MCEL Basel III Pillar 3 Capital Disclosure

1

MCEL Basel III Pillar 3

Capital Disclosure

March 2021

Macquarie Capital (Europe) Limited

Macquarie Capital (Europe) Limited 1

Contents

1. Overview ......................................................................................................................................................................................................... 2

2. Risk Management ........................................................................................................................................................................................ 3

3. Remuneration ............................................................................................................................................................................................... 6

4. Governance Arrangements ..................................................................................................................................................................... 7

5. Capital Adequacy ........................................................................................................................................................................................ 9

6. Credit Risk Management ....................................................................................................................................................................... 11

7. Market Risk Management ..................................................................................................................................................................... 12

8. Operational Risk Management ........................................................................................................................................................... 13

9. Exposure classification and Credit Risk Mitigation ..................................................................................................................... 15

10. Leverage Ratio .......................................................................................................................................................................................... 18

11. Asset Encumbrance ................................................................................................................................................................................ 21

12. Capital Buffers........................................................................................................................................................................................... 23

13. Disclosure .................................................................................................................................................................................................... 24

Appendix 1 ............................................................................................................................................................................................................... 25


1. Overview

This disclosure is in relation to Macquarie Capital (Europe) Limited (“MCEL”). MCEL is a UK incorporated company,

authorised by the Financial Conduct Authority (“FCA”) as a full scope investment firm, and is regulated under the

Prudential sourcebook for Investment Firms (“IFPRU”) and the UK onshored versions of the Capital Requirements

Directive (“CRD”) and Capital Requirements Regulation (“CRR”) as per the FCA’s Transitional Directive. These

regulations are structured in line with Basel Committee’s three Pillars of supervision: Pillar 1 “minimum capital

requirements”, Pillar 2 “supervisory review process” and Pillar 3 “market discipline”.

MCEL is ultimately owned by Macquarie Group Limited (“MGL”). MGL is a large financial conglomerate, authorised and

regulated by the Australian Prudential Regulation Authority (“APRA”) as the non-operating holding company of an

Australian deposit-taking institution.

MCEL has produced its Pillar 3 disclosures in accordance with Part 8 of CRR. These requirements are supplemented by

the guidelines published by the European Banking Authority (“EBA”)1. This document sets out the Pillar 3 disclosures

for MCEL as at 31 March 2021. The disclosures for MCEL are prepared on an individual basis or

solo basis.

1 https://www.eba.europa.eu/regulation-and-policy/transparency-and-pillar-3/guidelines-on-disclosure-requirements-under-part-eight-of-regulation-eu-

https://www.eba.europa.eu/regulation-and-policy/transparency-and-pillar-3/guidelines-on-disclosure-requirements-under-part-eight-of-regulation-eu-


2. Risk Management

All MGL subsidiaries, including MCEL, are subject to Macquarie’s risk management framework. This framework has

been endorsed by the MCEL Board.

Macquarie’s risk management framework consists of systems, structures, policies, processes, people and culture. It is

through this framework that Macquarie is able to identify, measure, evaluate, monitor, report, manage and ultimately

accept risk. Acceptance of risk is an integral part of Macquarie’s operations. Strong independent prudential

management has been crucial to Macquarie’s success and stability over many years. The risk management framework

assigns clear risk roles and responsibilities represented by the ‘three lines of defence’. Primary responsibility for risk

management lies at the business level. This is the first line of defence. Part of the role of all business managers

throughout Macquarie is to ensure they manage risks appropriately. The Risk Management Group (“RMG”) forms the

second line of defence and independently assesses all material risks. The third line of defence, which includes internal

audit, independently reviews and challenges Macquarie’s risk management controls, processes and systems.

Macquarie’s core risk management principles have remained stable, and are applied by MCEL as follows:

1. Ownership of risk at the business level: MCEL business heads are responsible for identifying risks within their

businesses and operations and ensuring appropriate management. Before taking decisions, clear analysis of the

risks is sought to ensure those taken are consistent with Macquarie and MCEL’s risk appetite and strategy.

Furthermore, any proposed new business activity in MCEL will require the approval of the relevant boards. It will

be subject to Macquarie’s New Product and Business Approval (“NPBA”) process. This process is an important

aspect of Macquarie’s approach to risk management, providing a well-established framework for the identification

and assessment of incremental risks arising.

2. Understanding worst case outcomes: MCEL examines the consequences of worst-case outcomes and determines

whether these are acceptable. This approach is adopted for all material risk types and is often achieved by stress

testing. Resultant limits effectively constrain positions where the current risk appears low but potential risk exists

in extreme loss events.

3. Requirement for an independent signoff by risk management: MCEL has a strong, independent RMG that is

charged with signing off all material risk acceptance decisions. RMG's opinion is sought at an early stage in the

decision-making process. The approval document submitted to senior management includes independent input

from RMG on risk and return. Additionally, the incremental impact of any proposed new activity on MCEL’s capital

position, and hence ICAAP, will be assessed by RMG as part of this process. Where that impact is considered

material, it will be reported to the MCEL Board.

MCEL’s risk appetite is the degree of risk that MCEL is willing to accept in pursuit of its strategic objectives. This is

detailed in MCEL’s Board approved Risk Appetite Statement (“RAS”), which describes:

• MCEL’s risk appetite, being the nature and amount of risk that Macquarie is willing to accept in pursuit of its

strategic objectives

• the risks MCEL is not willing to accept;

• the processes that MCEL has established to maintain and monitor compliance with risk appetite; and

• the timing and process for review of MCEL’s risk appetite.

Business divisions operating through MCEL are required to act in adherence with the MCEL RAS. On an annual basis,

the MCEL RAS is presented to MCEL Board who review the risk management arrangements for MCEL, including the

appropriateness of risk appetite for MCEL, which are used to embed, set and monitor risk appetite for MCEL’s material

risks. The MCEL Board has formally adopted the MCEL RAS.

MCEL has adopted a range of principles which govern the firm’s overall approach to risk acceptance. These principles

are taken into consideration by all businesses and control functions when the firm considers accepting risk in pursuit

of MCEL’s strategic objectives. These principles are consistent with the wider Macquarie Group Risk

Appetite principles.


MCEL’s risk appetite reflects that it only has appetite to accept risks that are consistent with the following principles

which apply across the Macquarie Group:

‘Risk taking must be consistent with What We Stand For and our Code of Conduct’

MCEL only has appetite for taking risks in a manner which is consistent with the core principles expressed in

Macquarie’s What We Stand For and Macquarie’s Code of Conduct. Opportunity, accountability and integrity are the

principles which form the basis of all our actions.

MCEL seeks to establish and maintain an appropriate and effective risk culture. This is the foundation of Macquarie’s

risk management framework and is critical to MCEL’s success. We demonstrate our established risk culture by the way

we behave every day.

