MARCUARD CYPRUS LTD Disclosure and Market Discipline

Transcription

MARCUARD CYPRUS LTD
Disclosure and Market Discipline
Report
April 2016
Table of Contents
1.
Introduction .................................................................................................................... 3
2.
Scope of Application.......................................................................................................... 4
3.
Risk Management Objectives and Policies ............................................................................. 5
4.
Governance Arrangements ................................................................................................. 6
5.
Own Funds ...................................................................................................................... 7
6.
Capital Requirements ........................................................................................................ 8
7.
Exposure to counterparty Credit risk and Credit Risk adjustments ............................................. 9
8.
Use of External Credit Assessment Institutions (ECAIs) .......................................................... 10
9.
Exposure to market risk ................................................................................................... 12
10.
Fixed Overheads Risk ....................................................................................................... 13
11.
Exposures in equities not included in the trading book ........................................................... 13
12.
Other Risks .................................................................................................................... 14
13.
a)
Investment risk ........................................................................................................... 14
b)
Liquidity risk ............................................................................................................... 14
c)
Legal, Compliance and Regulatory risk ............................................................................. 14
d)
Reputational risk .......................................................................................................... 15
e)
Strategic risk ............................................................................................................... 15
Remuneration policy ........................................................................................................ 15
Appendix 1............................................................................................................................... 17
MARCUARD CYPRUS LTD
Metis Tower, 3rd Floor | 363, 28th October Avenue | 3107 Limassol | Cyprus | Phone +357 25 81 48 70 | Fax +357 25 59 15 40 | www.marcuardheritage.com
Regulated by the Cyprus Securities and Exchange Commission under License No. 131/11
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1. Introduction
This report pertains to the “Specific publication requirements” as stipulated in paragraph 32 of Section 4
(“Supervisory measures and powers”) of the Cyprus Securities and Exchange Commission’s (hereinafter
“CySEC”) Directive DI144-2014-14 of 2014 and to the “Disclosures by institutions” as stipulated in Part Eight
of the Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms
of 2013. Under these regulatory obligations the firm is required to disclose information relating to the capital
it holds and each material category of risk it faces in order to assist clients and counterparties and to
encourage market discipline. These disclosures aim to provide information on the risk exposures faced by
the company and the risk assessment process it has in place to monitor these exposures. The risk
management objectives and policies of MARCUARD CYPRUS LIMITED are disclosed according to the
Articles 435 - 455 of Part Eight of Regulation (EU) No 575/2013 and Directive DI144-2014-15 on the
discretions of the CySEC arising from Regulation (EU) No 575/2013, where applicable. The Company may
omit one or more of the disclosures listed in Title II of Part Eight of the Regulation if the information provided
by such disclosures is not regarded as material, except for the disclosures of Articles: 435 (2)(c), 437 and
450.
Definitions:
Company:
Directive:
Regulation:
Frequency:
Media and Location:
Scope of report:
MARCUARD CYPRUS LIMITED;
Directive DI144-2014-14 of December 2014 of the CySEC for the Prudential
Supervision of Investment Firms of 2014 which repeals Directives DI144-2007-05 for
Capital Adequacy and DI144-2007-06 for Large Exposures of CIFs and Directive
DI144-2014-15 on the discretions of the CySEC arising from Regulation (EU) No
575/2013;
Regulation (EU) 575/2013 on Prudential Requirements for Credit Institutions and
Investment Firms (CRR), adopted by the European Union on 26th of June 2013;
The Company will be making these disclosures annually;
The
disclosure
will
be
published
on
the
Company’s
website:
https://marcuardheritage.com/en/marcuardcyprus/
The disclosures are in accordance with the audited financial statements of the
Company for the year ended 31 December 2015.
MARCUARD CYPRUS LTD
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2. Scope of Application
The Company was incorporated in Cyprus on 08.07.2010 as a limited liability company. The Company was
granted a license from CySEC to operate as a Cypriot Investment Firm (CIF) on 13.01.2011 and it has been
operating under license number 131/11. The Company has an investment in a subsidiary. No consolidation
of accounts is required for accounting and COREP purposes based on the relevant Directives’ requirements.
There are no current or foreseen legal impediments between the Company and the parent undertaking.
