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You are viewing the version of the document as on 2023-11-28.

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

MIFIDPRU 3.7.1R

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

MIFIDPRU 3.7.2R

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.

MIFIDPRU 3.7.3G

1As explained in MIFIDPRU 2.6.6G, the group capital test effectively applies to each intermediate parent undertaking, as well as to the ultimate parent undertaking of the investment firm group.

MIFIDPRU 3.7.4R
  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.

MIFIDPRU 3.7.5R
  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.