BIPRU 8.5 Basis of consolidation

Although an undertaking falling outside BIPRU 8.5.1 R will not be included in a UK consolidation group or non-UK sub-group6 it may be relevant in deciding whether one undertaking in the banking sector or the investment services sector is a subsidiary undertaking of another with the result that they should be included in the same UK consolidation group or non-UK sub-group6.

An example of BIPRU 8.5.2 G is as follows. Say that the undertaking at the head of a BIPRU firm's4 UK group is a parent financial holding company in the UK6. One of its subsidiary undertakings is the firm4. The parent financial holding company in the UK6 also has an insurer as a subsidiary undertaking. That insurer has several BIPRU firms4 as subsidiary undertakings. Say that the UK group is not a financial conglomerate. The UK consolidation group will include the parent financial holding company in the UK6 and the firm4. It will also include the BIPRU firms4 that are subsidiary undertakings of the insurer. This is because the BIPRU firms4 are subsidiary undertakings of the parent financial holding company in the UK6 through the parent financial holding company in the UK's6 holding in the insurer. However it will not include the insurer itself.

In general a collective portfolio management investment firm2 only calculates its capital and concentration risk requirements in relation to its designated investment business and does not calculate them with respect tomanaging an AIF or managing a UK UCITS5. The effect of BIPRU 8.5.7 R is that this does not apply on a consolidated basis. For the purpose of this chapter the calculations are carried out2 with respect to the whole of the activities of a collective portfolio management investment firm.2

Article 95(2) preserves the discretion for6 the appropriate regulator to decide to exclude a BIPRU firm,4 financial institution, asset management company or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-UK sub-group6 for the purposes of this chapter in the following circumstances:

1. (1)

   where the head office of the undertaking concerned is situated in a country outside the UK6 where there are legal impediments to the transfer of the necessary information; or

2. (2)

   where, in the opinion of the appropriate regulator, the undertaking concerned is of negligible interest only with respect to the objectives of monitoringBIPRU firms;4 or

   4
3. (3)

   where, in the opinion of the appropriate regulator, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of BIPRU firms4 are concerned.

   4

If a firm wishes to exclude an undertaking on the basis of any of the grounds set out in BIPRU 8.5.11 G it should apply to the appropriate regulator for a waiver. The appropriate regulator will consider such applications in the light of the criteria in Section 138A of the Act.

If several undertakings meet the criteria in BIPRU 8.5.11G (2), the appropriate regulator will not agree to a waiver to exclude them all from consolidation where collectively they are of non-negligible interest with respect to the objectives of the supervision of institutions.

The appropriate regulator may require a firm to provide information about the undertakings excluded from consolidation of the UK consolidation group or non-UK sub-group6 pursuant to this section.