Under its CIF license the Company is entitled to provide the following investment and ancillary services:
Investment Services:
1. Portfolio Management
2. Investment Advice (extension of the original license obtained on 13 November 2012)
Ancillary Services:
1. Safekeeping and administration of financial instruments for the account of clients, including custodianship
and related services such as cash/collateral management;
2. Foreign exchange services where these are connected to the provision of investment services (solely in
respect to “Transferable securities”)
Other Activities:
1. Fund Management to the Alternative Investment Fund with Limited Number of persons (approval
obtained on 22 October 2015)
Organizational Structure
MARCUARD CYPRUS LTD
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3. Risk Management Objectives and Policies
Management recognizes that risk is embedded in all of the Company’s activities and that is vital to identify,
assess, monitor and control each type of risk the Company is exposed to. The Company’s risk management
framework encompasses the type of risks to be managed, the processes / systems and procedures to manage
these risks, and the roles and responsibilities of all individuals involved in risk management. Risk is about
uncertainties that may have either a positive (constructive) or negative (destructive) impact. A risk is an
opportunity that will not be realized or a threat that an event or action will materialize. That missed
opportunity or unmanaged threat in turn damages an organization’s ability to deliver results for stakeholders
and to achieve the business objectives.
The Company’s Management is primarily responsible for managing risks and ensuring that the Company’s
business strategy does not expose the Company to undue risk. It should be noted that due to the Company’s
size, simple internal structure and the nature, level of complexity of the Company’s activities, and in line with
the provisions of the Law, the risk management duties are performed by the Risk Manager, who combines
this function together with the Compliance and Anti-Money Laundering function in the Company.
The ongoing responsibilities of management are to:








Ensure that the Company’s strategy in terms of the development of existing and new services is in
line with the Company’s risk profile;
Ensure that the Company has sufficient capital and reserves to support its risks, and take appropriate
action where necessary;
Develop and maintain the necessary risk management policies;
Ensure appropriate strategies are in place to mitigate or transfer risks;
Establish and maintain policies and objectives which do not expose the Company to substantial risk;
Establish and maintain an adequate system of internal controls which can prevent the assumption of
unnecessary risk;
Help create a culture of risk awareness within the Company;
Monitor the Company’s capital adequacy and liquidity levels at all times to ensure compliance with
the applicable laws and directives.
The Company’s risk management framework aims to be proportionate to the scale, nature and level of
complexity of its business, and is comprised of the following components:
1.
2.
3.
4.
5.
6.
7.
8.
Compliance;
External Audit;
Internal Audit (outsourced);
Internal Control (Board of Directors, Senior Management);
Risk Management;
Investment Committee;
Investment Advisory Committee;
Internal Capital Adequacy Assessment Process (ICAAP).
As indicated above in the organisational structure, due to the size, nature of business, the level of complexity
and investment services and activities of the Company, the Risk Function is performed by the Risk Manager
and the main authority and statute of this function is:
-
-
To establish, implement and maintain adequate risk management policies and procedures which
identify the risks the Company is facing during its operation;
To set together with the Board of Directors the level of risk tolerated by the Company;
To monitor on an on-going basis the adequacy and effectiveness of the Company’s risk management
policies and procedures, the level of compliance with the implemented risk management policies, the
adequacy and effectiveness of measures taken to address any deficiencies in those policies by the
relevant persons of the Company;
To ensure that appropriate strategies are in place to mitigate or transfer risks;
To ensure that risk management is an integral part of the Company’s process of the decision making
and capital planning;
To help to create a culture of a risk awareness within the Company.
The risk reporting is aimed to address to the Board of Directors a general overview of the Company’s risks
and specifically identifies the areas with higher risk which need to be improved. On an annual basis, the
Board of Directors receives the following reports which are prepared by the respective officers:
MARCUARD CYPRUS LTD
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-
Annual Report on Compliance with Money Laundering and Terrorist Financing preventive issues (Anti
Money Laundering Report),
Annual Compliance,
Annual Internal Auditors and
Annual Risk Management reports.
The Board of Directors reviews and discusses these reports at the Board of Directors meeting. The minutes
are produced to capture the decisions taken. Further the minutes and reports are submitted to CySEC within
the deadlines as set up in the Directive DI144-2007-01&01(A)&01(B). The method of submission of the
Annual Anti Money Laundering Report for the year 2015 and respective Board of Directors Minutes has been
changed from hard copies submission to the electronical one, following CySEC instructions of the Circular
C119.
The above annual reports and regular Common Reporting (“COREP”) forms as part of the CRD IV Package
which is based and consists of the Capital Requirements Directive (“CRD” or Directive 2013/36/EU) and the
Capital Requirements Regulation (“CRR” or Regulation (EU) 575/2013) are used by the Company as the
main tools for mitigating risks and for monitoring the continuing effectiveness of these mitigating factors /
measures. The Company does not use hedging due to its limited size of exposures.
