for monitoring and reporting end of day limit usage to senior

management and heads of business lines.

Equity Price Risk

Equity price risk is the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in market prices. Peel Hunt is exposed to equity price risk

through changes in equity prices and the volatility of equity prices on its equity holdings

which comprise mainly securities held for trading, predominantly arising from market

making, as well as AFS investments.

Interest Rate Risk

Interest rate risk is the risk that fair value or future cash flows of a financial instrument will

fluctuate because of changes in market interest rates. Interest rate risk arises on exposures

relating to excess funds in cash and loan facilities with credit institutions and fixed income

securities.

Foreign Exchange Risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial

instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises

on financial instruments that are denominated in a currency other than Sterling.

Liquidity Risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations

associated with financial liabilities that are settled by delivering cash or another financial asset.

Liquidity risk is managed by regular reporting of sources and uses of funds to senior

management, strict trading systems controls that limit the amount of funding for trading

activities and a further review of funding conducted in the monthly Risk Committee. Peel

Hunt currently maintains excess liquidity so that it can be confident of being able to settle

transactions and continue operations even in the most difficult foreseeable circumstances.

Operational and Reputational Risk

There is a risk that Peel Hunt could suffer financial loss arising from inadequate or failed

internal processes, human errors or systems, which in turn could have a negative impact on the

reputation of Peel Hunt. Although operational risks can never be completely eliminated, Peel

Hunt mitigates its exposure to such risks by operating a system of strong internal controls and

an embedded risk management culture, particularly through its corporate governance and

adoption of the EWRMF (see section 4). Peel Hunt also has clearly defined business continuity

planning strategies in place to minimise unforeseen business disruptions. To reduce operational

and reputational risks further, the Board requires that all new products or business lines are

subject to rigorous appraisal and review by a New Products and Activities Committee, which is

a sub-committee of the Risk Committee.

of 29

Legal and Regulatory Risk

Peel Hunt is an FCA regulated entity and operates in highly regulated markets. The Board

encourages a culture of compliance with all legal and regulatory requirements throughout Peel

Hunt and operates a robust corporate governance structure to help maintain this culture.

The Board requests that the independent Compliance department reports to it on compliance

with regulations and key regulatory changes in order to help deliver and maintain focus on legal

and regulatory risk.

Non-material Risks

The following risks have been deemed not to be relevant or material in the context of Peel

Hunt’s business:

Pension Obligation Risk

Peel Hunt does not run, manage or provide a defined benefit pension scheme for staff,

although it does contribute to employees’ individual pension schemes with a preferred

provider.

Securitisation Risk

Peel Hunt does not undertake any securitisations or hold any securitised assets.

9. Remuneration

This remuneration disclosure is set out below as required by Article 450 of the CRR. Specifically,

the disclosure provides details in relation to Remuneration Code Staff who comprise categories of

staff including senior management, risk takers, staff engaged in control functions and any employee

receiving total remuneration that takes them into the same remuneration bracket as senior

management.

Remuneration Committee

The Remuneration Committee meets at least twice a year and is chaired by an independent

Non-Executive. During the year under review, the Remuneration Committee comprised two

independent Non-Executives and the Non-Executive Chairman. The Board has delegated

authority to the Remuneration Committee to develop and implement sound and commercial

remuneration policies, to set the remuneration of senior management, and to review and

approve all annual awards, which are recommended by senior management, including awards

to those who perform risk and control roles.

Remuneration policy

Peel Hunt’s remuneration policy, which is reviewed annually, is designed to attract and retain

high performing individuals whilst adhering to Peel Hunt’s long term business strategy, its

of 29

business objectives, its risk appetite, values and the long term interests of Peel Hunt and

recognises the interest of relevant stakeholders of Peel Hunt. No external advisors assisted in

the design of Peel Hunt’s current remuneration policy.

The link between remuneration to performance

Remuneration is composed of guaranteed drawings (for members) or salary (for employees) and

a variable payment in the form of profit share at year end. Profit share awards are discretionary.

