Risk management; Authorisation to issue statutory instruments

(1) The capital management company must establish and maintain a permanent risk control function that is hierarchically and functionally independent of the operating units (segregation of functions). The Federal Institute monitors the segregation of functions in accordance with the principle of proportionality. Capital management companies for which, owing to the nature, scale, and complexity of their business and of the investment funds they manage, the establishment of a hierarchically and functionally independent risk control function would be disproportionate must at least be able to demonstrate that special safeguards against conflicts of interest enable independent risk control, and that the risk management process satisfies the requirements of subsections (1) to (6) and is effective at all times.
(2) The capital management company must have adequate risk management systems that, in particular, ensure that the risks of the investment funds that are material for the respective investment strategies can be identified, measured, managed, and monitored at all times. The capital management company must review the risk management systems regularly, at least once a year, and adjust them where necessary.
(2a) In assessing the credit quality of the assets of the investment funds, the capital management company must not rely solely or mechanically on ratings issued by a rating agency under Article 3(1), letter b, of Regulation (EC) No 1060/2009, as amended from time to time. The risk management systems under subsection (2) must ensure this. The Federal Institute monitors the adequacy of capital management companies' processes for assessing credit quality, and the use of references to ratings within the meaning of the first sentence, within the framework of the investment strategy of the investment funds; in its monitoring, the Federal Institute has regard to the nature, scale, and complexity of the investment funds. Insofar as appropriate, the Federal Institute works towards a reduction of the influence of such references, in order to reduce a solely mechanical reaction to such ratings.
(3) The capital management company is subject at least to the following obligations: 1. it must make investments for the account of the investment fund in accordance with the investment strategy, the objectives, and the risk profile of the investment fund, on the basis of adequate, documented, and regularly updated due diligence processes; 2. it must ensure that the risks associated with each investment position of the investment fund, and their respective effect on the overall risk profile of the investment fund, can be properly identified, measured, managed, and monitored on an ongoing basis; for this purpose it must use, among other things, appropriate stress tests; 3. it must ensure that the risk profiles of the investment funds correspond to the size, the composition, and the investment strategies and investment objectives, as laid down in the investment conditions, the sales prospectus, and the other sales documents of the investment fund; 4. where it is an AIF capital management company, it must, in granting loans, ensure effective strategies, procedures, and processes for the granting of loans.
(4) The capital management company must set a maximum level of leverage that it may employ for each of the investment funds it manages, and the extent of the right of reuse of collateral or other guarantees that could be granted under the leverage arrangement, having regard to the following: 1. the type of the investment fund, 2. the investment strategy of the investment fund, 3. the sources of leverage of the investment fund, 4. any other link or relevant relationship with other financial services institutions that could pose a systemic risk, 5. the need to limit the exposure to any single counterparty, 6. the extent to which the leverage is collateralised, 7. the asset-liability ratio, 8. the scale, nature, and extent of the capital management company's business activities in the markets concerned.
(5) For AIF capital management companies, the criteria applicable, for the AIFs they manage, to 1. the risk management systems, 2. the appropriate intervals between reviews of the risk management system, 3. the manner in which the functional and hierarchical separation between the risk control function and the operating divisions, including portfolio management, must be effected, 4. the special safeguards against conflicts of interest under subsection (1), third sentence, and 5. the requirements under subsection (3), are governed by Articles 38 to 45 of Delegated Regulation (EU) No 231/2013.
(5a) (repealed)
(5b) The criteria for the requirements that an originator, a sponsor, or an original lender must satisfy in order for a capital management company to be permitted to invest, in the name of the investment funds it manages, in securitisations, are governed by Regulation (EU) 2017/2402. Article 43(5) and (6) of Regulation (EU) 2017/2402 applies correspondingly to UCITS capital management companies. Where capital management companies have entered into a securitisation that no longer satisfies the requirements of Regulation (EU) 2017/2402, they must act in the best interests of the investors in the investment funds concerned and, where appropriate, take corrective action.
(6) The Federal Ministry of Finance is authorised to issue, by statutory instrument not requiring the consent of the Bundesrat, more detailed provisions for capital management companies that manage UCITS or retail AIFs, on risk management systems and procedures. The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Federal Institute.