1.The capital requirements of a CSD for business risk shall be whichever of the following is higher:
the estimate resulting from the application of paragraph 2, minus whichever of the following is the lowest:
the net income after tax of the last audited financial year;
the expected net income after tax for the current financial year;
the expected net income after tax for the previous financial year where audited results are not yet available;
25 % of the CSD's annual gross operational expenses referred to in paragraph 3.
2.For the purposes of point (a) of paragraph 1, a CSD shall apply all of the following:
estimate the capital necessary to cover losses resulting from business risk on reasonably foreseeable adverse scenarios relevant to its business model;
document the assumptions and the methodologies used to estimate the expected losses referred to in point (a);
review and update the scenarios referred to in point (a) at least annually.
3.For the calculation of a CSD's annual gross operational expenses, the following shall apply:
the CSD's annual gross operational expenses shall consist of at least the following:
total personnel expenses including wages, salaries, bonuses and social costs;
total general administrative expenses, and, in particular, marketing and representation expenses;
insurance expenses;
other employees' expenses and travelling;
real estate expenses;
IT support expenses;
telecommunications expenses;
postage and data transfer expenses;
external consultancy expenses;
tangible and intangible assets' depreciation and amortisation;
impairment and disposal of fixed assets;
the CSD's annual gross operational expenses shall be determined in accordance with one of the following:
International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 of the European Parliament and of the Council 2;
generally accepted accounting principles of a third country determined to be equivalent to IFRS in accordance with Commission Regulation (EC) No 1569/2007 5 or accounting standards of a third country the use of which is permitted in accordance with Article 4 of that Regulation;
the CSD may deduct tangible and intangible assets' depreciation and amortisation from annual gross operational expenses;
the CSD shall use the most recent audited information from their annual financial statement;
where the CSD has not completed business for one year from the date it starts its operations, it shall apply the gross operational expenses projected in its business plan.