The amount available for profit share in any year is based on profits before interest and taxation

and is available for distribution across all areas of Peel Hunt. The Remuneration Committee

may, in its sole discretion, adjust profit share amounts in order to ensure that actual

remuneration is appropriate and reflective of all performance-related and risk-adjusted factors.

Year-end awards are proposed by senior management to the Remuneration Committee for

approval. Both fiscal and non-fiscal aspects of an individual’s performance are considered when

determining awards.

Fixed and Variable Remuneration

Peel Hunt operates an integrated broking and advisory business and although there are different

revenue streams they are not distinguished as separate business areas for the purposes of

remuneration. In accordance with the proportionality rules set out in SYSC 19A3.3R, Peel

Hunt is considered to be a proportionality level 3 firm, and as such the ratio limiting fixed

versus variable remuneration has been dis-applied.

of 29

Code Staff Remuneration

The tables below set out the aggregate remuneration for Remuneration Code Staff:

As at 31 March 2016 Senior

management

Other

Code

Staff £’000s £’000s

Fixed compensation 1,300 1,654

Variable compensation

- Cash 2,895 1,785

4,195 3,439

Number of Code Staff 11 12

Sign-on and Severance Payments

The tables below set out the aggregate sign-on and severance payments made during the

financial year to 31st March 2016.

As at 31 March 2016 £’000s

Sign-on & Severance

Payments 318

318

Number of beneficiaries 7

As at 31 March 2016 £’000s

Severance Payments 28

of which;

highest award 15

Number of beneficiaries 2

Remuneration Bands

During the year ended 31st March 2016, no members or employees were remunerated by €1

million or greater.

of 29

Deferred Remuneration

Peel Hunt does not operate a deferred compensation scheme. No amounts were awarded or

paid during the year ended 31st March, and no vested or unvested awards remain outstanding.

10. Country by Country Reporting under CRDIV

The below disclosure is made as at 31st March 2016 and is taken from the Firm’s audited

financial statements for the year ending 31st March 2016.

The Firm is a leading provider of stockbroking services to small and mid-cap companies and

investors, principally in the UK market. The Firm received no public subsidies.

Entity Geographical

Location

Type Turnover Average no.

of

Employees

and

Members

Profit

before tax

Corporation

tax paid

£’000s £’000s £’000s

Peel

Hunt

LLP

UK Head

office

64,614 181 26,064 -

11. Leverage Ratio

This leverage disclosure is set out below as required by Article 451 of the CRR. The Firm is

not a credit institution and the use of leverage is not an integral part of its business model. The

Firm does not consider excess leverage to be a material risk. The ratio (on a transitional basis)

for 31 March 2016 is set out below and, at 11.1% (on a non-transitional basis, the ratio is also

11.1%), is considerably in excess of the 3% minimum requirement which is expected to

become mandatory from January 2018.

As at 31 March 2016 £’000s

Gross Assets (as per audited financial statements) 368,603

Less Intangible Assets (see Section 5.1.2) (453)