Risks must be consistent with our strategic intent

MCEL only has appetite for risks which are consistent with its strategic intent.

Risks must be well understood

All risks are comprehensively understood before being accepted. Risks are owned at the business level and all

material risk acceptance decisions are independently signed off by RMG.

Risks must generate returns in proportion to their risk

MCEL only has appetite for risks where the financial or other returns are commensurate with the risks – both

expected and unexpected. A risk and return analysis is performed for all businesses and transactions, which includes

an assessment of worst-case outcomes.

Further information on Macquarie’s risk management framework can be found in the Macquarie Group Limited’s 2021

Financial Statements at:

• www.macquarie.com.au/mgl/au/about-macquarie-group/investor-relations/financial-disclosure/financial-

reports/macquarie-group-limited-mqg

• www.macquarie.com/uk/about/company/risk-management-at-macquarie

Regular reports are produced covering compliance, prudential, market, and operational risks to facilitate the ongoing

monitoring of key risks and ensuring that any breaches, or potential breaches, are escalated to the appropriate level of

management. Regular reports are also produced to monitor the liquidity and capital position of MCEL, including total

capital ratios, liquid assets and large exposures.

The risk information is included in a Risk Management Group report which is presented at the quarterly MCEL Board

meetings in order to facilitate the information flow on risk to the management body.

MCEL’s management body provides feedback on reporting and its content on an ongoing basis, and this is particularly

considered when new business lines are commenced. In addition, the annual board evaluation process includes

consideration of the appropriateness of Board papers.

Additionally, MCEL’s overall risk profile is assessed through the comprehensive risk assessment process as part of

MCEL’s Internal Capital Adequacy Assessment Process (“ICAAP”) which is reviewed, challenged and approved by the

MCEL Board at least annually as part of the business planning cycle, or following any significant change to the business

strategy and/or risk profile of MCEL.

http://www.macquarie.com.au/mgl/au/about-macquarie-group/investor-relations/financial-disclosure/financial-reports/macquarie-group-limited-mqg

http://www.macquarie.com.au/mgl/au/about-macquarie-group/investor-relations/financial-disclosure/financial-reports/macquarie-group-limited-mqg

http://www.macquarie.com/uk/about/company/risk-management-at-macquarie


ICAAP

MCEL’s ICAAP is prepared in accordance with Article 73 of the CRD, as implemented in IFPRU 2.2 of the FCA

Handbook. The ICAAP sets out the means by which MCEL identifies and manages its key risks, and also details the

required level of regulatory capital for MCEL to meet its regulatory minimum (and internal target) requirements over a

three-year forecast period in both base and stress cases.

The ICAAP is part of MCEL’s overall risk management framework. Its key features include:

• comprehensive risk assessment process;

• internal assessment of capital adequacy;

• financial and capital forecasts;

• business strategy and growth plans;

• the impact of a three-year downturn stress scenario; and

• wind down analysis.

MCEL’s ICAAP summary document is reviewed, challenged and approved by the MCEL Board.


3. Remuneration

Please refer to MCEL’s Pillar 3 Remuneration Disclosures for information on MCEL’s remuneration policy and practices.

https://www.macquarie.com/au/about/investors/regulatory-disclosures

https://www.macquarie.com/au/about/investors/regulatory-disclosures


4. Governance Arrangements

Details of the Directors of MCEL as at 31 March 2021 are set out below:

Name Role Background

Number of total

directorship

appointments

George Alford Non-Executive

Director and

Chair of Board,

Nominations

Committee &

Remuneration

Committee

George Alford joined the MCEL Board of Directors in July

2018 as a Non-Executive Director. George was further

appointed as Chair of MCEL in September 2018 and was

appointed as Chair of the Remuneration and Nominations

Committee in November 2020.

George has over 40 years’ experience in financial services in

both executive and non-executive roles, including at

Kleinwort Benson Group, Financial Services Authority

(formerly Bank of England) and Investec Plc.

2

Paul Plewman Executive

Director

Paul Plewman joined the MCEL Board of Directors in October

2018. Paul joined Macquarie in 2005 and is the Head of

Commodities and Global Markets (“CGM”) EMEA.

Paul holds a BA in Computer Engineering and Mathematics

and previously held senior leadership positions at Investec

and the Standard Bank Group.

13

Phil Nash Executive

Director

Phil Nash joined the MCEL Board of Directors in December

2019. Phil joined Macquarie in 2016 and is the EMEA Chief

Financial Officer.

Phil previously held senior leadership positions at Bank of

America Merrill Lynch, ABN AMRO and Barclays.

11

Christine Higgins Non Executive

Director and

Chair of Audit

Committee

Christine Higgins joined the MCEL Board of Directors in

September 2020 as Non-Executive Director and was

appointed Chair of the Audit Committee in September 2020.

Christine has over 20 years’ experience in international asset

finance including as Head of Capital Solutions for Europe &

Americas at ANZ and Director of Business Development &

International Leasing at Bank of America. Prior to this,

Christine worked as Director of Specialist Finance for

National Australia Bank and was a Principal at Babcock &

Brown.

4

Angela

Henderson

Non Executive

Director and

Chair of Risk

Committee

Angela Henderson joined the MCEL Board of Directors in

September 2020 as Non-Executive Director and was

appointed Chair of the Risk Committee in September 2020.

Angela has over 20 years of executive experience in the

financial services sector. Previous non executive roles include

the board of start up companies in the technology and asset

management sectors.

4

As per MCEL’s Board Charter, the minimum number of directors is five and the majority of directors must be resident

in the United Kingdom. As at 31 March 2021 the Board consisted of the EMEA CEO, the EMEA CFO and three

independent non-executives directors.

As at 31 March 2021, MCEL had a separate risk committee, audit committee, remuneration committee and

nominations committee. Macquarie has a Nominee Directors & Officers Policy to ensure that only persons with

sufficient seniority and experience are nominated to the Boards of Macquarie entities with appropriate consideration

of the relevant regulatory and statutory requirements.


Notwithstanding Brexit, MCEL continued to apply Macquarie’s Suitability and Diversity Guidelines (as formulated for

management bodies of entities that are subject to the requirements of the ESMA and EBA joint guidelines on the

assessment of the suitability of members of the management body and key function holders). These S&D Guidelines

provide that directors of MCEL should be suitable at all times and should be reassessed periodically. Suitability in this

context includes, but is not limited to, the following criteria:

• Being of good repute;

• An ability to act with honesty, integrity and independence of mind;

• Overseeing, monitoring and challenging management decision-making effectively;

• The possession of sufficient knowledge, skills and experience to perform their duties;

• Disclosing any financial or non-financial interests that could create potential conflicts of interest;

• Being able to commit sufficient time to perform management body functions in a supervisory context; and

• Not being restricted from taking up the position by any regulatory requirement.

