Related provisions for CASS 5.5.52
1 - 20 of 48 items.
A firm may
hold client money with a bank
that is not an approved bank if
all the following conditions are met:(1) the client money relates to one or more insurance
transactions which are subject to the law or market practice of a jurisdiction
outside the United Kingdom;(2) because
of the applicable law or market practice of that overseas jurisdiction, it
is not possible to hold the client money in
a client bank account with an approved bank;(3) the firm holds the money with
such
A firm owes
a duty of care to a client when
it decides where to place client money.
The review required by CASS 5.5.43 R is intended to ensure that the risks inherent
in placing client money with
a bank are minimised or appropriately diversified by requiring a firm to consider carefully the bank or banks
with which it chooses to place client money.
For example, a firm which is
likely only to hold relatively modest amounts of client
money will be likely to be able to satisfy this
When considering where to place client money and to determine the frequency
of the appropriateness test under CASS 5.5.43 R, a firm should
consider taking into account, together with any other relevant matters:(1) the
capital of the bank;(2) the
amount of client money placed,
as a proportion of the bank's capital and deposits;(3) the
credit rating of the bank (if available); and(4) to
the extent that the information is available, the level of risk in the investment
and loan activities
Subject to CASS 5.5.41 R,
a firm that holds or intends
to hold client money with a
bank which is in the same group as
the firm must:(1) undertake
a continuous review in relation to that bank which is at least as rigorous
as the review of any bank which is not in the same group,
in order to ensure that the decision to use a group bank
is appropriate for the client;(2) disclose
in writing to its client at
the outset of the client relationship
(whether by way of a client agreement,4terms
of
If a client has
notified a firm in writing that
he does not wish his money to
be held with a bank in the same group as
the firm, the firm must
either:(1) place
that client money in a client bank account with another bank in
accordance with CASS
5.5.38 R; or(2) return
that client money to, or pay
it to the order of, the client.
When a firm opens
a client bank account, the firm must give or have given written notice
to the bank requesting the bank to acknowledge to it in writing:(1) that
all money standing to the credit
of the account is held by the firm as
trustee (or if relevant in Scotland, as agent) and that the bank is not entitled
to combine the account with any other account or to exercise any right of
set-off or counterclaim against money in
that account in respect of any sum owed to it on any
In the case of a client
bank account in the United
Kingdom, if the bank does not provide the acknowledgement referred
to in CASS 5.5.49 R within 20 business days after
the firm dispatched the notice,
the firm must withdraw all money standing to the credit of the account
and deposit it in a client bank account with
another bank as soon as possible.
A firm must
not hold, for a consumer5, client money in
a client bank account outside
the United Kingdom, unless
the firm has previously disclosed
to the consumer5 (whether in its terms of business, client
agreement11 or otherwise in writing):5511(1) that
his money may be deposited in
a client bank account outside
the United Kingdom but that
the client may notify the firm that he does not wish his money to be held in a particular jurisdiction;(2) that
in such circumstances, the
On the failure of
a third party with which client money is
held, a firm must notify the FSA:(1) as
soon as it becomes aware, of the failure of
any bank, other broker or settlement agent or
other entity with which it has placed, or to which it has passed, client money; and(2) as
soon as reasonably practical, whether it intends to make good any shortfall that has arisen or may arise and
of the amounts involved.
(1) A firm must, as often as is necessary to ensure
the accuracy of its records and at least at intervals of not more than 25 business days:2(a) check whether its client money resource, as determined by CASS 5.5.65 R on the previous business day,
was at least equal to the client money requirement,
as determined by CASS 5.5.66 R or CASS 5.5.68 R, as at the close of
business on that day; and2(b) ensure that:2(i) any shortfall is
paid into a client bank account by
the close of business
The client
money resource, for the purposes of CASS
5.5.63 R (1)(a),2 is:(1) the
aggregate of the balances on the firm's client money
bank accounts, as at the close of business on the previous business day and, if held in accordance with CASS
5.4, designated investments (valued
on a prudent and consistent basis) together with client
money held by a third party in accordance with CASS 5.5.34 R;
and(2) (but
only if the firm is comparing
the client money resource with
its client's
To comply with its duties, the firm should show proper care:(1) in
the selection of a third party; and(2) when
monitoring the performance of the third party.In the case of client
money transferred to a bank, by demonstrating compliance with CASS 5.5.43 R, a firm should be
able to demonstrate that it has taken reasonable steps to comply with its
duties.
When a bank fails and
the firm decides not to make
good the shortfall in the amount
of client money held at that
bank, a secondary pooling event will
occur in accordance with CASS 5.6.20 R. The firm would
be expected to reflect the shortfall that
arises at the firm's bank in
the periodic client money calculation
by reducing the client money resource
and client money requirement
accordingly.