368,150

Tier 1 Capital 40,881

Leverage Ratio 11.1%

of 29

12. Annex 1 Balance Sheet Reconciliation Methodology

Balance sheet as in

published financial

statements

Under regulatory scope

of consolidation

Reference to

Annex 3

As at 31 March 2016 £'000 £'000

Assets

Cash and balances at central banks -

Items in the course of collection from other banks -

Trading portfolio assets 32,632

Financial assets designated at fair value 343,947

Derivative financial instruments 11

Loans and advances to banks 8,080

Loans and advances to customers -

Reverse repurchase agreements and other similar secured lending -

Available for sale financial investments -

Current and deferred tax assets -

Prepayments, accrued income and other assets -

Investments in associates and joint ventures -

Goodwill and intangible assets 323

of which goodwill -

of which other intangibles (excluding MSRs) 323 a

of which MSRs - c

Property, plant and equipment 1,725

Total assets 386,718

Liabilities

Deposits from banks 2,000

Items in the course of collection due to other banks -

Customer accounts -

Repurchase agreements and other similar secured borrowing -

Trading portfolio liabilities 15,295

Financial liabilities designated at fair value 329,958 2,192 b

Derivative financial instruments -

Debt securities in issue -

Accruals, deferred income and other liabilities -0

Current and deferred tax liabilities -

Of which DTLs related to goodwill - d

Of which DTLs related to intangible assets (excluding MSRs) - e

Of which DTLs related to MSRs - f

Subordinated liabilities -

of which amount eligible for T2 - -

Provisions 324

Retirement benefit liabilities -

Total liabilities 347,576

of 29

Balance sheet as in

published financial

statements

Under regulatory scope

of consolidation Reference

As at 31 March 2016 £'000 £'000

Shareholders' Equity

Paid-in share capital 39,140

of which amount eligible for CET1 39,140 c

of which amount eligible for AT1 - i

Retained earnings 2

of which amount eligible for CET1 2 d

Accumulated other comprehensive income -

of which amount eligible for CET1 - e

Total shareholders' equity 39,142

of 29

13. Annex 2 Description of the main features of Common Equity

Tier 1 and Tier 2 instruments issued

1 Issuer Peel Hunt LLP

2 Unique identifier N/A

3 Governing law(s) of the instrument English law

Regulatory treatment

4 Transitional Basel III rules Common Equity Tier 1

5 Post-transitional Basel III rules Common Equity Tier 1

6 Eligible at solo/group/group&solo Solo

7 Instrument type Limited Liability Partnership

(LLP) capital

8 Amount recognised in regulatory capital (£m) £39.14m

9 Par value of instrument £39.14m

10 Accounting classification Shareholders’ equity

11 Original date of issuance 10/12/2010

12 Perpetual or dated Perpetual

13 Original maturity date N/A

14 Issuer call subject to prior supervisory approval No

15 Optional call date, contingent call dates and redemption amount N/A

16 Subsequent call dates, if applicable N/A

Coupons / dividends

17 Fixed or floating dividend/coupon Floating

18 Coupon rate and any related index N/A

19 Existence of a dividend stopper No

20 Fully discretionary, partially discretionary or mandatory Fully discretionary

21 Existence of step up or other incentive to redeem No

22 Noncumulative or cumulative Noncumulative

23 Convertible or non-convertible Nonconvertible

24 If convertible, conversion trigger (s) -

25 If convertible, fully or partially -

26 If convertible, conversion rate -

27 If convertible, mandatory or optional conversion -

28 If convertible, specify instrument type convertible into -

29 If convertible, specify issuer of instrument it converts into -

30 Write-down feature No

31 If write-down, write-down trigger(s) -

32 If write-down, full or partial -

33 If write-down, permanent or temporary -

34 If temporary write-down, description of write-up mechanism -

35 Position in subordination hierarchy in liquidation (specify

instrument type immediately senior to instrument)

All subordinated liabilities

36 Non-compliant transitioned features No

37 If yes, specify non-compliant features -

14. Annex 3 Disclosure of nature and amounts of specific items on

own funds during the transitional period

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

(ANNEX 1)

Common Equity Tier 1 capital: instruments and reserves

1 Capital instruments and the related share

premium accounts

39,140 26 (1), 27, 28, 29

of which: Limited Liability Partnership

(LLP) capital

39,140 EBA list 26 (3) c

2 Retained earnings 2 26 (1) (c) d

3 Accumulated other comprehensive income

(and other reserves, to include unrealised

gains and losses under the applicable

accounting standards)

26 (1)

3a Funds for general banking risk 26 (1) (f)

4 Amount of qualifying items referred to in

Article 484 (3) and the related share

premium accounts subject to phase out from

CET1

486 (2)

Public sector capital injections

grandfathered until 1 January 2018

483 (2)

5 Minority Interests (amount allowed in

consolidated CET1)

2,192 84, 479, 480 b

5a Independently reviewed interim profits net

of any foreseeable charge or dividend

26 (2)

6 Common Equity Tier 1 (CET1) capital

before regulatory adjustments

41,333

Common Equity Tier 1 capital: regulatory adjustments

7 Additional value adjustments (negative

amount)

34, 105

8 Intangible assets (net of related tax liability)

(negative amount)

-129 36 (1) (b), 37, 472

(4)