MCEL selects its members in accordance with the S&D Guidelines and as per the global workforce diversity policy for

the Macquarie Group. The Workforce Diversity policy is intended to define Macquarie’s commitment to workforce

diversity and the structures in place to ensure it is realised. The principles contained in Macquarie’s Workforce

Diversity policy are available at: https://www.macquarie.com/uk/about/company/diversity-and-inclusion

Macquarie governance procedures are designed to facilitate constructive challenge and debate amongst the

management body, based on a range of perspectives and viewpoints. However, in order to further encourage diversity

of opinion and debate, avoid group-thinking and to promote sound governance outcomes, diversity aspects including

but not limited to the following will be taken into account by the management body of MCEL when changing and / or

assessing their composition, in accordance with the S&D Guidelines:

• Gender;

• Educational and professional background;

• Age;

• Ethnicity;

• Geographical Provenance;

• Professional experience; and

• Tenure and personal background.

When recruiting Directors for the MCEL Board, the above-mentioned suitability and diversity aspects, as well as

Macquarie’s wider policy and risk management framework requirements, will be taken into account, whether for

executive or non-executive appointments.

It is acknowledged that executive members of management bodies are typically nominated by virtue of their

executive duties and in accordance with the requirements of the Nominee Directors & Officers Policy. Management

body suitability and diversity is therefore closely linked to the suitability and diversity of senior management.

https://www.macquarie.com/uk/about/company/diversity-and-inclusion


5. Capital Adequacy

Capital Resources and Key Capital Ratios

MCEL’s regulatory capital resources are solely in the form of Common Equity Tier 1 (“CET1”) capital instruments,

comprising ordinary share capital, equity contribution and reserves less retained losses and Prudent Valuation

Adjustment (“PVA”).

CET1 capital is to only account for externally verified (audited) retained earnings, and foreseeable dividend payments.

MCEL’s capital ratios are calculated in accordance with CRR Article 92 – Capital Resources divided by the Total Risk

Exposure Amount (“TREA”). Given that MCEL’s Capital Resources are solely in the form of CET1 capital instruments, its

CET1 Capital Ratio, Tier 1 Capital Ratio and Total Capital Ratios are equivalent.

Under CRD IV, the minimum capital requirements under CRR Article 92 are supplemented by the following –

• Capital Conservation Buffer (“CCoB”) – The CCoB is a buffer for all firms that can be used to absorb losses while

avoiding breaching minimum capital requirements. The CCoB is to be comprised entirely of CET1 and is calculated

at 2.5% of the RWAs.

• Countercyclical Capital Buffer (“CCyB”) – The CCyB can be varied over time. The primary objective of the

countercyclical capital buffer is to ensure that the banking system is able to withstand stress without restricting

essential services, such as the supply of credit, to the real economy. Each firm’s CCyB depends on its weighted

average CCyB rate determined according to the CCyB rates that apply in the jurisdictions in which the bank has

relevant exposures.

• Systemic buffers ("G-SIIB" and "SRB”) – The systemic buffers apply only to globally systemic banks or ring-fenced

banks and are therefore not applicable to MCEL.

• Individual Capital Guidance (“ICG”; “Pillar 2A”) – ICG is the guidance given to a firm about the amount and quality of

capital resources that the FCA thinks it should hold at all times under the Overall Financial Adequacy Rule. This is

assessed as part of the ICAAP and FCA’s periodic supervisory review and evaluation process (“SREP”). Pillar 2A

capital requirements capture the risks that are not assessed to be adequately covered under the Pillar 1 capital

requirements. Pillar 1 and Pillar 2A capital requirements together constitute the ICG.

• Capital Planning Buffer (“CPB”; “Pillar 2B”) – The CPB is an amount separate, though related to, the ICG, whereby CPB

is the amount and quality of capital resources that a firm should hold at a given time in accordance with the

General Stress and Scenario Testing Rule, so that the firm is able to continue to meet the Overall Financial

Adequacy Rule throughout the relevant capital planning period in the face of adverse circumstances, after allowing

for realistic management actions.

Minimum Regulatory Capital (Pillar 1) Requirements

MCEL’s Pillar 1 capital resource requirement is calculated under the IFPRU rules as the higher of:

• £730,000; and

• 8% of the Total Risk Exposure Amount as calculated per Article 92(3) of the CRR.

Further details on the approach and methodology applied for the calculation of the risk methodologies is provided

below and in subsequent sections.

Credit Risk:

MCEL calculates its Pillar 1 capital requirements for credit risk exposures under the standardised approach, per Part

Three, Title II, Chapter 2 of the CRR.

MCEL calculates its Pillar 1 capital requirements for counterparty credit risk exposures under the mark-to-market

approach, per Article 274 of the CRR; and exposures to central counterparties per Part Three, Title II, Chapter 6,

Section 9 of the CRR.


MCEL currently holds no securitisation exposures and does not intend to hold securitisation exposures.

Where forms of credit risk mitigation are applied to MCEL’s credit and counterparty risk exposures, this is done in

accordance with Part Three, Title II, Chapter 4 of the CRR.

Market Risk:

MCEL calculates its Pillar 1 capital requirements for market risk positions under the standardised approach, per Part

Three, Title IV, Chapters 1-4 of the CRR.

Operational Risk:

MCEL calculates its Pillar 1 capital requirements for operational risk under the Basic Indicator Approach ("BIA"), per

Part Three, Title III, Chapter 2 of the CRR.

Settlement Risk:

MCEL calculates its Pillar 1 capital requirements for settlement risk per Part Three, Title V of the CRR.

CVA Risk:

MCEL calculates its Pillar 1 capital requirements for CVA risk under the standardised method, per Part Three, Title VI

of the CRR (noting the exclusions from the scope of the CVA risk Pillar 1 capital calculation in Article 382(4)).

Large Exposures in the Trading Book:

In accordance with Article 395(5) of the CRR, MCEL will maintain an additional capital requirement for any trading

book excess to a client or group of connected clients which exceeds 25% of MCEL’s eligible capital. Any additional

capital requirement is calculated in accordance with Articles 397 and 398 of the CRR.

As at 31 March 2021, the total capital ratio for the MCEL was 93.6% which is above the regulatory minimum required

by the FCA, and the MCEL Board imposed internal minimum requirement.