The Company’s Board of Directors considers the risk management arrangements as sufficient.
Due to the nature, scale and level of Company’s business complexity, i.e. that:
The Company’s main activity is the provision of Portfolio Management services;
The Company does not hold Clients’ assets nor any Clients’ instruments.
Hence the overall risk profile associated with the business operations and strategy is considered as medium
to low. The Company does not use a specific ratio, except for the calculation of the Capital Adequacy and
certain prudential requirements on a regular basis.
4. Governance Arrangements
According to the amendments in the main Law for Investment Firms in Cyprus implemented as from
December 2014 the members of the Company’s Board of Directors, other than the general requirements to
be of sufficiently good repute and possess sufficient knowledge, skills and experience to perform their duties
at all times, they shall fulfill the following requirements as well:
1) All members of the board of directors shall commit sufficient time to perform their functions in the
CIF;
2) Each member of the board of directors shall act with honesty, integrity and independence of mind
to effectively assess and challenge the decisions of the senior management where necessary and to
effectively oversee and monitor the decision-making of the management;
3) That a director cannot hold more than one of the following combinations:
- one executive directorship with two non-executive directorships;
- four non-executive directorships.
For the purposes of the above, executive or non-executive directorships held within the same group shall
count as a single directorship.
Directorships in organisations which do not pursue predominantly commercial objectives shall not count for
the purposes of the above.
CySEC may allow members of the board of director to hold one additional non-executive directorship.
The above requirements are known to the existing members of the board of Directors from the preceding
year and are always taken into consideration when reviewing the directorships.
The recruitment requirements for selection of members of the board of Directors are set up in the internal
policies in accordance with the requirements of the Law. The persons proposed for the appointment should
have specialized skills and/or knowledge to enhance the collective knowledge of the Board of Directors and
must be able to commit the necessary time and effort to fulfil their responsibilities ensuring in parallel that
MARCUARD CYPRUS LTD
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the board of Directors is adequately diversified. Prior to any appointment a candidate shall obtain the approval
from CySEC as confirmation that the candidate has successfully passed the Regulator’s assessment.
Main factors considered by the board of Directors in its review of the potential candidates include:
Specialized skills and/or knowledge in accounting, investment and ancillary services, business
administration and other related subjects;
Integrity, honesty and the ability to generate Clients’ and public confidence;
Demonstrated independence of mind in monitoring the decision-making of the management;
Knowledge and experience in provision of the investment services.
The current composition of the Company’s Board of Directors is considered as sufficiently diversified. The
members of the board have post graduate and professional qualifications, such as: MBA, ACA, BEng, ACCA,
TEP etc as well as experience in legal and fiduciary services. They average 15-20 years of experience in such
areas like Financial and Fiduciary Services.
5. Own Funds
The Company calculates its regulatory own funds and capital adequacy ratio on a quarterly basis. According
to the CRD IV Directive there are three new Own Funds categories: Common Equity Tier 1 (CET1), Additional
Tier 1 and Tier 2. The Company’s Eligible Own Funds include only CET1. CET1 capital is the core measure of
the Company’s financial strength from a Regulator’s point of view. It is composed of the share capital and
retained earnings.
As required by the Article 437 (1)(b) of the Regulation the Company shall disclose its capital instruments as
at 31.12.2015, using the format set out in Annex II and according to the instructions provided in Annex III
of the EU Regulation 1423/2013. The Company’s capital base comprises from the ordinary shares (CET 1)
(please refer to Appendix 1 for the said disclosure).
According to the requirements of the Article 437(1)(a) of the Regulation below is the balance sheet
reconciliation information of own funds items to the audited financial statements:
As per Balance Sheet
Share Capital
550.000
Preference Shares
611
Retained Earnings
576.494
Total Equity as per Balance Sheet
1.127.105
Less Intangible Assets
(700)
Less preference shares that cannot be grandfathered
(611)
Capital Base as per COREP
1.125.794
To fulfil the requirements of the Regulation to disclose the components of the regulatory capital for the
period from 31.03.2014 to 31.12.2017 the below table indicates the transitional own funds disclosure
based on the template provided in Annex VI and in accordance with the instructions in Annex VII of the EU
Regulation 1423/2013 where applicable to the Company.
