MIFIDPRU 3.7 Composition of capital for parent undertakings subject to the group capital test

1This section applies to a parent undertaking in accordance with MIFIDPRU 3.1.2R.

1A parent undertaking must, at all times, have own funds instruments that satisfy the following conditions:

1. (1)

   the parent undertaking’s common equity tier 1 capital must be at least equal to:

   1. (a)

      the sum of the book value of the parent undertaking’s holdings of the common equity tier 1 capital of the relevant financial undertakings under MIFIDPRU 2.6.5R; plus

   2. (b)

      the total amount of all the parent undertaking’s contingent liabilities in favour of the relevant financial undertakings under MIFIDPRU 2.6.5R;

2. (2)

   the sum of common equity tier 1 capital and additional tier 1 capital of the parent undertaking must be at least equal to the sum of:

   1. (a)

      the amounts in (1)(a) and (1)(b); plus

   2. (b)

      the sum of the book value of the parent undertaking’s holdings in the additional tier 1 capital of the relevant financial undertakings under MIFIDPRU 2.6.5R; and

3. (3)

   the sum of the parent undertaking’s own funds instruments must be at least equal to the total requirement under MIFIDPRU 2.6.5R.

1. (1)

   1Subject to (2), a parent undertaking must comply with:

   1. (a)

      MIFIDPRU 3.3.2R to MIFIDPRU 3.3.4G when issuing own funds instruments which are intended to qualify as common equity tier 1 capital;

   2. (b)

      MIFIDPRU 3.6.5R when issuing own funds instruments which are intended to qualify as additional tier 1 instruments or tier 2 instruments.

2. (2)

   Where the Handbook provisions in (1)(a) and (b) apply, they apply as if a reference to:

   1. (a)

      a “firm” is a reference to the parent undertaking;

   2. (b)

      “capital instruments” is a reference to capital instruments issued by the parent undertaking;

   3. (c)

      “additional tier 1 instruments” and “tier 2 instruments” is a reference to these instruments issued by the parent undertaking; and

   4. (d)

      “common equity tier 1 capital” is a reference to this type of capital as held by the parent undertaking.

1. (1)

   1This rule applies where a responsible UK parent applies the approach in MIFIDPRU 2.6.7R(2)(a) in relation to an undertaking established in a third country.

2. (2)

   Where this rule applies, a responsible UK parent must comply with MIFIDPRU 3.7.4R in relation to any issuance of own funds instruments by the undertaking established in a third country.