Table 1: Capital Adequacy

31 March 2021 31 March 2020 £’m £’m

Capital Resources

Tier 1 Capital

Ordinary share capital (including share premium) 336.6 336.6

Audited retained earnings (160.3) (152.9)

Equity contribution from ultimate parent entity 2.1 2.1

Prudent Valuation and other adjustments (1.79) (0.7)

Total Tier 1 capital 176.6 185.2

Tier 2 Capital - -

Total Resources 176.6 185.2

Capital Requirement

Credit risk 9.5 11.0

Settlement Risk 0.0 0.2

Market risk 0.4 1.5

• Foreign Exchange Position Risk Requirement 0.4 1.5

Credit Valuation Adjustment 0.1 0.1

Operational Risk 5.0 6.4

Total Capital Requirement 15.0 19.2

Total Risk Weighted Assets 187.9 240.2

Tier 1 Capital Ratio 94.0% 77.1%

Total Capital Ratio 94.0% 77.1%

Note that any figure labelled as “-“ throughout this document relates to a zero balance, whereas figures labelled as

£0.0m relate to non-zero balances which round to £0.0m (to the nearest hundred thousand).


6. Credit Risk Management

Credit Risk

MCEL’s appetite for credit and counterparty risk is defined in the MCEL Risk Appetite Framework and the MCEL Credit

Policy, which among other things sets out:

• The approval requirements for all MCEL credit limits and exposures;

• Monitoring framework for credit risk within MCEL;

The ongoing reporting requirements to ensure the MCEL CRO, the MCEL CEO, the MCEL Board and other senior

management retain appropriate oversight of the credit risk held within MCEL.

Additionally, as a member of the Macquarie Group, MCEL is subject to a global framework for the approval,

management and reporting of credit risk exposures. This includes the assessment of credit risk using Macquarie’s

economic capital model that is consistent with the advanced approaches under Basel III.

RMG Credit, as part of the Risk Management Group, assists the MCEL Board in establishing and maintaining a robust

framework for the management of credit risks within MCEL.

MCEL enforces a strict ‘no limit, no dealing’ principle. All proposed transactions are analysed and approved by

individuals with discretion authority before they can proceed. Each proposal to incur a material credit exposure is

assessed independently by RMG Credit. This assessment includes a comprehensive review of the creditworthiness of

the counterparty and related entities, key risks and mitigants, and downside case scenarios. The assessment confirms

consistency with risk appetite and portfolio limits. For wholesale credit exposures, the customer creditworthiness is

expressed through the probability of default (MQ rating) and loss given default (LGD) which are the main inputs into

regulatory and economic capital and return on risk calculations. Ratings and LGDs are derived using standardised

rating scorecards that are tailored to specific types of counterparties to ensure comparability of creditworthiness.

RMG Credit monitors the performance of counterparties on an ongoing basis to ensure any deterioration is identified

and reflected in an adjustment to limits, MQ rating, LGD and other customer attributes. This is done, as applicable to

the counterparty, through monitoring of covenant compliance and review and analysis of a variety of sources

including publicly available information specific to the counterparty (such as share price and CDS spread movements),

annual reports, financial statements, media releases, the macroeconomic environment, industry variables, regulatory

changes, market updates, and private information received from the counterparty. RMG Credit also maintains close

contact with the relevant businesses and in some instances, direct contact with the client. At a minimum, full

counterparty reviews must be completed every 12 months.

Wrong-way risk is considered immaterial to MCEL however the entity is subject to the Macquarie Group Credit Risk

Management Framework which sets out the responsibility of RMG Credit and the Front Office for ensuring that

Macquarie is not exposed to specific wrong-way risk.

MCEL does not currently hold collateral, however, any collateral held would be subject to the Macquarie Security

Valuation Policy which defines the principles and standards for valuing and adopting security, as well as roles and

responsibilities of the various stakeholders.

Additional details on impaired exposures, past due exposures and provisioning is set out in the MCEL financial

accounts as published on the Companies House website.

(https://www.gov.uk/government/organisations/companies-house)

https://www.gov.uk/government/organisations/companies-house


7. Market Risk Management

Market risk is the risk of loss associated with changes in the volatility or prices in markets to which MCEL is exposed.

The only potential source of traded market risk in MCEL is from the Equities business in Macquarie Capital (MacCap),

which should only arise on an exceptional basis. MCEL may also be exposed to immaterial non-traded FX risk, arising

from the MacCap Advisory business.

Traded market risk is constrained at the aggregate level by MCEL’s Macro-Economic Linkages (‘MEL’) and Value at Risk

(‘VaR’) limits.

The MEL scenarios are large, simultaneous, ‘worst case’ movements in global markets. They consider very large

movements in a number of markets at once, based on an understanding of the economic linkages between markets.

The MEL scenarios reflect a market ‘shock’ or ‘gap’ over a period where positions are unable to be managed, as

opposed to a sustained deterioration. The MEL scenario relevant for MCEL models a Global Financial Crisis-style equity

market contagion crash event.

VaR provides a statistical measure of market risk in MCEL, based on a 10-day close-out period and 99% confidence

interval. The magnitude of VaR reflects changes in positions as well as changes in market volatility, correlations, and

enhancements to the model parameters.

Both MEL and VaR are calculated and monitored against limits daily by RMG Market Risk.

As a member of the Macquarie Group, MCEL is also subject to a global framework for the approval, management and

reporting of market risk exposures. Divisional limits are set for individual trading desks and divisions at an MGL level,

with MCEL exposures feeding into MGL limits.

MCEL calculates its market risk capital requirement as the higher of MCEL’s MEL exposure and the standardised

approach as laid out under the CRR. As at 31 March 2021, the market risk capital requirement in MCEL is £0.4m

(derived from the standardised approach) and comprised only of FX position risk.

Interest Rate Risk in the Non-Trading Book (“IRRBB”)

IRRBB is the risk of losses arising from changes in the interest rates associated with banking book items. MCEL has

minimal exposure to IRRBB as the primary activities undertaken within MCEL relate to trading activities and corporate

advisory. IRRBB may arise through DCM underwriting activities performed by the MacCap business unit, and also

through potential mismatches between base rates charged on intercompany lending facilities provided to MCEL

versus rates earnt by MCEL on intercompany or external cash deposits.

MCEL is subject to Macquarie’s management and reporting framework for IRRBB. Macquarie’s approach is that

business units do not take outright interest rate risk and that, where possible, interest rate risks arising in MCEL are to

be transferred out of the non-trading book and managed within traded market risk limits.

Any residual interest rate risks are subject to limits that are approved and monitored by RMG Market Risk.

To the extent that any interest rate exposures remain in MCEL, MCEL calculates its IRRBB risk position with reference

to both Economic risk and Earnings at risk. As at 31 March 2021, the IRRBB exposure in MCEL from the internal

assessment is £4k, fully capitalised under Pillar 2A.


8. Operational Risk Management

Operational risk framework

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, controls or systems

or from external events.