-194 a

9 Empty Set in the EU

10 Deferred tax assets that rely on future

profitability excluding those arising from

temporary differences (net of related tax

liability where the conditions in Article 38

(3) are met) (negative amount)

36 (1) (c), 38, 472

(5)

11 Fair value reserves related to gains or losses

on cash flow hedges

33 (a)

12 Negative amounts resulting from the

calculation of expected loss amounts

36 (1) (d), 40, 159,

472 (6)

13 Any increase in equity that results from

securitised assets (negative amount)

32 (1)

14 Gains or losses on liabilities valued at fair

value resulting from changes in own credit

standing

33 (b)

15 Defined-benefit pension fund assets

(negative amount)

36 (1) (e) , 41, 472

(7)

16 Direct and indirect holdings by an

institution of own CET1 instruments

(negative amount)

36 (1) (f), 42, 472

(8)

BASEL III Pillar 3 Disclosures

31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

17 Holdings of the CET1 instruments of

financial sector entities where those entities

have reciprocal cross holdings with the

institution designed to inflate artificially the

own funds of the institution (negative

amount)

36 (1) (g), 44, 472

(9)

18 Direct and indirect holdings by the

institution of the CET1 instruments of

financial sector entities where the

institution does not have a significant

investment in those entities (amount above

the 10% threshold and net of eligible short

positions) (negative amount)

-52 36 (1) (h), 43, 45,

46, 49 (2) (3), 79,

472 (10)

19 Direct, indirect and synthetic holdings by

the institution of the CET1 instruments of


institution has a significant investment in

those entities (amount above 10% threshold

and net of eligible short positions) (negative

amount)

36 (1) (i), 43, 45,

47, 48 (1) (b), 49

(1) to (3), 79, 470,

472 (11)


20a Exposure amount of the following items

which qualify for a RW of 1250%, where

the institution opts for the deduction

alternative

- 36 (1) (k)

20b of which: qualifying holdings outside the

financial sector (negative amount)

36 (1) (k) (i), 89 to

91

20c of which: securitisation positions (negative

amount)

36 (1) (k) (ii)

243 (1) (b)

244 (1) (b)

258

20d of which: free deliveries (negative amount) - 36 (1) (k) (iii), 379

(3)

21 Deferred tax assets arising from temporary

differences (amount above 10% threshold,

net of related tax liability where the

conditions in 38 (3) are met) (negative

amount)

36 (1) (c), 38, 48

(1) (a), 470, 472 (5)


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

22 Amount exceeding the 15% threshold

(negative amount)

48 (1)

23 of which: direct and indirect holdings by

the institution of the CET1 instruments of



those entities

36 (1) (i), 48 (1)

(b), 470, 472 (11)


25 of which: deferred tax assets arising from

temporary differences

36 (1) (c), 38, 48

(1) (a), 470, 472 (5)

25a Losses for the current financial year

(negative amount)

36 (1) (a), 472 (3)

25b Foreseeable tax charges relating to CET1

items (negative amount)

36 (1) (l)

26 Regulatory adjustments applied to

Common Equity Tier 1 in respect of

amounts subject to pre-CRR treatment

26a Regulatory adjustments relating to

unrealised gains and losses pursuant to

Articles 467 and 468

26b Amount to be deducted from or added to

Common Equity Tier 1 capital with regard

to additional filters and deductions required

pre CRR

481

27 Qualifying AT1 deductions that exceed the

AT1 capital of the institution (negative

amount)

-272 36 (1) (j)

28 Total regulatory adjustments to Common

equity Tier 1 (CET1)

-453

29 Common Equity Tier 1 (CET1) capital 40,881

Additional Tier 1 capital: instruments


premium accounts

51, 52

31 of which: classified as equity under

applicable accounting standards

32 of which: classified as liabilities under

applicable accounting standards




AT1

486 (3)


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

34 Qualifying Tier 1 capital included in

consolidated AT1 capital (including

minority interests not included in row 5)

issued by subsidiaries and held by third

parties

85, 86, 480

35 of which: instruments issued by

subsidiaries subject to phase out

486 (3)

36 Additional Tier 1 (AT1) capital before

regulatory adjustments

-

Additional Tier 1 capital: regulatory adjustments


institution of own AT1 Instruments

(negative amount)

