PRU 2.2 3 Capital resources
3Calculation of capital resources
Where PRU 2.2.14 R refers to related text, it is necessary to refer to that text in order to understand fully what is included in the descriptions of capital items and deductions set out in the table.
3Limits on the use of different forms of capital
2In PRU 2.2.17 R and PRU 2.2.18 R:
-
(1)
items listed at stage B in PRU 2.2.14 R may be included notwithstanding PRU 2.2.20 R (1);
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(2)
innovative tier one capital that meets the conditions (other than PRU 2.2.108 R (11)) for it to be included as upper tier two capital at stage G in PRU 2.2.14 R may be treated as an item listed at stage G; and
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(3)
a firm must exclude from the calculation the higher of the following:
- (a)
the amount (if any) by which the sum of the items listed at stages G and H in PRU 2.2.14 R exceeds the total (net of deductions) of the remaining constituents of adjusted stage M; and
- (b)
the amount (if any) by which the sum of the items listed at stage H in PRU 2.2.14 R exceeds one-third of the total (net of deductions) of the remaining constituents of adjusted stage M;
where adjusted stage M means the amount calculated at stage M of the calculation in PRU 2.2.14 R less the amount of any innovative tier one capital that is not treated as upper tier two capital for the purpose of PRU 2.2.17 R or PRU 2.2.18 R, as the case may be.
- (a)
3In relation to a firm's tier one capital resources calculated at stage F of the calculation in PRU 2.2.14 R:
2In PRU 2.2.24 R the amount of any innovative tier one capital that meets the conditions for it to be included as upper tier two capital at stage G in PRU 2.2.14 R may be included in the amount calculated at stage G.
3Basic rules about redemption and cumulative coupons
PRU 2.2.38 R does not apply to permanent share capital because no item of capital that is either redeemable or that has a cumulative coupon can be permanent share capital.
3Innovative tier one instruments: Coupons
An item of capital does not fall into PRU 2.2.60 R merely because a firm has come under an obligation to pay a particular coupon in permanent share capital where that obligation is the result of a voluntary election by the holder or the firm to be paid the coupon in that form. Thus, for example, if a shareholder of a firm is allowed to elect to be paid a dividend in the form of a conventional scrip dividend, that does not make the share into an innovative tier one instrument.
2Fund for future appropriations
2The fund for future appropriations means the fund of the same name required by the insurance accounts rules, comprising all funds the allocation of which either to policyholders or to shareholders has not been determined by the end of the financial year, or the balance sheet items under international accounting standards which in aggregate represent as nearly as possible that fund.
3Upper tier two capital
2Where a capital instrument meets PRU 2.2.101 R, and notice of the redemption or repayment of that instrument has been given by the firm in accordance with PRU 2.2.116A R, the firm must no longer include that instrument in its tier two capital resources.