The client
money (insurance) distribution rules seek to ensure that clients who have previously specified that
they are not willing to accept the risk of the bank that has fails, and who therefore requested that their client money be placed in a designated client bank account as a different
bank, should not suffer the loss of the bank that has failed.
If a secondary
pooling event occurs as a result of the failure of
a bank where one or more general client bank
accounts are held, then:(1) in
relation to every general client bank account of
the firm, the provisions of CASS 5.6.22 R and CASS 5.6.26 R to CASS 5.6.28 G will apply;(2) in
relation to every designated client bank account held
by the firm with the failed bank, the provisions of CASS 5.6.24 R and CASS 5.6.26 R to CASS 5.6.28 G will apply; and(3) any money held at a
If a secondary
pooling event occurs as a result of the failure of
a bank where one or more designated client
bank accounts are held then in relation to every designated client bank account held by the firm with the failed bank,
the provisions of CASS 5.6.24 R and CASS 5.6.26 R to CASS 5.6.28 G will
apply.
Money held
in each general client bank account of
the firm must be treated as
pooled and:(1) any shortfall in client
money held, or which should have been held, in general client bank accounts, that has arisen
as a result of the failure of
the bank, must be borne by all the clients whose client money is held in a general
client bank account of the firm,
rateably in accordance with their entitlements;(2) a
new client money entitlement
must be calculated for each client by
the firm,
For each client with
a designated client bank account held
at the failed bank:(1) any shortfall in client
money held, or which should have been held, in designated client bank accounts that has
arisen as a result of the failure,
must be borne by all the clients whose client money is held in a designated
client bank account of the firm at
the failed bank, rateably in
accordance with their entitlements;(2) a
new client money entitlement
must be calculated for each of the relevant
Client
money received by the firm after
the failure of a bank, that
would otherwise have been paid into a client
bank account at that bank:(1) must
not be transferred to the failed bank
unless specifically instructed by the client in
order to settle an obligation of that client to
the failed bank; and(2) must
be, subject to (1), placed in a separate client
bank account that has been opened after the secondary
pooling event and either:(a) on
the written instruction of the client,
transferred
If a firm receives
a mixed remittance after the secondary pooling event which consists of client money that would have been paid into
a general client bank account,
a designated client bank account or
a designated client fund account maintained
at the bank that has failed,
it must:(1) pay
the full sum into a client bank account other
than one operated at the bank that has failed;
and(2) pay
the money that is not client money out of that client
bank account within one business
day
The amount of qualifying holdings that a bank or building society must deduct in the calculation in the capital resources table is:(1) (if the firm has one or more qualifying holdings that exceeds 15% of its relevant capital resources) the sum of such excesses; and(2) to the extent not already deducted in (1), the amount by which the sum of each of that firm'squalifying holdings exceeds 60% of its relevant capital resources.
A material holding is:(1) a BIPRU firm's holdings of shares and any other interest in the capital of an individual credit institution or financial institution (held in the non-trading book or the trading book or both) exceeding 10% of the share capital of the issuer, and, where this is the case, any holdings of subordinated debt of the same issuer are also included as a material holding; the full amount of the holding is a material holding; or(2) a BIPRU firm's holdings of shares,
(1) 3This paragraph gives guidance as to the amount to be deducted at Part 2 of stage M (Deductions from the totals of tier one and two) of GENPRU 2 Annex 2 (Capital resources table for a bank) and GENPRU 2 Annex 3 (Capital resources table for a building society) in respect of investments in subsidiary undertakings and participations (excluding any amount which is already deducted as material holdings or qualifying holdings).(2) The effect of those rules is to achieve the deduction
A bank must not deduct any item as connected lending of a capital nature to the extent that it falls to be deducted at Part 1 of stage M of the calculation in the capital resources table (Deductions for material holdings, qualifying holdings and certain other items) or as a reciprocal cross-holding.
For the purpose of the rules in this section about connected lending of a capital nature and in relation to a bank, a connected party means another person ("P") who fulfils at least one of the following conditions and is not solo-consolidated with the bank under BIPRU 2.1 (Solo consolidation):(1) P is closely related to the bank; or(2) P is an associate of the bank; or(3) the same persons significantly influence the governing body of P and the bank.
For the purpose of GENPRU 2.2.224 R, in relation to a person ("P") to which a bank has an exposure when P is acting on his own behalf and also an exposure to P when P acts in his capacity as a trustee, custodian or general partner of an investment trust, unit trust, venture capital or other investment fund, pension fund or similar fund (a "fund") the bank may choose to treat this latter exposure as an exposure to the fund, unless such treatment would be misleading.