52 (1) (b), 56 (a),

57, 475 (2)

38 Holdings of the AT1 instruments of

financial sector entities where those entities

have reciprocal cross holdings with the

institution designed to inflate artificially the

own funds of the institution (negative

amount)

56 (b), 58, 475 (3)

39 Direct and indirect holdings of the AT1

instruments of financial sector entities

where the institution does not have a

significant investment in those entities

(amount above the 10% threshold and net

of eligible short positions) (negative

amount)

56 (c), 59, 60, 79,

475 (4)


institution of the AT1 instruments of



those entities (amount above the 10%

threshold net of eligible short positions)

(negative amount)

56 (d), 59, 79, 475

(4)

41 Regulatory adjustments applied to

additional tier 1 in respect of amounts

subject to pre-CRR treatment and

transitional treatments subject to phase out

as prescribed in Regulation (EU) No

575/2013 (i.e. CRR residual amounts)


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

41a Residual amounts deducted from

Additional Tier 1 capital with regard to

deduction from Common Equity Tier 1

capital during the transitional period

pursuant to article 472 of Regulation (EU)

No 575/2013

472, 472(3)(a), 472

(4), 472 (6), 472

(8) (a), 472 (9), 472

(10) (a), 472 (11)

(a)

41b Residual amounts deducted from


deduction from Tier 2 capital during the

transitional period pursuant to article 475 of

Regulation (EU) No 575/2013

477, 477 (3), 477

(4) (a)

41c Amount to be deducted from or added to


additional filters and deductions required

pre-CRR

467, 468, 481

42 Qualifying T2 deductions that exceed the

T2 capital of the institution (negative

amount)

56 (e)

43 Total regulatory adjustments to Additional

Tier 1 (AT1) capital

-

44 Additional Tier 1 (AT1) capital -

45 Tier 1 capital (T1 = CET1 + AT1) 40,881

Tier 2 capital: instruments and provisions


premium accounts

- 62, 63 b




T2

486 (4)

Public sector capital injections

grandfathered until 1 January 2018

483 (4)

48 Qualifying own funds instruments included

in consolidated T2 capital (including

minority interests and AT1 instruments not

included in rows 5 or 34) issued by

subsidiaries and held by third parties

87, 88, 480

49 of which: instruments issued by

subsidiaries subject to phase out

486 (4)

50 Credit risk adjustments - 62 (c) & (d)

51 Tier 2 (T2) capital before regulatory

adjustments

-


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

Tier 2 capital: regulatory adjustments


institution of own T2 instruments and

subordinated loans (negative amount)

63 (b) (i), 66 (a),

67, 477 (2)

53 Holdings of the T2 instruments and

subordinated loans of financial sector

entities where those entities have reciprocal

cross holdings with the institution designed

to inflate artificially the own funds of the

institution (negative amount)

66 (b), 68, 477 (3)

54 Direct and indirect holdings of the T2

instruments and subordinated loans of



investment in those entities (amount above

10% threshold and net of eligible short

positions) (negative amount)

66 (c), 69, 70, 79,

477 (4)

54a of which new holdings not subject to

transitional arrangements

54b of which holdings existing before 1

January 2013 and subject to transitional

arrangements


institution of the T2 instruments and

subordinated loans of financial sector

entities where the institution has a

significant investment in those entities (net

of eligible short positions) (negative

amount)

66 (d), 69, 79, 477

(4)

56 Regulatory adjustments applied to tier 2 in

respect of amounts subject to pre-CRR

treatment and transitional treatments

subject to phase out as prescribed in

Regulation (EU) No 575/2013 (i.e. CRR

residual amounts)

56a Residual amounts deducted from Tier

2capital with regard to deduction from

Common Equity Tier 1 capital during the



472, 472(3)(a), 472

(4), 472 (6), 472

(8) (a), 472 (9), 472

(10) (a), 472 (11)

(a)


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

56b Residual amounts deducted from Tier 2

capital with regard to deduction from

Additional Tier 1 capital during the



475, 475 (2) (a),

475 (3), 475 (4) (a)

