Own Funds Requirements for UCITS ManCos and AIFMs:  Changes Proposed by Central Bank

PUBLISHED: 31st January 2023

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The Central Bank of Ireland is proposing to introduce new own funds requirements for UCITS Management Companies and Authorised Investment Funds Managers.

The objective is to set out proposed changes to ‘own funds requirements’ for UCITS Management Companies (UCITS ManCos) and Authorised Investment Funds Managers (AIFMS) authorised to perform discretionary portfolio management. These proposed changes would align the current requirements with the requirements currently applicable for MiFID investment firms and level the playing field.

The Central Bank published a Consultation Paper (CP152) on 1 December 2022, Own funds requirements for UCITS ManCos and AIFMs authorised for discretionary portfolio management, setting out its proposals.


UCITS ManCos and AIFMs are authorised under the UCITS Regulations or the AIFM Regulations, but the legislation does not take into account the discretionary portfolio management and non-core services that UCITS ManCos and AIFMs may be authorised to perform. The resulting issue is that UCITS ManCos and AIFMs may not hold sufficient own funds to reflect risks to the firm and clients arising from the provision of additional services.

The Central Bank currently imposes an additional condition of authorisation on UCITS ManCos and AIFMs to address this risk and align the requirements in that UCITS ManCos and AIFMs must comply with the Capital Adequacy of Investment Firms Regulations 2006. Any additional capital required is included in the Internal Capital Adequacy Assessment Process (ICAAP) that has to be updated on at least an annual basis.

The impetus for CP152 is that there have been developments in this area for MiFID portfolio managers, as they are now subject to other requirements as set out in Regulation (EU) 2019/2033 on the Prudential Requirements for Investment Firms (IFR).  Therefore, the current conditions of authorisation no longer impose an analogous prudential regime on UCITS ManCos and AIFMs to that which applies to MiFID portfolio managers.

The Central Bank is seeking to update the requirements applicable to UCITS ManCos and AIFMs to ensure continued alignment between the requirements applicable to firms providing similar services.

Proposed Changes to Requirements in CP152

CP152 proposes implementing requirements in respect of the discretionary management aspect of UCITS ManCos and AIFMs by using the same method for calculation as own funds requirements for investment firms under the IFR.

This would entail utilising ‘Risk to Client K-Factors’ in that UCITS ManCos and AIFMs would be required to hold a minimum of own funds equal to a higher of the:

  • Total amount of initial capital and own funds which the UCITS ManCos or AIFM is required to hold under the UCITS Regulations or the AIFM Regulations, as applicable; or
  • Risk to Client K-Factor.

Under the proposals, UCITS ManCos and AIFMs will be able to limit any increase in their own funds requirements, resulting from the incorporation of the Risk to K-Factor, to twice their fixed overheads requirement up to the end of June 2026.

The following K-Factors (adjusted by a coefficient) will be combined to create the Risk to Client K Factor:

  • K-AUM (Assets Under Management);
  • K-CMH (Client Money Held);
  • K-ASA (Assets Safeguarded and Administered); and
  • K-COH (Client Orders Handled) (K-COH only for AIFMs)

It is also important to note that should a UCITS ManCo or AIFM be classified as a 'small and non-interconnected firm' they will not be required to calculate the above Risk to Client K-Factor when reviewing their own funds requirements.

Reporting Requirements

UCITS Mancos and AIFMs are required to submit a Minimum Capital Requirement Report through the ONR system on a bi-annual basis.  The Central Bank is recommending that this timeframe is retained and that the Report is submitted on a bi-annual basis, with some slight formatting amendments to ensure compliance with a proposed new regulation under the UCITS Regulations and the Central Bank’s AIF Rulebook.

Assessment of Internal Capital

UCITS Mancos and AIFMs are also currently subject to a condition of authorisation requiring them to undertake an assessment of the adequacy of their internal capital (the ICAAP).  A questionnaire has to be submitted to the Central Bank annually.

The Central Bank is also proposing to set out this requirement on a legislative basis through an addition to the UCITS Regulations and the AIF Rulebook.  This will ensure that current and future UCITS ManCos and AIFMs will be required to undertake this assessment in a consistent and comparable manner.

Proposed Amendments to UCITS Regulations and the AIF Rulebook

Annexed to the Consultation Paper are the proposed changes to both the UCITS Regulations and the AIF Rulebook considering this proposal.


UCITS ManCos and AIFMs with MiFID top-up permissions should familiarise themselves with the proposed changes in the context of the continued requirement to have in place sound, effective and comprehensive strategies and processes to assess and maintain an adequate level of internal capital on an ongoing basis. 

Responses to CP152 should be submitted to the Central Bank no later than 23 February 2023.


For further information, please contact David Naughton or Katrina Smyth.

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