Strategic report Governance Financial statements Other information SECTION 5: OTHER NOTES NOTES TO THE GROUP FINANCIAL STATEMENTS OTHER CONTINUED 5.7 Financial instruments continued The table below shows the credit category of financial assets that are neither past due nor impaired. Capital management – Unaudited Financial Corporate Regulatory capital is determined in accordance with the requirements of the Capital Requirements institutions clients Individuals Total Directive IV prescribed in the UK by the FCA. The Directive requires continual assessment of the £m £m £m £m Group’s risks in order to ensure that the higher of Pillar 1 (Minimum Capital Requirements) and Pillar At 30 June 2021 2 (Supervisory Review) requirements is met. Trade receivables 181.6 0.1 554.8 736.5 Other receivables 4.1 – – 4.1 Pillar 1 imposes a minimum capital requirement on investment firms which is calculated as the Accrued income 27.4 – 19.3 46.7 higher of the sum of the credit and market risk capital requirements and the fixed overheads Term deposits 60.0 – – 60.0 requirement (FOR). The FOR equates to 25% of the fixed overheads reported in the most recent Investments held at fair value through profit and loss 0.9 0.9 audited financial statements. – – 274.0 0.1 574.1 848.2 Pillar 2 requires investment firms to assess firm-specific risks not covered by the formulaic At 30 June 2020 requirements of Pillar 1, the objective of this being to ensure that investment firms have adequate Trade receivables 194.0 0.1 462.5 656.6 capital to enable them to manage their risks. The Group completes its assessment of regulatory Other receivables 2.6 – – 2.6 capital requirements using its ICAAP under Pillar 2, which is a forward looking exercise that includes Accrued income 42.4 – 22.2 64.6 Term deposits 230.0 230.0 stress testing on major risks, such as a significant market downturn, and identifying mitigating action. – – Derivative assets 0.1 – – 0.1 As required by the FCA, Hargreaves Lansdown holds capital based on a multiple of Pillar 1 and Investments held at fair value through profit and loss 0.6 0.6 maintains a significant surplus over this requirement at all times. – – 469.7 0.1 484.7 954.5 The Group manages its retained earnings and share capital which total £601.4 million as at 30 June 2021 (2020: £566.5 million). Surplus regulatory capital was maintained throughout the year at both Capital management a consolidated Group level, as well as at an individual regulated entity level. Under the requirements The Group’s objectives when managing capital are: i) to safeguard the Group’s ability to continue as of Pillar 3 (Disclosure), the Group is required to disclose regulatory capital information, and has done a going concern so that it can continue to provide returns for shareholders and benefits for other so by making the disclosures available in the Group’s website at www.hl.co.uk/investor-relations/ stakeholders; ii) to maintain a strong capital base and utilise it efficiently to support the development key-financial-data/pillar-3-disclosures2. of its business; and iii) to comply with the regulatory capital requirements set by the FCA. Capital adequacy and the use of regulatory capital are monitored by the Group’s management and Board. 171 Hargreaves Lansdown Report and Financial Statements 2021