BIPRU 10.8 UK integrated groups

This section applies to a firm if:

1. (1)

   it is a member of a UK integrated group; and

2. (2)

   it gives notice in accordance with BIPRU 10.11.1 R (Notification procedures for BIPRU 10.7 to BIPRU 10.10) that it will apply BIPRU 10.8.

If this section applies to a firm, it must apply this section to all exposures to all its concentration risk group counterparties and not just some of them.

An undertaking is a member of a firm's UK integrated group if, in relation to the firm, that undertaking satisfies the following conditions:

1. (1)

   it is a concentration risk group counterparty;

2. (2)

   it is an institution, financial holding company, financial institution, asset management company or ancillary services undertaking;

3. (3)

   it is subject to the same risk evaluation, measurement and control procedures as the firm;

4. (4)

   it is established in the United Kingdom and either it is incorporated in the United Kingdom or (if that counterparty is of a type that falls within the scope of that Regulation) the centre of its main interests is situated within the United Kingdom within the meaning of the Council Regulation of 29 May 2000 on insolvency proceedings (Regulation 1346/2000/EC); and

5. (5)

   there is no current or foreseen material practical or legal impediment to the prompt transfer of capital resources or repayment of liabilities from the counterparty to the firm.

A firm must ensure that the rules listed in BIPRU 10.8.7 R are complied with on a consolidated basis in accordance with the following:

1. (1)

   the rules apply in relation to the firm's UK integrated group rather than in relation to the firm;

2. (2)

   the rules apply in relation to exposures of members of the UK integrated group to members of the residual block; and

3. (3)

   the UK integrated group and the residual block must each be treated as a single undertaking.

The rules referred to in BIPRU 10.8.6 R are:

1. (1)

   BIPRU 10.5.6 R (25% non-trading book limit);

2. (2)

   BIPRU 10.5.11 R (trading book limits) other than BIPRU 10.5.11 R (2) (CNCOM);

3. (3)

   BIPRU 10.5.12 R (500% limit for trading book excess exposures) with the deletion of the time limit set out in BIPRU 10.5.12 R; and

4. (4)

   BIPRU 10.7 (Treasury concession and intra-group securities financing transactions).

A firm may only treat an exposure as exempt under BIPRU 10.7.1 R (Treasury Concession) as applied under this section if the exposure is or (if that rule applied to the member of the UK integrated group in question) would be exempt under BIPRU 10.7.1 R on a solo basis. The following adjustments apply:

1. (1)

   the exposure must be to a concentration risk group counterparty; and

2. (2)

   the limit in BIPRU 10.7.2 R (Exemption limited to 50% of a firm's capital resources) is calculated on a consolidated basis with respect to the UK integrated group.

A firm may only treat an exposure as exempt under BIPRU 10.7.4 R (Intra-group securities financing transactions) as applied under this section if the exposure is or (if that rule applied to the undertaking in question) would be exempt under BIPRU 10.7.4 R on a solo basis. BIPRU 10.7.6 R (Abuse of the exemption) continues to apply. The exemption is not available if the firm uses the CCR internal model method1 for securities financing transactions for the purpose of this chapter.

For the purposes of this section, a member of the residual block means, in relation to a firm and its UK integrated group, a concentration risk group counterparty of the firm which is not a member of the firm's UK integrated group.

For the purposes of this section, a firm must calculate the capital resources of the UK integrated group in accordance with GENPRU 3 Annex 1 R Part 2 (Method 2 of Annex I of the Financial Groups Directive (Deduction and aggregation Method)) and apply the limits set out in this section to those capital resources rather than the capital resources of the firm. For these purposes the definition of solo capital resources is adjusted so that the rules on which the calculation for each member of the UK integrated group is based are the ones that would apply under the procedure in BIPRU 8.6.6 R to BIPRU 8.6.9 R (Consolidated capital resources).

If this section applies to a firm, then subject to BIPRU 10.10 (Treatment of the trading book concentration risk excess under the integrated groups regime), it may, on a solo basis, treat an exposure to a concentration risk group counterparty as exempt from the limits in BIPRU 10.5 (Limits on exposures and large exposures).