MCEL calculates its Pillar 1 capital requirements for operational risk under the Basic Indicator Approach (“BIA”), per

Part Three, Title III, Chapter 2 of the CRR.

MCEL uses the last three yearly observations from audited financial statements to calculate the average relevant

indicator over this period per Article 316 of the CRR. The average of the relevant indicator is then multiplied by 15% to

calculate the capital requirement for operational risk. The Pillar 1 capital requirements for Operational Risk as at 31

March 2021 were £5.0m.

The relevant indicator is calculated as the sum of the following:

• Interest receivable and similar income

• Interest payable and similar charges

• Income from shares and other variable/ fixed-yield securities

• Commissions/ fees receivable

• Commissions/ fees payable

• Net profit or net loss on financial operations

• Other operating income

MCELs Operational Risk Management Framework (ORMF) is designed to identify, assess and manage operational risks

within the organisation. The key objectives of the framework are:

• Risk identification, analysis and acceptance.

• Execution and monitoring of risk management practices.

• Reporting and escalation of risk information on a routine and exception basis.

The Framework incorporates six primary pillars in the management of operational risk:

1. Operational Risk Policies

Policies and guidelines are established to support the management of operational risks.

2. New Product and Business Approval (“NPBA”) process

A robust change management process to ensure operational risks inherent in new products, businesses,

processes or systems and major organisational projects are identified, addressed and managed prior to

implementation.

3. Incident Reporting and Escalation

Operational risk incidents are analysed to identify lessons learned and ensure appropriate actions have been

taken towards the relevant risk.

4. Risk and Control Self-Assessment (“RCSA”) and Control Assurance

The RCSA is a formal process of risk self-assessment, designed to identify operational and compliance risks

that exist in the business, and to record and assess the performance of the controls in place to mitigate

those risks. Control assurance is a proactive investigation to provide comfort that critical controls are

adequately designed and operating effectively.

5. Operational Risk Capital Framework

MCEL uses the BIA to calculate a Pillar 1 Operational Risk Capital Requirement. MCEL uses a scenario-based

approach to determine operational risk capital requirements under Pillar 2A. The framework for managing

operational risk capital has been developed to establish the level of capital required to be held for operational


risk exposures and as a tool to encourage appropriate management of Macquarie’s day-to-day operational

risk.

6. Business aligned Operational Risk Management (“BORM”)

BORMs are appointed by Macquarie business division heads to be their representative on operational risk

management matters, and act as their delegate in ensuring that operational risk is addressed appropriately

within the Group.

Structure and Organisation of the Operational Risk Function

Most Macquarie operational risk staff operate at the business level. BORMs are responsible for embedding operational

risk management within their business. They report directly to the relevant business and have a dotted reporting line

to the Head of RMG Operational Risk and Governance. RMG Operational Risk and Governance is a division of RMG and

is responsible for ensuring the MCEL ORMF remains appropriate and that skilled resources are available to support it.

The function is also responsible for MCEL’s Pillar 2 Operational Risk Capital measurement methodology.


9. Exposure Classification and

Credit Risk Mitigation

The external credit ratings of MCEL’s exposures to corporates, institutions and sovereigns have been mapped to

credit quality steps to determine the appropriate risk weights according to the FCA guidance.

• MCEL has a non-significant investment in a non-financial sector company which is risk-weighted at 100%.

• As at 31 March 2021, MCEL’s credit risk capital requirement amounted to £9.5m.

• Rating agencies used by Macquarie are Moody’s, Standard & Poor’s and Fitch.

MCEL complies with Macquarie Group policy with regards to balance sheet netting arrangements. The tables below

illustrate the balance sheet exposure values by risk weight, before and after application of credit risk mitigation. Past

due fees receivable are assigned to the category ‘Exposures in default’ and are assigned a risk weight of 150%.

Table 2: Geographic and Exposure Class Breakdown of Exposures and Credit Risk Capital Requirements

31 March 2021 31 March 2020

Exposure Class

Geographic

Location

Exposure

pre-credit risk

mitigation and

provision

Credit Risk

Capital

Requirements

Exposure pre-credit

risk mitigation

and provision

Credit Risk

Capital

Requirements

Central governments

or central banks

Australia

1.3 -

Europe 1.2 0.1 6.6 0.1

Claims on institutions

and corporate with a

short-term credit

assessment

Australia 3.0 0.0 80.5 0.1

Europe

2.1

0.0

2.9

0.2

Corporates

Americas

Asia

Australia

Africa

Europe

-

-

89.1

0.7

21.0

-

-

7.1

0.1

1.6

0.3

0.9

20.3

-

84.9

0.0

0.1

1.6

-

6.8

Public sector entities Europe

0.1

0.0

-

-

Equity Exposures Europe - - 3.4 0.3

Exposures in default

Americas - - 0.6 0.1

Asia - - - -

Europe - - 4.6 0.5 Americas 1.6 0.0 - -

Institutions Australia 0.0 0.0 4.1 0.6

Europe 17.6 0.3 24.8 0.3

Other items Europe 2.3 0.2 3.0 0.2

Grand Total 140.1 9.5 236.9 11.0


Table 3: Asset Class and Risk Weight Class Breakdown of Exposures and Credit Risk Capital Requirements

