Reset to Today

To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004.

Content Options:

Content Options

View Options:

Alternative versions

  1. Point in time
    2019-07-21

IPRU-INV 9.5 CALCULATION OF OWN FUNDS

IPRU-INV 9.5.1RRP

A firm's initial capital:

minus the sum of the items set out against B

plus the sum of the items set out against C

minus material holdings in credit and financial institutions and material insurance holdings

equals own funds.

IPRU-INV 9.5.2RRP

Table

The table forms part of rule 9.5.1R

(1)

Investments in own shares at book value

B

(2)

Intangible assets

(3)

Material current year losses

(1)

Revaluation reserves

C

(2)

Perpetual cumulative preference share capital

(3)

Long-term subordinated loans

(4)

Perpetual long-term subordinated loans

(5)

Fixed term preference share capital

Perpetual long-term subordinated loans and perpetual cumulative preference share capital

IPRU-INV 9.5.3RRP

Perpetual long-term subordinated loans and perpetual cumulative preference share capital may not be included in the calculation of own funds unless they meet the following requirements:

  1. (1)

    it may not be reimbursed on the holder's initiative or without the prior agreement of the FCA;

  2. (2)

    the instrument must provide for the firm to have the option of deferring the dividend payment on the share capital;

  3. (3)

    the shareholder's claims on the firm must be wholly subordinated to those of all non-subordinated creditors;

  4. (4)

    the terms of the instrument must provide for the loss-absorption capacity of the share capital and unpaid dividends, whilst enabling the firm to continue its business; and

  5. (5)

    it must be fully paid-up.

Subordinated loans

IPRU-INV 9.5.4RRP

A firm may include a subordinated loan in the calculation of its own funds only:

  1. (a)

    if it is drawn up in accordance with the standard forms obtained from the FCA;

  2. (b)

    if it is signed by authorised signatories of all the parties; and

  3. (c)

    to the extent that it is fully paid up.

Long-term subordinated loans

IPRU-INV 9.5.5RRP

A long-term subordinated loan may not be included in the calculation of own funds unless it meets the following requirements:

  1. (1)

    it must be fully paid-up;

  2. (2)

    it has an original maturity of at least five years;

  3. (3)

    the extent to which it may be used in the calculation of own funds shall be amortised on a straight line basis during at least the five years before repayment; and

  4. (4)

    it must not become repayable before the agreed repayment date other than in the winding-up of the firm or unless the firm has provided the FCA with at least five years' written notice.

IPRU-INV 9.5.6RRP

A firm must not (except in accordance with the terms of the loan) make any payment of interest if after such action the firm's own funds will fall below 120% of its own funds requirement.

Perpetual noncumulative and cumulative preference share capital

IPRU-INV 9.5.7RRP

A firm may include perpetual non-cumulative and cumulative preference share capital in its initial capital and its own funds only if there is an agreement between the firm and the shareholders which provides that redemption of the shares may not take place, if after such redemption the firm would be in breach of its own funds requirement

Own funds - Restrictions

IPRU-INV 9.5.8RRP
  1. (1)

    In calculating own funds:

    1. (i)

      the total amount of revaluation reserves, perpetual cumulative preference share capital, long-term subordinated loans, perpetual long-term subordinated loans and fixed term preference share capital must not exceed 100% of initial capital minus B; and

    2. (ii)

      the total amount of fixed term preference share capital and long-term subordinated loans must not exceed 50% of initial capital minus B.