MARCUARD CYPRUS LTD
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Own Funds disclosure
Transitional
position
as of 31.12.2015
(€, rounded up to
thousands)
Fully loaded
subject to preregulation (EU) No
575/2013 treatment
or prescribed
residual amount of
Regulations (EU) No
575/2013
(€, rounded up to
thousands)
CET 1 capital: instruments and the related
share premium accounts
550
550
Retained earnings
576
576
1126
1126
Intangible assets
(1)
(1)
Additional Tier 1 (AT1) capital
(1)
(1)
1126
1126
CET 1
22,76%
22,76%
Tier 1
22,75%
22,75%
Total capital
22.75%
22,75%
Common Equity Tier 1 (CET1) capital
before regulatory adjustment
Common Equity Tier 1 (CET1) capital:
regulatory adjustments
Tier 1 capital (T1=CET1+AT1)
Capital Ratios
6. Capital Requirements
According to the Directive, the Company’s Board of Directors has decided that the most appropriate method
for measuring the capital requirement is the Credit and Market Risk using the Standardized Approach.
According to the Regulation, based on services the Company provides as per its license, Fixed Overheads are
used as another appropriate method for measuring the capital requirement.
The total Capital Requirements as at 31 December 2015 are shown in the table below:
Risk weighted exposure amounts for credit, counterparty credit and dilution risks and
free deliveries
Total Risk exposure amount for position, foreign exchange and commodities risks
(€, rounded up
to thousands)
4,340
606
Additional risk exposure amount due to Fixed Overheads
Total Risk Exposure Amount
CET1 Capital ratio
T1 Capital ratio
Total Capital ratio
0
4,946
22.76%
22.75%
22.75%
MARCUARD CYPRUS LTD
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The Own Funds requirement as per Article 147 of the Regulation for each applicable exposure class as of
31.12.2015 is as follows:
Exposure Class
Exposure Value
Own Funds
(€, rounded up to
requirement (€,
thousands)
rounded up to
thousands)
Public Sector Entities
46
4
Institutions
659
32
Corporates
619
157
Equity
169
14
Other
75
6
Total
1568
213
According to the Article 92 of the Regulation EU No. 575/2013 a CIF shall at all times satisfy the following
own funds requirements:
CET1 Capital ratio
T1 Capital ratio
Total Capital ratio
4.5%
6.0%
8.0%
Fixed Overheads requirement is 25% of the total Fixed Overheads and as at 31 December 2015 the amount
was €193 750.
As indicated in the Risk Exposure table above, the CET 1 Capital ratio, T1 Capital ratio and Total Capital ratio
of the Company as of 31 December 2015 are 22.76%, 22.75% and 22.75% respectively, which is significantly
higher than the minimum required respective percentages of 4.5%, 6% and 8%.
During the year 2015 the Total Capital ratio never fell below 8%, which is the deemed minimum required by
CySEC according to the previous and current capital requirements.
The Company uses the results of its ICAAP exercise as a measurement of its internal capital requirements as
well. Due to the small size of operation and nature of business the Risk Manager calculates internal capital
to support current and future activities by using COREP forms on a monthly basis. The results are reported
to Management and Management takes decisions and actions accordingly.
The process followed for the preparation of the ICAAP document consists of the following steps:
• Identifying risks and assessing the management of those risks;
• Documenting the techniques used for the quantification of the risks identified;
• Calculating the amount of regulatory and internal capital required for each type of risk identified;
• Determining the need for additional capital buffers to ensure the Company has enough capital over a cycle
as well as the case of a stress scenario.
7. Exposure to counterparty Credit risk and Credit Risk adjustments
The Company adopts the Standardized approach for Credit Risk.
In the ordinary course of business, the Company is exposed to credit risk, which is monitored through various
control mechanisms. Credit risk arises when a failure by counterparties to discharge their obligations could
reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. Cash
balances are held with local financial institutions and foreign financial institutions which are rated above
investment grade. The Company has policies to limit the amount of credit exposure to any debtor or financial
institution.
Specifically the Company defines:
MARCUARD CYPRUS LTD
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-
a financial asset as past due when the counterparty has failed to make a payment when contractually
due. If payments have not been made within 90 days from their contractual payment date they are
classified as non-performing;
-
a financial asset as impaired and recognises a provision for impairment when there is objective
evidence that the Company will not be able to collect all amounts due according to the original terms
of the receivables. Among other, significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or delinquency in payments are considered indicators that a receivable
is impaired. The amount of the provision is the difference between the carrying amount and the
recoverable amount of the receivable, being the present value of estimated future cash flows,
discounted at the effective interest rate.