31 March 2021 31 March 2020

Exposure Class

Risk

Weight

Exposure

pre-credit

risk

mitigation

Exposure

post-credit

risk

mitigation

Capital

requirements

Exposure

pre-credit

risk

mitigatio

n

Exposure

post-

credit risk

mitigation

Capital

requiremen

ts

Central

governments or

central banks

0% 1.4 1.4 - 5.1 5.1 -

100%

1.1 1.1 0.1 1.5 1.5 0.1

Claims on

institutions and

corporates with

a short-term

credit

assessment

20% 5.2 5.2 0.1 81.0 4.1 0.1

50% - - - 1.3 1.3 0.1

100%

- - - 1.1 1.1 0.1

Corporates 20%

100%

0.5

110.3

0.5

110.0

0.0

8.8

-

106.4

-

106.4

-

8.5

Equity

Exposures 100%

- - - 3.4 3.4 0.3

Exposures in

default 150%

- - - 5.2 5.2 0.6

Institutions 20%

100%

19.2

-

19.2

-

0.3

-

21.2

7.7

21.2

7.7

0.3

0.6

Public sector

entities 150%

0.1 0.1 - - - -

Other items 20%

100%

-

2.3

-

2.3

-

0.2

0.0

3.0

0.0

3.0

0.0

0.2

Grand Total 140.1 139.8 9.5 236.9 159.9 11.0

Table 4: Post-CRM Exposure by Industry Type

31-Mar-21 31-Mar-20

Industry Type £’m £’m

Bank 2.2 1.3

Central Government 2.5 6.6

Electricity, Gas and Water supply 0.1 5.7

Financial Intermediaries and auxiliary services 125.5 129.3

Industrials - 1.1

Infrastructure 5.4 4.0

Manufacturing 0.4 4.7

Other 3.7 4.3


Resources - 2.9

Grand Total 139.8 159.9

Table 5: Pre-CRM Exposure by Residual Maturity

0-3 3-6 6-12 1-5 >5

Exposure Class Months Months Months Years Years N/A Total

Central governments or central banks - - - 2.5 - - 2.5

Claims on institutions and corporates with a short-

term credit assessment

5.2 - - - - - 5.2

Corporates 96.8 - 4.9 9.1 - - 110.8

Institutions 19.2 - - - - - 19.2

Equity Exposures - - - - - -

Public sector entities 0.1 - - - - - 0.1

Other Items - 2.3 - - 2.3

Grand Total 121.3 - 7.2 11.6 - - 140.1

Table 6: Pre-CRM Exposure by ECAI Credit Quality Steps

Exposure Class Unrated 1 2 3 4 5

Central governments or central banks 0.0 2.5 - - - -

Claims on institutions and corporates with a short-term

credit assessment

0.0 1.8 3.3 0.1 - -

Corporates 110.8 - - - - -

Equity Exposures - - - - - -

Public sector entities - 0.1 - - - -

Institutions 19.2 - - - - -

Other Items 2.3 - - - - -

Grand Total 132.3 4.4 3.3 0.1 - -

Table 7: Exposure post credit risk mitigation ("CRM") and average exposure

31-Mar-21 31-Mar-20

Exposure Class

Exposure

Post CRM

Average

Exposure

Post CRM

Exposure

Post CRM

Average

Exposure

Post CRM

Central governments or central banks 2.5 6.6 6.6 8.9

Claims on institutions and corporates with a short-term

credit assessment

5.2 6.7 6.4 16.6

Corporates 110.8 112.6 106.4 117.0

Equity Exposures - 1.3 3.4 6.3

Exposures in default - 4.0 5.2 4.6

Institutions 19.2 20.7 28.9 37.2

Public sector entities 0.1 0.0 - -

Other Items 2.3 1.4 3.0 2.2

Grand Total 140.1 153.3 159.9 192.6


10. Leverage Ratio

CRD IV requires the disclosure of MCEL’s leverage ratio, which measures the level of Tier 1 capital against both on- and

off-balance sheet exposures. As at 31 March 2021, the leverage ratio was 18.5%.

Leverage is the extent to which a firm funds its assets with borrowings rather than equity. More debt relative to equity

means a higher level of leverage. Excessive leverage is measured by a leverage ratio. This does not take into account

what those assets are, or what their risk characteristics are. Leverage ratios effectively place a cap on borrowings as a

multiple of a firm’s equity.

The purpose of monitoring and managing this metric is to enable regulators to constrain the build-up of excessive

leverage, which was considered to be one of the drivers of the banking crisis.

MCEL monitors its leverage requirements in line with the EBA requirements.

The risk of excessive leverage is managed through regular monitoring and reporting of the leverage ratio to the MCEL

board, this is measured against the Escalation and Triggers Framework.

Table 8: Table LRSum: Summary reconciliation of accounting assets and leverage ratio exposures

31-Mar-21

£’m

1 Total assets as per published financial statements 1,249.8

2 Adjustment for entities which are consolidated for accounting purposes but are outside

the scope of regulatory consolidation

-

3 (Adjustment for fiduciary assets recognised on the balance sheet pursuant to the

applicable accounting framework but excluded from the leverage ratio exposure measure

in accordance with Article 429(13) of Regulation (EU) No 575/2013 "CRR")

-

4 Adjustments for derivative financial instruments 8.4

5 Adjustments for securities financing transactions "SFTs" 2.7

6 Adjustment for off-balance sheet items (i.e. conversion to credit equivalent amounts of

off-balance sheet exposures)

-

EU-6a (Adjustment for intragroup exposures excluded from the leverage ratio exposure measure

in accordance with Article 429 (7) of Regulation (EU) No 575/2013)

-

EU-6b (Adjustment for exposures excluded from the leverage ratio exposure measure in

accordance with Article 429 (14) of Regulation (EU) No 575/2013)

-

7 Other adjustments (304.7)

8 Total leverage ratio exposure 956.3


Table 9: Table LRCom: Leverage ratio common disclosure

CRR leverage ratio exposures

31-Mar-21

£'m

On-balance sheet exposures (excluding derivatives and SFTs)

1 On-balance sheet items (excluding derivatives, SFTs and fiduciary assets, but

including collateral)

867.1

2 (Asset amounts deducted in determining Tier 1 capital) (1.3)

3 Total on-balance sheet exposures (excluding derivatives, SFTs and fiduciary assets)

(sum of lines 1 and 2)

865.9

Derivative exposures

4 Replacement cost associated with all derivatives transactions (i.e. net of eligible

cash variation margin)

0.6

5 Add-on amounts for PFE associated with all derivatives transactions (mark-to-market

method)

8.4

EU-5a Exposure determined under Original Exposure Method

6 Gross-up for derivatives collateral provided where deducted from the balance sheet

assets pursuant to the applicable accounting framework

-

7 (Deductions of receivables assets for cash variation margin provided in

derivatives transactions)

-

8 (Exempted CCP leg of client-cleared trade exposures) -

9 Adjusted effective notional amount of written credit derivatives -

10 (Adjusted effective notional offsets and add-on deductions for written credit derivatives) -

11 Total derivative exposures (sum of lines 4 to 10) 9.0

Securities financing transaction exposures

12 Gross SFT assets (with no recognition of netting), after adjusting for sales

accounting transactions

78.8

13 (Netted amounts of cash payables and cash receivables of gross SFT assets) -

14 Counterparty credit risk exposure for SFT assets 2.7

EU-14a Derogation for SFTs: Counterparty credit risk exposure in accordance with Article 429b

(4) and 222 of Regulation (EU) No 575/2013

-

15 Agent transaction exposures -

EU-15a (Exempted CCP leg of client-cleared SFT exposure) -

16 Total securities financing transaction exposures (sum of lines 12 to 15a) 81.4

Other off-balance sheet exposures

17 Off-balance sheet exposures at gross notional amount -

18 (Adjustments for conversion to credit equivalent amounts) -

19 Other off-balance sheet exposures (sum of lines 17 to 18) -

Exempted exposures in accordance with CRR Article 429 (7) and (14) (on and off-balance sheet)

EU-19a (Exemption of intragroup exposures (solo basis) in accordance with Article 429(7) of

Regulation (EU) No 575/2013 (on and off-balance sheet))

-

EU-19b (Exposures exempted in accordance with Article 429 (14) of Regulation (EU) No 575/2013

