The Dutch Central Bank (De Nederlandsche Bank, DCB) recently announced that, in the coming period, it will be paying increased attention to the fixed overheads requirement (vastekostenvereiste, FOR), that must be met by licensed AIFMs, managers of UCITS, and investment firms (BOBIs). In 2025, DCB will conduct investigations into how BOBIs determine and report the FOR. Relevant parties are expected to carefully analyze and, if necessary, refine the calculation and reporting of the FOR based on the additional information provided by DCB.
Background
The DCB has communicated this to BOBIs through a letter and an update on its website. In these communications, the DCB noted that many supervised institutions make significant errors in calculating total costs, determining deductions, and assessing the amounts of these deductions. The DCB has expressed concern over the following consequences:
- Incorrect FOR calculations result in incorrect reporting of the capital requirement, potentially leading to insufficient capital being held by the institution.
- Institutions may lack a proper understanding of their actual prudential position, preventing timely identification, prevention, and resolution of issues.
- Liquidity requirements are often calculated based on the FOR. Errors in the FOR calculation can lead to inaccuracies in determining the statutory minimum amount of liquid assets to be held.
Increased Supervision and Additional Clarifications
The DCB emphasized the seriousness of these issues and indicated it will pay closer attention to the FOR in the coming period. In the letter sent to relevant institutions, DCB provided a (non-exhaustive) explanation of the elements essential for FOR calculations.
The DCB also announced that in 2025 it will investigate how BOBIs determine and report the FOR. Institutions may receive inquiries from the DCB in this regard. The DCB has indicated that that it will consider the extent to which institutions have incorporated the guidance from its letter into their reports for year-end 2024.
Call to Action
Finally, the DCB has emphasised its expectation that BOBIs maintain continuous insight into their compliance with applicable prudential requirements. It has urged institutions to analyse and, if necessary, refine their FOR calculations and reporting using the additional information provided by DCB. Any revised FOR can be reported in the subsequent supervisory report (for year-end 2024).
Next Steps
Given the DCB's increased focus on the FOR in the coming period, it is crucial for BOBIs to thoroughly review the information provided by the DCB. BOBIs should adjust their FOR calculations and reporting as needed, starting with the supervisory report for year-end 2024.
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