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SYSC 20.1 Application and purpose

Application

SYSC 20.1.1R
  1. (1)

    1SYSC 20 applies to:

    1. (a)

      a BIPRU firm, unless it is a BIPRU investment firm excluded in accordance with (2); and

    2. (b)

      an insurer unless it is:

      1. (i)

        a non-directive friendly society; or

      2. (ii)

        a Swiss general insurer; or

      3. (iii)

        an EEA-deposit insurer; or

      4. (iv)

        an incoming EEA firm; or

      5. (v)

        an incoming Treaty firm.

  2. (2)

    Subject to (3) and (4), a BIPRU investment firm is excluded from the scope of SYSC 20 if:

    1. (a)

      where it carries out the regulated activity of managing investments or safeguarding and administering investments, it has assets under management or administration of no more than £10 billion (or the equivalent amount in foreign currency); or

    2. (b)

      the total annual fee and commission income arising from its regulated activities is no more than £250 million (or the equivalent amount in foreign currency); or

    3. (c)

      it has assets and liabilities of no more than £2 billion (or the equivalent amount in foreign currency).

  3. (3)

    In order to determine whether a BIPRU investment firm is excluded from the scope of SYSC 20, the exclusion criteria in (2) apply on a consolidated basis to all of the BIPRU investment firms within the same UK consolidation group or non-EEA sub-group as if they were one firm.

  4. (4)

    Any BIPRU investment firm which is not excluded in accordance with (2) and (3) in any given year will continue to be subject to SYSC 20 for the following two years irrespective of whether it satisfies the criteria to be excluded in any of those subsequent years.

Purpose

SYSC 20.1.2GRP

This chapter amplifies Principle 2, under which a firm must conduct its business with due skill, care and diligence, and Principle 3, under which a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

SYSC 20.1.3GRP

This chapter contains rules on reverse stress testing, which require a firm to identify and assess events and circumstances that would cause its business model to become unviable. This chapter also requires the firm's senior management or governing body to review and approve the results of the reverse stress testing exercise. This should help the firm's senior management to identify the firm's vulnerabilities and design a strategy to prevent or mitigate the risk of business failure.

SYSC 20.1.4G

The reverse stress testing requirements are an integral component of a firm's business planning and risk management under SYSC. For BIPRU firms as referred to in SYSC 20.1.1R (1)(a), this chapter amplifies SYSC 7.1.1 G to SYSC 7.1.8 G on risk control. For insurers as referred to in SYSC 20.1.1R (1)(b), this chapter amplifies SYSC 14.1.17 G to SYSC 14.1.25 G on business planning and risk management.