(on and off-balance sheet))

-

Capital and total exposures

20 Tier 1 capital 176.6

21 Total leverage ratio exposures (sum of lines 3, 11, 16, 19, EU-19a and EU-19b) 956.3

Leverage ratio

22 Leverage ratio 18.5%


Table 10: Table LRSpl: Split-up of on balance sheet exposures (excluding derivatives, SFTs and exempted exposures)

CRR leverage ratio exposures

31-Mar-21

£’m

EU-1 Total on-balance sheet exposures (excluding derivatives, SFTs, and exempted exposures),

of which:

867.1

EU-2 Trading book exposures 746.0

EU-3 Banking book exposures, of which: 121.1

EU-4 Covered bonds -

EU-5 Exposures treated as sovereigns 2.8

EU-6 Exposures to regional governments, MDB, international organisations and PSE NOT

treated as sovereigns

-

EU-7 Institutions 8.8

EU-8 Secured by mortgages of immovable properties -

EU-9 Retail exposures -

EU-10 Corporate 101.4

EU-11 Exposures in default 5.7

EU-12 Other exposures (e.g. equity, securitisations, and other non-credit obligation assets) 2.3

LRQua: Disclosure on qualitative items

The Leverage ratio for MCEL is impacted most significantly by changes in the course of settlement as of 31 March

2021. Banking book exposures for MCEL is impacted mostly by fees receivable and intercompany receivables as of

31 March 2021.


11. Asset Encumbrance

As per the guidelines issued pursuant to Article 16 of Regulation (EU) No 1093/2010 of the European Parliament and

of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority),

amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (the EBA Regulation) and in

accordance with Article 16(3) of the EBA Regulation, an investment firm is required to disclose information on

encumbered and unencumbered assets.

An asset shall be treated as encumbered if it has been pledged or if it is subject to any form of arrangement to secure,

collateralise or credit enhance any transaction from which it cannot be freely withdrawn.

Table 11: Template A – Assets

Carrying amount of

encumbered

assets

Fair value of

encumbered

assets

Carrying amount of

unencumbered

assets

Fair value of

unencumbered

assets

of which

notionally

eligible

EHQLA

and HQLA

of which

notionally

eligible

EHQLA

and HQLA

of which

EHQLA

and

HQLA

of which

EHQLA

and

HQLA

10 30 40 50 60 80 90 100

10 Assets of the

reporting institution

8.8

937.9

20 Loans on demand

132.7

30 Equity instruments

40 Debt securities

50 of which:

covered bonds

60 of which: asset-backed

securities

70 of which: issued by

general governments


financial corporations


non-financial

corporations

100 Loans and advances

other than loans on

demand

82.8

120 Other assets 8.8

722.5

*Cells which are coloured in grey indicate those components which are not reportable under EBA Guidelines.


Table 12: Template B – Collateral received

The following below table discloses information on collateral received by MCEL that is off-balance sheet

Fair value of

encumbered

collateral received

or own debt

securities issued

Unencumbered

Fair value of collateral received or

own debt securities issued

available for encumbrance

of which

notionally

eligible EHQLA

and HQLA

of which

EHQLA

and

HQLA

10 30 40 60

Collateral received by the reporting institution 78.3 78.3

Loans on demand

Equity instruments

Debt securities 78.3 78.3

• of which: covered bonds

• of which: asset-backed securities

• of which: issued by general governments 78.3 78.3

• of which: issued by financial corporations

• of which: issued by non financial corporations

Loans and advances other than loans on demand

Other collateral received

Own debt securities issued other than own covered

bonds or asset-backed securities

Own covered bonds and asset-backed securities issued

and not yet pledged

Total assets, collateral received and own debt securities

issued

*Cells which are coloured in grey indicate those components which are not reportable under EBA Guidelines

Table 13: Template C – Sources of encumbrance

The following table show sources of encumbrance for the period ended 31 March 2021

Matching liabilities,

contingent liabilities

or securities

lent

£'000

Assets, collateral received

and own debt securities

issued other than covered

bonds and ABSs encumbered

£'000

010 Carrying amount of selected financial liabilities

170 Total sources of encumbrance

8.8

D – Information on importance of encumbrance

Collateral received relates to government bonds that do not meet the conditions to be recognised on balance sheet in

accordance with the applicable accounting framework.

Included within the carrying value of unencumbered assets, there are assets which would not normally be considered

available for encumbrance in the normal course of business including trade timing/settlement differences, intangible

assets, property, plant and equipment, prepayments and accruals and deferred tax assets.


12. Capital Buffers

Capital Buffers

Institutions are required to hold a capital conservation buffer and a counter-cyclical capital buffer to ensure that

sufficient capital is accumulated during periods of economic growth to absorb losses in stressed periods. MCEL holds

capital buffers in accordance with IFPRU 10.

Capital Conservation Buffer

As per the FCA guidance in IFPRU TP 7, MCEL holds a capital conservation buffer of 2.5% of its total

risk-weighted assets.

Countercyclical Buffer (“CCyB”)

Institutions are required to calculate an institution-specific counter-cyclical capital buffer as a weighted average of the

counter-cyclical buffer rates that apply in the countries where the credit exposures are located. Each member state

designates an authority responsible for setting the counter-cyclical buffer rate in that member state on a quarterly

basis, taking into account the growth of credit levels and changes to the ratio of credit to GDP. The Financial Policy

Committee (FPC) of the Bank of England is responsible for setting the rate in the UK.

MCEL will hold additional capital in respect of exposures with countries as and when the FPC prescribes the CCyB rate.

As of 31 March 2021, the applicable CCyB rates in force were 1% set by Hong Kong, 1% set by Norway, 1% set by

Slovakia and 0.5% set by Luxembourg.

Based on the current exposures this does not have a material impact on MCEL.

Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer

31 March 2021:

General credit exposures Own funds requirements

Own funds

requirement

weights

Counter-

cyclical

capital

buffer rate Country (£’m)

Exposure

value for SA

Exposure

value for

IRB

of which:

General

credit

exposures

of which:

Trading

book

exposures

of which:

Securitisation

exposures Total

Hong Kong - - - - - - 0.0% 1.00%

Luxembourg 4.0 - 0.3 - - - 3.6% 0.50%

Norway - - - - - - 0.0% 1.00%

Slovakia - - - - - - 0.0% 1.00&

Total 4.0 - 0.3 - - -

£'m

Total risk exposure amount 179.9

Institution specific countercyclical capital buffer rate 0.02%

Institution specific countercyclical capital buffer requirement 0.03


13. Disclosure

• The material in this document has been prepared by Macquarie Capital (Europe) Limited, Company number

03704031 (“MCEL”) purely for the purpose of explaining the basis on which MCEL has prepared and disclosed

certain capital requirements and information about the management of risks relating to those requirements and

for no other purpose. Information in this document, including any forward-looking statements, should not be

considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or

selling securities or other financial products or instruments (the “Investment Activity”) and does not take into

account investors’ or potential investors’ particular investment objectives, financial situation or needs. Before acting

on any information investors and potential investors should consider the appropriateness of information having

regard to the Investment Activity, any relevant offer document and in particular, investors and potential investors

should seek independent financial advice. No representation or warranty is made as to the accuracy, completeness

or reliability of the information. All securities and financial product or instrument transactions involve risks, which

include (among others) the risk of adverse or unanticipated market, financial or political developments and, in

international transactions, currency risk.