56c Amount to be deducted from or added to

Tier 2 capital with regard to additional

filters and deductions required pre CRR

467, 468, 481

57 Total regulatory adjustments to Tier 2 (T2)

capital

58 Tier 2 (T2) capital

59 Total capital (TC = T1 + T2) 40,881

59a Risk weighted assets in respect of amounts

subject to pre-CRR treatment and

transitional treatments subject to phase out

as prescribed in Regulation (EU) No

575/2013(i.e. CRR residual amounts)

60 Total risk weighted assets 206,252

Capital ratios and buffers

61 Common Equity Tier 1 (as a percentage of

risk exposure amount)

19.82% 92 (2) (a), 465

62 Tier 1 (as a percentage of risk exposure

amount)

19.82% 92 (2) (b), 465

63 Total capital (as a percentage of risk

exposure amount)

19.82% 92 (2) (c)

64 Institution specific buffer requirement

(CET1 requirement in accordance with

article 92 (1) (a) plus capital conservation

and countercyclical buffer requirements,

plus systemic risk buffer, plus the

systemically important institution buffer

(G-SII or O-SII buffer), expressed as a

percentage of risk exposure amount)

5.13% CRD 128, 129, 130

65 of which: capital conservation buffer

requirement

0.63%

66 of which: countercyclical buffer

requirement

0.00%

67 of which: systemic risk buffer requirement

67a of which: Global Systemically Important

Institution (G-SII) or Other Systemically

Important Institution (O-SII) buffer

CRD 131


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

68 Common Equity Tier 1 available to meet

buffers (as a percentage of risk exposure

amount)

15.82% CRD 128

69 [non relevant in EU regulation]



Amounts below the thresholds for deduction (before risk weighting)

72 Direct and indirect holdings of the capital

of financial sector entities where the


investment in those entities (amount below

10% threshold and net of eligible short

positions)

- 36 (1) (h), 45, 46,

472 (10)


institution of the CET 1 instruments of



those entities (amount below 10%

threshold and net of eligible short positions)

36 (1) (i), 45, 48,

470, 472 (11)


75 Deferred tax assets arising from temporary

differences (amount below 10% threshold,

net of related tax liability where the

conditions in Article 38 (3) are met)

36 (1) (c), 38, 48,

470, 472 (5)

Applicable caps on the inclusion of provisions in Tier 2

76 Credit risk adjustments included in T2 in

respect of exposures subject to standardized

approach (prior to the application of the

cap)

- 62

77 Cap on inclusion of credit risk adjustments

in T2 under standardised approach

213 62

78 Credit risk adjustments included in T2 in

respect of exposures subject to internal

ratings-based approach (prior to the

application of the cap)

62

79 Cap for inclusion of credit risk adjustments

in T2 under internal ratings-based approach

62


31 March 2016

of 29

(A)

AMOUNT AT

DISCLOSURE

DATE £'000

(B)

REGULATION

EU 575/2013

ARTICLE

REFERENCE

(C)

AMOUNTS

SUBJECT TO

PRE-

REGULATION

EU 575/2013

TREATMENT

OR

PRESCRIBED

RESIDUAL

AMOUNT OF

REGULATION

EU 575/2013

(D)

RECONCILIATION

TO BALANCE

SHEET

REFERENCE

Capital instruments subject to phase-out arrangements

(only applicable between 1 Jan 2018 and 1 Jan 2022)

80 Current cap on CET1 instruments subject

to phase out arrangements

484 (3), 486 (2) &

(5)

81 Amount excluded from CET1 due to cap

(excess over cap after redemptions and

maturities)

484 (3), 486 (2) &

(5)

82 Current cap on AT1 instruments subject to

phase out arrangements

484 (4), 486 (3) &

(5)

83 Amount excluded from AT1 due to cap


maturities)

484 (4), 486 (3) &

(5)

84 Current cap on T2 instruments subject to

phase out arrangements

484 (5), 486 (4) &

(5)

85 Amount excluded from T2 due to cap


maturities)

484 (5), 486 (4) &

(5)

basel iii pillar 3 disclosures - amazon s3 · bis bank for international settlements board board of...

Documents