With regards to past due, impairments and provisions, the Company has adopted the definitions and
accounting recognition criteria as these are specified in the applicable International Financial Reporting
Standards (IFRSs). During the year 2015 the invoices issued by the Company were timely set off, there was
only one case with indications for impairment. The Company didn’t have any past due exposures either.
In line with the Company’s audited Financial Statements, provisions are recognised when the Company has
a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources
will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not
recognised for future operational losses.
Provisions are measured at the present value of the expenditure expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessment of the time value of money and the
risks specific to the obligations.
As at 31 December 2015, the Company did not recognise any provisions. Additionally it is noted that the
Company does not recognize any value adjustments.
8. Use of External Credit Assessment Institutions (ECAIs)
For the calculation of credit risk, under the Standardised Approach, the Company uses Fitch Sovereign
Ratings as its nominated External Credit Assessment Institution. The use of Fitch Sovereign Ratings is in
compliance with the requirements of the Directive and is used consistently for all exposures in a specific asset
class. Public sector Entities are unrated. Their credit risk and risk for unrated corporates is calculated
according to Fitch Sovereign Ratings for the Country.
The Company’s exposures to geographical location, maturity, significant industry and average exposures
over the period are presented in the tables below. It is noted that the Company’s exposures primarily consist
of exposures with banks where cash deposits are held and receivables from the various parties it cooperates
with. The Company does not use any credit risk mitigation techniques.
The Company’s exposures as at 31 December 2015 are presented (by residual maturity, geographic
distribution and significant industries) in the following tables:
Exposures before and after Credit Risk Mitigation (CRM)
Value of Exposure
Provisions
Average Exposures
before/after CRM
(€, rounded up to
thousands)
46
46
Institutions
659
598
Corporates
619
600
Equity
169
170
Other
75
75
Total Exposures
1568
1489
Asset Class
MARCUARD CYPRUS LTD
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Geographic
Distribution
Asset Class
Public
Sector
Entities
Institutions
Corporates
Equity
Others
Fitch’s
Sovereign
Rating
Exposure Amount
Cyprus
British
Islands
46
(€, rounded up to thousands)
240
135
169
Virgin
Cayman Islands
UK
108
Guernsey
Switzerland
N/A
112
N/A
184
AA+
8
N/A
AAA
27
46
659
B-
35
311
Singapore
Total
exposures
75
501
AAA
169
75
The Company has no exposure to SMEs.
Asset Class
Institutions
Corporates
Equity
Others
Total Exposures
Exposure Amount by residual maturity (€, rounded up to thousands)
< 1 month
1-3 months
3-12 months
> 12 months
46
659
501
117
175
2
39
34
661
501
39
372
The majority of exposures to institutions such Barclays and JB Bank are with an effective maturity of less
than a month and the risk weight that is assigned is 20%. The minority of exposures is with the local
institutions with an effective maturity of less than a month and the risk weight that is assigned is 100% for
Hellenic Bank and 150% for Bank of Cyprus.
The exposure to the Investor’s Compensation Fund was classified as exposure to “Public Sector Entities” with
risk weight of 100%.
The exposure to the Clients and different counterparties was classified as exposure to “Corporates”. As none
of them are public Companies, they are not listed on the stock markets and don’t have external ratings.
Therefore, their credit risk weight is 100%. Exempted from deduction shall be risk weighted at 150%
according to the requirements of EU Regulation.
The exposure to trade and other receivables along with the total cost of property, plant and equipment were
classified as “other” with assigned risk weight of 100%.
MARCUARD CYPRUS LTD
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Exposure by significant industries (€, rounded up to thousands)
Asset Class
Banking
Public Sector
Entities
Institutions
Corporates
Funds
Investment
firms
Other
Grand Total
46
46
568
659
908
Equity
169
169
Others
Total Exposures
75
858
75
1857
659
156
659
184
156
184
The general ECAI association with each credit quality step complies with the standard association according
to the Directive.
Credit
quality
step
Fitch’s
assessments
Corporate
Institutions (includes banks)
Sovereign
Credit assessment
method
method
Maturity > Maturity 3
3 months
months or
less
20%
20%
20%
Sovereign
1
AAA to AA-
20%
2
3
A+ to ABBB+ to BBB-
50%
100%
50%
100%
50%
50%
20%
20%
20%
50%
4
5
BB+ to BBB+ to B-
100%
150%
100%
100%
100%
100%
50%
50%
100%
100%
6
CCC+ and below
150%
150%
150%
150%
150%
0%
9. Exposure to market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will
affect the Company’s income or the value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while
optimizing the return on risk.
