BIPRU 10.8A Intra-group exposures: core UK group

In relation to BIPRU 10.8A.2R (3), a subsidiary undertaking should generally be 100% owned and controlled by a single shareholder. However, if a subsidiary undertaking has more than one shareholder, that undertaking may be a member of the core UK group if all its shareholders are also members of that same core UK group.

If a core concentration risk group counterparty is of a type that falls within the scope of the Council Regulation of 29 May 2000 on insolvency proceedings (Regulation 1346/2000/EC) and it is established in the United Kingdom other than by incorporation, a firm wishing to include that counterparty in its core UK group may apply to the FSA for a waiver of BIPRU 10.8A.2R (5) if it can demonstrate fully to the FSA that the counterparty's centre of main interests is situated in the United Kingdom within the meaning of that Regulation.

The FSA will consider the following criteria when assessing whether the condition in BIPRU 10.8A.2R (6) is going to be met:

1. (1)

   the speed with which funds can be transferred or liabilities repaid to the firm and the simplicity of the method for the transfer or repayment;

2. (2)

   whether there are any interests other than those of the firm in the core concentration risk group counterparty and what impact those other interests may have on the firm's control over the core group concentration risk group counterparty and the ability of the firm to require a transfer of funds or repayment of liabilities;

3. (3)

   whether there are any tax disadvantages for the firm or the core concentration risk group counterparty as a result of the transfer of funds or repayment of liabilities;

4. (4)

   whether the purpose of the core concentration risk group counterparty prejudices the prompt transfer of funds or repayment of liabilities;

5. (5)

   whether the legal structure of the core concentration risk group counterparty prejudices the prompt transfer of funds or repayment of liabilities;

6. (6)

   whether the contractual relationships of the core concentration risk group counterparty with the firm and other third parties prejudices the prompt transfer of funds or repayment of liabilities; and

7. (7)

   whether past and proposed flows of funds between the core concentration risk group counterparty and the firm demonstrate the ability to make prompt transfer of funds or repayment of liabilities.

1. (1)

   Firms are referred to the guidance relating to 0% risk weights for exposures within a core UK group under the standardised approach as follows:

   1. (a)

      BIPRU 3.2.28 G in respect of BIPRU 10.8A.2R (3) on same risk evaluation, measurement and control procedures; and

   2. (b)

      BIPRU 3.2.30 G and BIPRU 3.2.31 G in respect of BIPRU 10.8A.2R (6) on prompt transfer of capital resources and repayment of liabilities.

2. (2)

   For the purpose of BIPRU 10.8A.5R (2), the obligation to increase the firm's capital resources may be limited to capital resources available to the counterparty and may reasonably exclude such amount of capital resources that, if transferred to the firm, would cause the counterparty to become balance sheet insolvent in the manner contemplated in section 123(2) of the Insolvency Act 1986.

The FSA will expect a firm to which this section applies not to use any member of its core UK group which is not a firm to route lending or to have exposures to any third party in excess of the limits in BIPRU 10.5 (Limits on exposures).

The calculation of capital resources under GENPRU 3 Annex 1 R Part 2 (Method 2 of Annex 1 of the Financial Groups Directive (Deduction and aggregation Method) is based on the solo capital resources of members of a financial conglomerate. The definition of solo capital resources depends on what type of undertakings the financial conglomerate contains. For example, if a financial conglomerate contains a bank the solo capital resources calculation for every group member in the banking sector and the investment services sector is based on the capital resources calculation for banks. The purpose of BIPRU 10.8A.10R is to apply the corresponding procedure that applies under BIPRU 8.6 (Calculation of capital resources on a consolidated basis for BIPRU firms).