• This document may contain forward-looking statements that is, statements related to future, not past, events or

other matters – including, without limitation, statements regarding our intent, belief or current expectations with

respect to MCEL’s businesses and operations, market conditions, results of operation and financial condition,

capital adequacy, individually assessed provisions for impairment and risk management practices. Readers are

cautioned not to place undue reliance on these forward-looking statements. MCEL does not undertake any

obligation to publicly release the result of any revisions to these forward-looking statements or to otherwise update

any forward-looking statements, whether as a result of new information, future events or otherwise, after the date

of this document. Actual results may vary in a materially positive or negative manner. Forward-looking statements

and hypothetical examples are subject to uncertainty and contingencies outside MCEL’s control. Past performance

is not a reliable indication of future performance. Unless otherwise specified, all information is at 31 March 2021.

• Although Pillar 3 disclosures are intended to provide transparent disclosures on a common basis, the information

contained in this document may not be directly comparable with the information of other firms. This may be due to

a number of factors such as:

− the mix of business exposures differs between firms; and

− the fact that Pillar 2 capital requirements are excluded from this disclosure but play a major role in determining

both the total capital requirements of the firm and any surplus capital available.


Appendix 1

Capital Adequacy

31 March 2021

£m

(B)

REGULATION

(EU) No 575/2013

ARTICLE

REFERENCE

Capital instruments and the related share premium accounts 338.7 26 (1), 27, 28, 29,

EBA list 26 (3)

of which: Instrument type 1 338.7 EBA list 26 (3)

Retained earnings (160.3) 26 (1) (c)

Accumulated other comprehensive income (and any other reserves) (1.8) 26 (1)

Funds for general banking risk - 26 (1) (f)

Amount of qualifying items referred to in Article 484 (3) and the related share

premium accounts subject to phase out from CET1

- 486 (2)

Public sector capital injections grandfathered until 1 January 2018 - 483 (2)

Minority interests (amount allowed in consolidated CET1) - 84, 479, 480

Independently reviewed interim profits net of any foreseeable charge or dividend - 26 (2)

Common Equity Tier 1 (CET1) capital before regulatory adjustments 176.6

Common Equity Tier 1 (CET1) capital: regulatory adjustments

Total regulatory adjustments to Common Equity Tier 1 (CET1) -

Common Equity Tier 1 (CET1) capital 176.6

Total regulatory adjustments to Additional Tier 1 (AT1) capital

Additional Tier 1 (AT1) capital

Tier 1 capital (T1 = CET1 + AT1) 176.6

Total regulatory adjustments to Tier 2 (T2) capital

Tier 2 (T2) capital

Total capital (TC = T1 + T2) 176.6

Total risk-weighted assets 187.9

Capital ratios and buffers

Common Equity Tier 1 (as a percentage of total risk exposure amount 93.99% 92 (2) (a), 465

Tier 1 (as a percentage of total risk exposure amount 93.99% 92 (2) (b), 465

Total capital (as a percentage of total risk exposure amount 93.99% 92 (2) (c)

Institution specific buffer requirement (CET1 requirement in accordance with

article 92 (1) (a) plus capital conservation and countercyclical buffer requirements

plus a systemic risk buffer, plus systemically important institution buffer

expressed as a percentage of total risk exposure amount)

4.7 CRD 128, 129, 140

of which: capital conservation buffer requirement 4.7

of which: countercyclical buffer requirement 0.0

of which: systemic risk buffer requirement -

of which: Global Systemically Important Institution (G-SII) or Other Systemically

Important Institution (O-SII) buffer

- CRD 131

Common Equity Tier 1 available to meet buffers (as a percentage of risk

exposure amount)

85.97% CRD 128


Capital instruments’ main features template

Disclosure according to Article 3 in Commission implementing regulation (EU) No 1423/2013

Capital instruments’ main features template (1)

1 Issuer MCEL

2 Unique identifier (e.g CUSIP, ISIN or Bloomberg identifier for private placement) N/a

3 Governing law(s) of the instrument UK

Regulatory treatment

4 Transitional CRR rules CET1

5 Post-transitional CRR rules CET1

6 Eligible at solo/(sub-)consolidated/solo & (sub-)consolidated Solo

7 Instrument type (types to be specified by each jurisdiction) Ordinary Shares

8 Amount recognised in regulatory capital (currency in million, as of most recent

reporting date)

331.6

9 Nominal amount of instrument 331.6

9a Issue price 1

9b Redemption price 1

10 Accounting classification Called Up Share capital

11 Original date of issuance June 29, 1999

12 Perpetual or dated Perpetual

13 Original maturity date No Maturity Date

14 Issuer call subject to prior supervisory approval N/a

15 Optional call date, contingent call dates and redemption amount N/a

16 Subsequent call dates, if applicable N/a

Coupons / dividends

17 Fixed or floating dividend / coupon N/a

18 Coupon rate and any related index N/a

19 Existence of a dividend stopper No

20a Fully discretionary, partially discretionary or mandatory (in terms of timing) Fully discretionary

20b Fully discretionary, partially discretionary or mandatory (in terms of amount) Fully discretionary

21 Existence of step up or other incentive to redeem No

22 Noncumulative or cumulative Non-cumulative

23 Convertible or non-convertible Non-convertible

24 If convertible, conversion trigger(s) N/a

25 If convertible, fully or partially N/a

26 If convertible, conversion rate N/a

27 If convertible, mandatory or optional conversion N/a

28 If convertible, specify instrument type convertible into N/a

29 If convertible, specify issuer of instrument it converts into N/a

30 Write-down features N/a

31 If write-down, write-down trigger(s) N/a

32 If write-down, full or partial N/a

33 If write-down, permanent or temporary N/a

34 If temporary write-down, description of write-up mechanism N/a

35 Position in subordination hierarchy in liquidation (specify instrument type

immediately senior to instrument)

N/a

36 Non-compliant transitioned features No

37 If yes, specify non-compliant features N/a

1. 'N/A' inserted if the question is not applicable.

MCEL Basel III Pillar 3 Capital Disclosure

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