The Company adopted the Standardized approach for Market risk.
(a) Interest rate risk
Interest rate risk is the risk that the value of financial assets or liabilities may fluctuate as a result of changes
in the market interest rate environment which might include changes in the overall level of interest rates,
the volatility of interest rates and the interest rate spreads.
The Company does not have significant long-term interest bearing assets. As a result, the Company’s
Management has decided that it is not necessary to perform an analysis on the value of earnings or its
economic value following an upward or downward change in interest rates to assess capital requirements
against interest rate risk. Nonetheless, Management monitors interest rate fluctuations on a continuous basis.
(b) Foreign Exchange Risk
The main sources of foreign exchange risk for the Company are exposures in foreign currencies from fees
receivable.
Foreign exchange Risk as at 31 December 2015 was as follows:
All positions
Net positions
MARCUARD CYPRUS LTD
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Total positions in non-reporting currencies
Long
660
Short
54
Long
606
Short
0
Currency positions
Euro
Pound Sterling
CHF
USD
823
2
20
638
698
0
26
28
125
2
0
610
0
0
6
0
As per the requirements of Article 92 (3) (b) and (c) the Company is exposed to the foreign exchange risk
only. Own Funds requirements are as per the statement dated 31.12.2015 is €48 000. It is noted that the
Company has no capital requirements against position, settlement and commodities risks.
10. Fixed Overheads Risk
According to the new Regulation requirements the Company uses an alternative method to calculate their
total risk exposure based on their Fixed Overheads as CIFs which provide services as per the Article 95 (2)
(Portfolio Management) shall use the specific formula for calculation Fixed Overheads Risk Exposure amount.
Calculated amounts are indicated in the table below.
Fixed Overheads
Fixed Overheads Requirement (25% * Fixed Overheads)
Fixed Overheads risk exposure amount
Total risk exposure amount (as per Article 92(3), excluding item (e))
(€, rounded up to
thousands)
775
194
2422
4946
The Company’s fixed overhead requirement amounts to €194k.
It worth noting that overall operational risk of the Company had a positive impact after a restructuring
exercise of Marcuard Group. That is because one would expect that being part of a bigger group with a
stronger name in the market will assist the Company to establish easier relationships with counterparties,
negotiate better rates / conditions for new relationships and have smoother processes / interactions as part
of a bigger and more reputable group of companies.
The Company uses efficient systems and tools such as Wealth Relationship Manager (WRM) together with
Client Due Diligence System (CDDS) for Clients’ data. It is implemented by the Group entities to improve
Client data storage and different types of monitoring. WRM is used for on-boarding new Clients and for
monitoring and reviewing existing ones, CDDS is used for daily scanning of the Clients data against new
information, sanction lists etc. Clients’ data now is stored centrally in WRM and summary of the portfolio
information is linked to each respective Client portfolio. This implementation has a positive impact on the
operations of the Company.
Such tools like PortfolioNet, Webfolio are used for monitroing, reporting for the Clients’ model portfolios.
Installation and usage of the local server with back up solutions had a positive impact on the business
continuity processes of the Company and caused positive impact on the operations as well.
11. Exposures in equities not included in the trading book
The shareholding in the Company’s subsidiary is classified in the non trading book. The Company acquired
dividend shares in a fellow subsidiary company of Marcuard Group (Marcuard Trust (Cyprus) Ltd) which
provides Fiduciary and Administrative services. MTC is an operating Company of Marcuard Heritage Group.
It is noted that the shares of the said subsidiary are not exchange traded. Furthermore, it is noted that during
the year there were no disposals of shares that gave rise to a realized / unrealized profit or loss.
MARCUARD CYPRUS LTD
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The value of this investment amounts to €411k. For the purposes of calculating capital requirements, the
said investment has been treated as a Qualifying Holding outside the Financial Sector and treated in line with
the requirements of Article 89.
The Company expects to have real returns on this investment and to recover the funds invested, within the
coming years, from the dividend distribution.
12. Other Risks
In the course of its operating activities, the Company has to face and tackle some other risks like:
a) Investment risk
b) Liquidity risk
c) Legal, Compliance and Regulatory risk
d) Reputational risk
e) Strategic risk
a) Investment risk
During the year 2015 the Company continued its holding in Marcuard Trust (Cyprus) Limited (MTC - company
of Marcuard Group). The purpose of MTC shares acquisition was to facilitate the expansion of fiduciary
services to existing and new clients of the Company through a separate entity which is regulated by the
Institute of Certified Public Accountants of Cyprus (ICPAC).
