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Capital and Capital base

Capital adequacy for investment firms

Investment firms are regulated by the Investment Firm Regulation (IFR), containing regulations regarding own funds composition and own funds requirements, and Investment firm directive (IFD) covering, among other things, start-up capital requirements and internal processes to assess capital and liquidity. SEB Asset Management AB is a class 2 investment firm, that is other than a small and non-interconnected investment firm (class 3). Investment firms categorized as systemically important and are authorized to trade in own accounts are class 1 firms and applies the same capital requirements as credit institutions (CRD/CRR).

The purpose with the IFR is to set sufficient capital requirements in relation to the risks (risks to clients, risks to market and risks to firms) that are associated with the operations typical of an investment firm. IFR contains rules calculating requirements based on the risks in the Company’s operations, known as K-factors, as well as the ratio to the investment firm’s own funds.

IFR also outlines the requirements on Own funds in terms of quality of the capital consisting of CET1 and Additional tier 1 capital.

Capital adequacy

SEB Asset Management AB follows the capital adequacy requirements according to the Investment Firm Regulation (IFR)

In Article 9 and 10, the composition of the own funds is described. Article 11 states that the own funds are expected to always have own funds greater than the highest of the following three capital requirements:

  • The requirements calculated as one quarter of the fixed overhead of the preceding year

  • The permanent minimum capital requirement

  • The sum of the K-factors.

In accordance with Article 54, the Company shall report the own funds, capital adequacy and liquidity requirements to the Swedish Financial Supervisory Authority on a quarterly basis. 

Own funds requirement calculated in accordance with fixed overheads

The fixed overhead requirement consists of one quarter of the fixed overheads of the preceding year. Since SEB Asset Management AB is a newly established investment firm and has not been in business for one year from the date it started to provide authorized services, calculations are based on the projections for the first 12 months, as submitted with the application for authorization.

Permanent minimum capital requirement

The permanent minimum capital requirement is defined as the required initial capital for the investment firms specified in Article 9 of Directive (EU) 2019/2034. Based on the investment activities operated by SEB Asset Management AB, the initial capital shall be EUR 75,000.

K-factor requirements

The K-factors are divided into the three categories 1) risks to clients 2) risks to market and 3) risks to the firm, which are based on the risks posed by the investment firm. Each category consists of numbers of K-factors that quantify the risk exposure for the Company.

Risk to clients (RtC): partly applicable for SEB Asset Management AB

  • K-AUM — Assets under management
  • K-ASA — Assets safeguarded and administrated
  • K-COH — Client orders handled
  • K-CMH — Client money held

Risk to market (RtM): not applicable for SEB Asset Management AB

  • K-NPR Net position risk
  • K-CMG Clearing member guarantee

Risk to firm (RtF): not applicable for SEB Asset Management AB

  • K-TCD – Trading counterparty default
  • K-DTF - Daily trading flow
  • K-CON - Concentration risk