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    2024-01-31

This chapter includes rules that refer to provisions of the UK CRR in the form in which it stood at 1 January 2022. That version of the UK CRR can be found on legislation.gov.uk using this link.

MIFIDPRU 3.5 Tier 2 capital

MIFIDPRU 3.5.1R
  1. (1)

    1A firm must determine its tier 2 capital in accordance with Chapter 4 of Title I of Part Two of the UK CRR, as modified by the rules in this section.

  2. (2)

    Any reference to the UK CRR in this section is to the UK CRR as applied by (1) and modified by the rules in this section.

MIFIDPRU 3.5.1AG

2MIFIDPRU 3 Annex 7R contains additional provisions relating to the calculation of a firm’s tier 2 capital.

Holdings of tier 2 instruments of financial sector entities

MIFIDPRU 3.5.2R
  1. (1)

    1This rule applies to a firm’s holdings of capital instruments that are not held in its trading book.

  2. (2)

    A firm must deduct its direct, indirect and synthetic holdings in the tier 2 instruments of financial sector entities under article 66(c) of the UK CRR without applying article 70 of the UK CRR (deduction of tier 2 instruments where an institution does not have a significant investment in the relevant entity).

  3. (3)

    The requirement in article 66(c) of the UK CRR does not apply where MIFIDPRU 3.5.4R applies.

MIFIDPRU 3.5.3R

1The following provisions do not apply to tier 2 instruments held in the trading book of the firm:

  1. (1)

    article 66(c) of the UK CRR; and

  2. (2)

    article 70 of the UK CRR.

Holdings of tier 2 instruments issued by a financial sector entity within an investment firm group

MIFIDPRU 3.5.4R

1A firm is not required to deduct holdings of tier 2 instruments issued by a financial sector entity from the firm’s tier 2 items in accordance with article 66 of the UK CRR if all of the following conditions are met:

  1. (1)

    the financial sector entity forms part of the same investment firm group as the firm;

  2. (2)

    there is no current or foreseen material, practical or legal impediment to the prompt transfer of capital or repayment of liabilities by the financial sector entity;

  3. (3)

    the risk evaluation, measurement and control procedures of the parent undertaking include the financial sector entity; and

  4. (4)

    the group capital test under MIFIDPRU 2.6 does not apply to the investment firm group.