As per the Memorandum and Articles of Association of MTC there are two classes of shares, which are the
ordinary and the voting preference shares. Its total issued share capital consists of 1.100 shares (1.000
ordinary shares and 100 voting preference shares with nominal value €1 each). Ordinary shares entitle
investors to participate in the distribution of dividends whereas the voting preference shares entitle investors
to participate and vote in general meetings. The company does not hold any voting preference shares in this
entity. However, the activities of MTC are in substance being conducted on behalf of the Company according
to its business needs so that the company obtains benefits from the operations of MTC, therefore this
investment is accounted for as an investment in subsidiary and is measured at cost less impairment. There
was only one provision for impairment made in the year 2015.
This investment can be treated as a normal to low risk as it is an operating company with increasing volume
of operations and income. The Company expects to have fair real returns on this investment and to recover
funds invested within coming years from dividend distributions. For the year 2015 there is no dividend
payment expected. The management of the Company has decided to assess the risks (credit, market,
liquidity) related to this investment based on the regular management account reports and financial results
of the acquired investment which is included in non-trading books of the Company.
b) Liquidity risk
Liquidity risk is defined as the risk to the Company’s earnings or capital from its inability to meet its financial
obligations as they fall due. It arises from the management of its assets and liabilities. The Company
maintains sufficient liquidity to manage known and unanticipated funding needs. Liquidity is managed in
accordance with a framework of policies and controls such as:


maintaining sufficient cash deposits and highly liquid assets;
performing monthly reconciliations of cash balances and payments.
All the Company’s financial assets and liabilities, with the exception of the contribution to the Investors’
Compensation Fund, are classified as short term and the Company maintains adequate deposits for the
repayment of its obligations.
c) Legal, Compliance and Regulatory risk
Compliance risk is the risk of financial loss (including fines and other penalties) which could arise as a result
of a direct breach or non compliance with the current legislation, agreements with third parties or ethical
standards of business.
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The risk is mitigated via in-house supervision applied by the compliance officer as well as other monitoring
controls applied such as the annual review by the outsourced (independent) internal auditors.
The Company’s Compliance and Regulatory risk has increased in 2015 due to the fact that the Company has
extended its authorized regulatory activities with the provision of such services like Fund Management of the
Alternative Investment Funds with Limited number of persons.
The Company is subscribed under the Group Policy for coverage by Professional Indemnity Insurance.
d) Reputational risk
The risk of loss of reputation arising from the negative publicity relating to the Company’s operations
(whether true or false) may result in a reduction of its client base, reduction in revenue and possible legal
actions against the Company.
Reputational risk can derive from financial or operational activities or have an effect or outcome with financial
or operational consequences. It is generally connected with hazard that has a social or ethical dimension,
rather than purely a financial or operational one. For example, poor customer service, fraud or theft, customer
claims and legal action.
Reputation is the most valuable asset, one that distinguishes the Company among the rest. Therefore, the
Company has applied policies and procedures to minimize this risk.
Reputation is protected, sustained and enhanced through the active management of issues and relationships,
both at high level and through our day to day routine contacts. No customer complaints have been made to
date.
The reputation of the Company is less affected to a large part due to the fact that it is part of the Marcuard
Heritage Group with around 2.5 billion US Dollar assets under management. Some other entities of the Group
are also regulated by local authorities, such as FINMA, Monetary Authority of Singapore (MAS). The Board
and Senior Management of the Company and the Group level are composed of high-level experienced
professionals with decades of experience in Wealth / Asset Management gained with top-tier institutional
names at the highest level. Furthermore, the overall Group’s reputation is not impacted as the Company only
consists of a small part of the overall operations and Assets under Management of the Group. The reputation
of the Marcuard Heritage Group is of significant value in the Swiss Financial Market and is expanding abroad.
e) Strategic risk
A key element of corporate planning is the identification of potential new risks that may appear over time.
Business strategies as well as credit and market risk appetite are agreed by the Board at least annually after
a review of the business environment and consideration of key risks. Independent internal audit and reporting
to the Management and to the Board helps achieve the independent oversight of the development and
effectiveness of the strategic goals.
Audited financial reports are prepared annually and are used as a benchmark for the performance of the
Company.
13. Remuneration policy
The Company has in place a remuneration policy which complies with the CySEC requirements and the new
Regulation.
