The EBA is mandated to develop, in consultation with the European Securities and Markets Authority (ESMA), the Regulatory Technical Standards (RTS) on own funds requirements for relevant investment firms.
Specifically, investment firms are required to hold eligible capital of at least one-quarter of the firm’s fixed overheads of the previous year, or projected fixed overheads in the case of an investment firm not having completed business for one year.
What is Fixed Overhead?
These are the costs that your business incurs in order to operate. They are ‘fixed’ as they do not vary substantially as a result of any change in activity, (except for say periodic changes such as contractual modifications e.g. an increase in office rent).
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