You are viewing COREPRU 6.3 Core liquid assets as it appeared on 25/10/2027. The current version of COREPRU 6.3 Core liquid assets was last updated on 25/10/2027.

COREPRU 6.3 Core liquid assets

25/10/2027R

Subject to COREPRU 6.3.3R to COREPRU 6.3.5R, a core liquid asset means any of the following, when denominated in pound sterling:

  1. (1) coins and banknotes;
  2. (2) short-term deposits at a UK-authorised credit institution;
  3. (3) assets representing claims on, or guaranteed by, the UK government or the Bank of England;
  4. (4) units or shares in a short-term MMF; and
  5. (5) units or shares in a third country fund that is comparable to a short-term MMF.
25/10/2027G

When assessing whether a third country fund is comparable to a short-term MMF, a firm should consider factors such as:

  1. (1) whether the restrictions on instruments eligible for inclusion in the fund are comparable to the restrictions on instruments in article 10(1) of the Money Market Funds Regulation; and
  2. (2) whether the fund is subject to requirements concerning portfolio diversification and risk management which are comparable to the requirements applicable to short-term MMFs in the Money Market Funds Regulation.
25/10/2027R
  1. (1) If a firm’s relevant expenditure is incurred in a currency other than pound sterling, the firm may also treat the following assets as liquid assets, when denominated in that currency:
    1. (a) coins and banknotes;
    2. (b) short-term deposits at a credit institution;
    3. (c) assets representing claims on, or guaranteed by, a central bank or government in a third country;
    4. (d) units or shares in a short-term MMF; and
    5. (e) units or shares in a third country fund that is comparable to a short-term MMF.
  2. (2) The proportion of core liquid assets denominated in any currency other than pound sterling that a firm can rely upon to meet its basic liquid assets requirement must be no greater than:
    1. (a) for the requirement in COREPRU 6.2.1R(1), the proportion of relevant expenditure incurred in that currency; and
    2. (b) for the requirement in COREPRU 6.2.1R(2), the proportion of guarantees provided in that currency.
  3. (3) This rule is subject to COREPRU 6.3.5R.
25/10/2027G

The effect of COREPRU 6.3.3R(2) is illustrated by the following example:

  1. (1) A firm has relevant expenditure with a value of £1,200,000, of which:
    1. (a) 20%, equivalent to £240,000, is incurred in US dollars (USD); and
    2. (b) 5%, equivalent to £60,000, is incurred in Swiss francs (CHF).
  2. (2) In addition, the firm has provided total guarantees to clients with a value of £10m of which 50%, equivalent to £5m, is denominated in USD.
  3. (3) The firm’s fixed overheads requirement (one quarter of its relevant expenditure calculated in accordance with COREPRU 4.3) is £300,000.
  4. (4) Under COREPRU 6.2.1R, the firm’s basic liquid assets requirement is £260,000, which reflects:
    1. (a) £100,000 in respect of the requirement in COREPRU 6.2.1R(1) (one-third of the amount of its fixed overheads requirement); and
    2. (b) £160,000 in respect of the requirement in COREPRU 6.2.1R(2) (1.6% of the total amount of any guarantees provided to clients).
  5. (5) To meet its requirement in COREPRU 6.2.1R, a firm may choose to use liquid assets listed in COREPRU 6.3.3R denominated in a currency other than pound sterling, up to a maximum equivalent to £105,000 in accordance with COREPRU 6.3.3R(2), as follows:
    1. (a) for the requirement in COREPRU 6.2.1R(1), up to the equivalent of:
      1. (i) £20,000 may be held in USD-denominated liquid assets (20% of 100,000 = 20,000); and
      2. (ii) £5,000 may be held in CHF-denominated liquid assets (5% of 100,000 = 5,000); and
    2. (b) for the requirement in COREPRU 6.2.1R(2), up to the equivalent of £80,000 (50% of 160,000 = 80,000) may be held in USD-denominated liquid assets.
25/10/2027R

A firm must not treat any of the following as a core liquid asset:

  1. (1) any asset that belongs to a client; and
  2. (2) any other asset that is encumbered.
25/10/2027G
  1. (1) For the purposes of COREPRU 6.3.5R(1), an asset may belong to a client even if the asset is held in the firm’s own name. Examples of assets belonging to a client include money or other assets held under the FCA’s client asset rules.
  2. (2) For the purposes of COREPRU 6.3.5R(2), an asset may be encumbered if it is pledged as security or collateral, or subject to some other legal restriction (for example, due to regulatory or contractual requirements) which affects the firm’s ability to liquidate, sell, transfer or assign the asset.

Requirement to exclude double counting of core liquid assets

25/10/2027R

A firm must not use the same core liquid assets to meet the basic liquid assets requirement in COREPRU 6.2.1R and any supplementary sectoral liquidity requirement.

Interaction between COREPRU and MIFIDPRU

25/10/2027G

Where a firm is subject to the Core Prudential Sourcebook (COREPRU) and the Prudential Sourcebook for MiFID Investment Firms (MIFIDPRU), a firm can use the same core liquid assets to meet the basic liquid assets requirement in COREPRU 6.2.1R and MIFIDPRU 6.2.1R.

Point In Time
25/10/2027