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Pillar 3 Disclosure


The third EU Capital Requirements Directive (CRD) came into effect on 1 January 2007. It established a regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment firms must maintain. On 1 January 2014, CRD IV, the fourth amendment of the CRD came into effect.

The framework consists of three ‘Pillars’:

  • Pillar 1 sets out the minimum capital requirements;
  • Pillar 2 requires firms to assess whether its Pillar 1 capital is adequate to meet its risks and is subject to annual review by the FCA; and
  • Pillar 3 requires public disclosure of a firm’s risks, risk management and capital position.

In the UK, the Financial Conduct Authority (FCA) has implemented the Directive through its Handbook of Rules and Guidance. The rules set out the provision for Pillar 3 disclosure and this document is designed to meet those obligations.

We are permitted to omit required disclosures if we believe that the information is immaterial such that omission would be unlikely to change or influence the decision of a reader relying on that information. In addition, we may omit required disclosures where we believe that the information is regarded as proprietary or confidential. In our view, proprietary information is that which, if it were shared, would undermine our competitive position. Information is considered to be confidential where there are obligations binding us to confidentiality with our customers, suppliers and counterparties.

We have made no omissions on the grounds that it is immaterial, proprietary or confidential.

C B Financial Services Limited’s (“the Firm”) Pillar 3 disclosures will be published annually. The Firm has concluded that more frequent disclosure is unnecessary, because the Firm’s business model and the services that it offers are unlikely to change materially during any one year. This conclusion will be reassessed annually prior to the annual disclosure and consideration will be given to the need to disclose some or all of the disclosure requirements on a more frequent basis. The disclosures are as at the Accounting Reference Date (“ARD”) i.e. 31st December 2016.

The disclosures will only be externally audited if they are required to be under accounting requirements. The Pillar 3 disclosures have been prepared purely for explaining the basis on which the Firm has prepared, calculated and disclosed certain capital requirements and information about management of certain risks and for no other purposes. They do not constitute any form of financial statement.

Scope and application of the requirements

The Firm is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. Given the nature of the Firm’s permissions, it has been categorised as an IFPRU €730K full scope investment firm.  

All disclosures are on an unconsolidated basis.

Risks and risk management

The Firm is governed by its Directors (“Principals”) who determine its business strategy and risk appetite. They are also responsible for establishing and maintaining the Firm’s governance arrangements along with designing and implementing a risk management framework that recognises the risks that the business faces. 

The Principals also determine how the risks the business faces may be mitigated and assess on an ongoing basis the arrangements to manage those risks.  The Principals meet on a regular basis and discuss current projections for profitability, cash flow, regulatory capital management, and business planning and risk management.  The Principals manage the Firm’s business risks through a framework of policy and procedures having regard to relevant laws, standards, principles and rules (including FCA principles and rules) with the aim to operate a defined and transparent risk management framework.

The Firm’s overall approach to assessing the adequacy of the Firm’s internal capital is set out in the Firm’s ICAAP. The ICAAP involves separate consideration of risk to the Firm’s capital combined with stress testing using scenario analysis.

The Principals have identified that business, operational, market and credit risks are the main areas of risk to which the Firm is exposed.  Annually the Principals formally review their risks, controls and other risk mitigation arrangements and assess their effectiveness.  Where the Principals identify material risks they consider the financial impact of these risks as part of their business planning and capital management and conclude whether the amount of regulatory capital is adequate. 

The Firm is small with a simple operational infrastructure.  Its market risk is limited to unhedged open positions on client trades and foreign exchange risk on its accounts receivable in foreign currency. 

The Firm’s Pillar 2 capital requirement, which is the Principals’ own assessment of the minimum amount of capital that the Principals believe is adequate to mitigate the risks identified, has been assessed as being lower than the Firm’s Pillar 1 capital requirement. Therefore, the Firm’s Pillar 1 requirement is the minimum regulatory capital requirement held by the Firm.

Capital resources

As discussed above the Firm is a ‘full scope firm’ and as such its capital requirements are calculated in accordance with the IFPRU Sourcebook within the FCA Handbook, and are based on its ‘own funds’ and ‘leverage ratios’.

The Firm’s capital as at the ARD is summarised as follows:

Capital and ReservesUSD
Share Capital3,498,590
Audited Reserves9,345,517

The Firm’s capital resources comprise of core Tier 1 capital only and therefore there are no other items or deductions. As demonstrated above the total Tier 1 capital of the Firm, which is calculated as ordinary share capital, plus brought forward profits, is $12,844,107.
The Firm’s capital requirement is shown below:

Tier CapitalCapital RequirementCapital HeldSurplus Capital
Common Equity Tier 1 Ratio 4.5%2,444,38312,844,10710,399,724
Tier 1 Ratio 6%3,259,17712,844,1079,584,930
Total Capital 8%4,345,57012,844,1078,498,537

The financial position of the Firm is therefore strong and it holds a surplus of capital, well in excess of the regulatory requirements, and it is the intention of the Principals not to materially alter the strategy of the Firm in the next twelve months.

Remuneration Policy

The Firm is compliant with its requirement to have a Remuneration Policy in place which has been approved by the Board.

Broad Principles:

Remuneration of all staff is based upon the principal of a market standard basic salary, plus a bonus. No other reward or compensation schemes are in place.

For some employees, bonuses may be performance based with reference to a pre-determined target; for others, bonuses will be discretionary.

All bonuses should be subject to the underlying profitability of the Firm and no bonus should be paid which, in the opinion of the Remuneration Committee, may compromise the financial resources or the credibility of the Firm.

Bonuses should recognize and reward good and excellent performance of employees and focus on retaining high performing senior management.

Bonuses should not be used to reward behaviour that increases the Firm’s exposure to risks.

All bonuses must be proportionate and prudent and consistent with regulatory requirements.

Remuneration Code Staff

Remuneration Code Staff are defined as senior management, risk takers and/or staff engaged in controlled functions. There were 19 Remuneration Code staff during the performance year and one new. No Middle East personnel are considered Remuneration Code staff.

The total remuneration for all Remuneration Code Staff in the financial year 2016/2017 was approximately £1,112,000

The Company’s full Remuneration Policy is available on request.

Office network
  • London Office
    Axi Financial Services (UK) Limited  
    1 Finsbury Market
    EC2A 2BN
    United Kingdom

    T: + 44 (0) 203 857 2000
  • Kuwait Office
    VI Markets  
    Sharq - Mazaya Tower 02 - 10th floor
    PO BOX 3040, 22031
    T: + 965 22256988

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services (UK) Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

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