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BIPRU 10.9A Intra-group exposures: non-core large exposures group

Application

BIPRU 10.9A.1R

1This section applies to a firm if it has:

  1. (1)

    a non-core large exposures group; and

  2. (2)

    a non-core large exposures group waiver.

BIPRU 10.9A.2G

A firm must treat the exposures to its connected counterparties that are not members of its non-core large exposures group as exposures to a single undertaking and must ensure that the total amount of its exposures to such connected counterparties does not exceed the 25% limit in BIPRU 10.5.6 R (Large exposure limit) and, if applicable, the trading book limits in BIPRU 10.10A (Connected counterparties: trading book limits).

Definition of non-core large exposures group

BIPRU 10.9A.3R

The non-core large exposures group of a firm consists of each non-core concentration risk group counterparty of the firm that is not a member of its core UK group but satisfies all other conditions for membership of the firm's core UK group except for the following:

  1. (1)

    BIPRU 10.8A.2R (1) (Core concentration risk group counterparty);

  2. (2)

    BIPRU 10.8A.2R (5) (Establishment in the United Kingdom); and

  3. (3)

    BIPRU 10.8A.5R (2) (Capital maintenance arrangements).

Definition of non-core concentration risk group counterparty

BIPRU 10.9A.4R

A non-core concentration risk group counterparty (in relation to a firm) is a counterparty which is its parent undertaking, its subsidiary undertaking or a subsidiary undertaking of its parent undertaking, provided that (in each case) both the counterparty and the firm satisfy one of the following conditions:

  1. (1)

    they are included within the scope of consolidation on a full basis with respect to the same UK consolidation group and BIPRU 8.3.1 R applies to the firm with respect to that UK consolidation group; or

  2. (2)

    they are included within the scope of consolidation on a full basis with respect to the same group by a competent authority of an EEA State other than the United Kingdom under the CRD implementation measures about consolidated supervision for that EEA State; or

  3. (3)

    they are included within the scope of consolidation on a full basis with respect to the same group by a third country competent authority under prudential rules for the banking sector or investment services sector of or administered by that third country competent authority and the firm or another EEA firm in that group has been notified in writing by the FSA or a competent authority of another EEA State pursuant to Article 143 of the Banking Consolidation Directive that that group is subject to equivalent supervision.

Revised large exposure limits for a non-core large exposures group

BIPRU 10.9A.5R

A firm to which this section applies must ensure that the rules listed in BIPRU 10.9A.6R are complied with on a consolidated basis subject to the following modifications:

  1. (1)

    (if the firm is not a member of a core UK group) the rules apply in relation to exposures of the firm to its non-core large exposures group as if it is a single undertaking;

  2. (2)

    if the firm is a member of a core UK group:

    1. (a)

      the rules apply in relation to its core UK group rather than in relation to the firm; and

    2. (b)

      the core UK group and the non-core large exposures group must each be treated as a single undertaking.

BIPRU 10.9A.6R

The rules referred to in BIPRU 10.9A.5R are:

  1. (1)

    BIPRU 10.5.6 R (25% large exposures limit);

  2. (2)

    BIPRU 10.10A.2 R (Trading book limits) other than BIPRU 10.10A.2R (2) (CNCOM); and

  3. (3)

    BIPRU 10.10A.3 R (500% limit for trading book excess exposures).

Non-trading book backstop limit for a non-core large exposures group

BIPRU 10.9A.7R

A firm must ensure that the total amount of non-trading book exposures between:

  1. (1)

    itself and members of its non-core large exposures group does not exceed 100% of the firm's capital resources; or

  2. (2)

    if it is a member of a core UK group, the members of its core UK group and members of its non-core large exposures group does not exceed 100% of the capital resources of the firm's core UK group.

Concentrated exposures in a non-core large exposures group

BIPRU 10.9A.8R
  1. (1)

    Subject to the limit in BIPRU 10.9A.7R (Back-stop large exposures limit), a firm may concentrate its intra-group exposure to a particular member of its non-core large exposures group in excess of 25% of the capital resources of the firm's core UK group.

  2. (2)

    A firm may not apply (1) unless it has given prior written notice to the FSA that it intends to do so.

  3. (3)

    The written notice referred to in (2) must contain the following:

    1. (a)

      an explanation on how the firm will ensure that it will still meet the requirement in BIPRU 10.9A.7R (Backstop large exposures limit) on a continuing basis when applying (1);

    2. (b)

      details of the counterparty, the size of the exposure and the expected duration of the exposure; and

    3. (c)

      an explanation of the reason for the exposure.

  4. (4)

    If a firm stops applying (1) it may start to apply it again if it notifies the FSA under (2) that it intends to do so.

Calculation of capital resources for a core UK group

BIPRU 10.9A.9R

BIPRU 10.8A.10R (Calculation of capital resources for a core UK group) applies for the purposes of this section in the same way that it applies for the purposes of BIPRU 10.8A (Intra-group exposures: core UK group).

Exemption for intra-group exposures on a solo basis

BIPRU 10.9A.10R

If this section applies to a firm, then subject to BIPRU 10.10A.12 (Core UK group and non-core large exposures group: treatment of the trading book concentration risk excess), it may, on a solo basis, treat an exposure to a member of its non-core large exposures group as exempt from the limits in BIPRU 10.5 (Limits on exposures).

BIPRU 10.9A.11G

The purpose of BIPRU 10.9A.10R is to reflect the fact that the limits in BIPRU 10.5 (Limits on exposures), so far as they apply to a member of a firm's non-core large exposures group, are calculated on a consolidated basis with respect to a firm's core UK group. It is therefore necessary to switch them off on a purely solo basis.

Notification

BIPRU 10.9A.12R

A firm must immediately notify the FSA in writing it if becomes aware that any exposure that it has treated as exempt under this section or any counterparty that it has been treating as a member of its non-core large exposures group has ceased to meet the conditions for application of the treatment in this section.