Due to the size and nature of its operations, the Company has not set up a Remuneration Committee and
instead the responsibilities of the Remuneration Committee are performed by the Board of Directors. The
Company’s Remuneration Policy addresses both the fixed and variable component of remuneration, the
governance around remuneration, the characteristics of performance measurement, determination of pay,
etc. As per the Company’s Policies and Procedures manual the remuneration of the Directors is determined
during the Company’s Annual General Meeting.
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The remuneration mechanism incorporates principles that take into account skills required in each
department and performance while supporting at the same time long-term business objectives. The criteria
for performance measurement are based on the assessment of the Company’s annual results and the
feedback that is obtained from clients and counterparties within the Marcuard Group as part of the annual
performance review according to the Group Policy – Employees Handbook, do not include entitlement to
shares, options or variable components of remuneration.
The total remuneration consists of:

Fixed component: The fixed component reflects the educational level, experience, accountability
and the role of the individual employee, including responsibility and job complexity, performance and
local market conditions. The main fixed remuneration element is the employee’s salary. Potential
fixed remuneration increases are accommodated during an annual salary review process. Company
performance and outlook, as well as market data and employee performance are taken into account
in fixed remuneration increase proposals.

Variable component: It is upon the Company’s discretion to award variable remuneration, primarily
based on an assessment of the Company’s performance. The variable components of the Company’s
remuneration are given in the form of a profit sharing bonus. It is noted that a bonus is given not
only based on the Company’s and the employee’s performance but also based on the performance
of the Group as a whole.
The company has two executive members of the Board of Directors and two non-executive. During 2015, the
Company paid an aggregate amount of €247.220 including both fixed and variable components as
remuneration to the key risk taker – an executive member of the Board. It was the only key management
compensation. The ratio between fixed and variable remuneration was followed as indicated in the Article 94
(1)(g) of CRD IV Directive and is approximately 1:0,4. The variable component was in the form of bonus
payable in cash only.
It is noted that during 2015, there was no outstanding deferred remuneration and no share options were
offered, no new sign-on and severance payments made, no amounts of severance payments awarded to the
members of the Board of Directors of the Company. There were no individuals being remunerated €1 mio or
more during 2015.
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Appendix 1
№
Description
31.12.2015
1
Issuer
N/A
2
Unique identifier (ISIN etc)
N/A
3
Governing Law (s) of the instrument
N/A
Regulatory treatment
4
Transitional CRR rules
Common Equity Tier 1
5
Post-transitional CRR rules
Common Equity Tier 1
6
Eligible at solo/(sub-) consolidation/solo and (sub-) consolidated
Solo
7
Instrument type
Ordinary shares
8
Amount recognized in regulatory capital
550 000
9
Nominal amount of instrument
550 000
9(a)
Issue price
€1
9(b)
Redemption price
N/A
10
Accounting classification
Shareholder’s equity
11
Original date of issuance
N/A
12
Perpetual or dated
Perpetual
13
Original maturity date
N/A
14
Issuer call subject to prior supervisory approval
N/A
15
Optional call date, contingent call dated and redemption amount
N/A
16
Subsequent call dates, if applicable
N/A
Coupons / dividends
N/A
17
Fixed or floating dividend/coupon
Floating
18
Coupon rate and any related index
N/A
19
Existence of a dividend stopper
N/A
20(a)
Fully discretionary, partially discretionary or mandatory (in terms of
timing)
N/A
20(b)
Fully discretionary, partially discretionary or mandatory (in terms of
amount)
N/A
21
Existence of step up or other incentive to redeem
N/A
22
Noncumulative or cumulative
Noncumulative
23
Convertible or non-convertible
Non-convertible
24
If convertible, conversion trigger (s)
N/A
25
If convertible, fully or partially
N/A
26
If convertible, conversion rate
N/A
27
If convertible, mandatory or optional conversion
N/A
28
If convertible, specify instruments type convertible into
N/A
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29
If convertible, specify issuer of instrument it converts into
N/A
30
Write-down features
N/A
31
If write-down, write-down trigger(s)
N/A
32
If write-down, full or partial
N/A
33
If write-down, permanent or temporary
N/A
34
If temporary write down, description of write-up mechanism
N/A
35
Position in subordination hierarchy in liquidation
N/A
36
Non-compliant transitioned features
N/A
37
If yes, specify non-compliant features
N/A
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MARCUARD CYPRUS LTD Disclosure and Market Discipline

Transcription

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