A loan falls into this rule for the purposes of GENPRU 2.2.227R (2) if, whether through contractual, structural, reputational or other factors:(1) based on the terms of the loan and the other knowledge available to the bank, the borrower would be able to consider it from the point of view of its characteristics as capital as being similar to share capital or subordinated debt; or(2) the position of the lender from the point of view of maturity and repayment is inferior to that
It is likely that a loan is not connected lending of a capital nature if:(1) it is secured by collateral that is eligible for the purposes of credit risk mitigation under the standardised approach to credit risk as set out in BIPRU 5.4 (Financial collateral) and BIPRU 5.5 (Other funded credit risk mitigation); or(2) it is repayable on demand (and should be treated as such for accounting purposes by the borrower and lender) and the bank can demonstrate that there are no potential
A guarantee is connected lending of a capital nature if it is a guarantee by the bank of a loan from a third party to a connected party of the bank and:(1) the loan meets the requirements of GENPRU 2.2.228 R; or(2) the rights that the bank would have against the borrower with respect to the guarantee meet the requirements of GENPRU 2.2.228R (2).
A loan may initially fall outside the definition of connected lending of a capital nature but later fall into it. For example, if the initial lending to a connected party is subsequently downstreamed to another connected party the relationship between the bank and the ultimate borrower may be such that, looking at the arrangements as a whole, the undertaking to which the bank lends is able to regard the loan to it as being capable of absorbing losses.
(1) The excess trading book position is the excess of:(a) a bank or building society's aggregate net long (including notional) trading bookpositions in shares, subordinated debt or any other interest in the capital of credit institutions or financial institutions;over;(b) 25% of that firm'scapital resources calculated at stage T (Total capital after deductions) of the capital resources table (calculated before deduction of the excess trading book position).(2) Only the excess
(1) This rule does not apply to government and public securities.(2) For the purposes of this rule companies included in the same group for the purposes of consolidated accounts as defined in accordance with the Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts or, in the same group in accordance with international accounting standards, are regarded as a single body.(3) Not more than 20% in value of the scheme
(1) A transaction in a derivative must:(a) be in an approved derivative; or(b) be one which complies with COLL 5.2.23 R (OTC transactions in derivatives).(2) The underlying of a transaction in a derivative must consist of any one or more of the following to which the scheme is dedicated:(a) transferable securities;(b) money-market instruments permitted under COLL 5.2.18 R (Investment in money-market instruments);(c) deposits permitted under COLL 5.2.26 R (Investment in deposits);(d)
A transaction in an OTC derivative under COLL 5.2.20 R (1) (b) must be:(1) with an approved counterparty; a counterparty to a transaction in derivatives is approved only if the counterparty is:(a) an eligible institution or an approved bank; or(b) a person whose permission (including any requirements or limitations), as published in the FSA Register, or whose Home State authorisation, permits it to enter into the transaction as principal off-exchange;(2) on approved terms; the
Discussions with the FSA are particularly relevant where the firm has to discharge obligations to its customers or policyholders before it can cease carrying on a regulated activity. This may be the case, for example, where the firm is an insurer, a bank or, as is often the case, holding client money or customer assets.
If an insureror a bank wishes to cease carrying on all regulated activities for which it has Part IV permission, it will usually be necessary to wind down the business over a long term period which is normally more than six months. This may also be the case for a firm holding client money or customer assets. In these circumstances, it will usually be appropriate for the firm to apply for variation of its Part IV permission before commencing the wind-down. A firm should only make
(1) Specific guidance on the additional procedures for a firm winding down (running off) its business in the circumstances discussed in SUP 6.2.8 G is in SUP 6 Annex 4.(2) The guidance in SUP 6 Annex 4 applies to any firm that is applying for variation of Part IV permission before it applies for cancellation of Part IV permission to enable it to wind down (run off) its business over a long term period of six months of more. It will apply to most insurers and banks and, in some
Applicable provisions of this section (see SUP 16.6.1 G)
Category of firm |
Applicable provisions |
Depositary of an ICVC |
|
(1) CASS 5.1 to CASS
5.6 apply, subject to (2), (3) and CASS 5.1.3 R to CASS 5.1.6 R, to a firm that receives
or holds money in the course
of or in connection with its insurance mediation
activity.(2) CASS 5.1 to CASS
5.6 do not, subject to (3), apply:(a) to
a firm to the extent that it
acts in accordance with the non-directive client money chapter or
the MiFID client money
chapter4; or4(b) to
a firm in carrying on an insurance mediation activity which is in
respect of a reinsurance
A firm that
is an approved bank, and relies
on the exemption under CASS
5.1.1 R (2)(e), should be able to account to all of
its clients for amounts held
on their behalf at all times. A bank account opened with the firm that is in the name of the client would generally be sufficient. When money from clients deposited
with the firm is held in a pooled
account, this account should be clearly identified as an account for clients. The firm should
also be able to demonstrate that an
(1) This rule applies to a bank that meets the following conditions:(a) on 31 December 2006 it had the benefit of IPRU(BANK) rule 3.3.12 (Reduced minimum capital requirement for a bank that is a credit institution which immediately before 1 January 1993 was authorised under the Banking Act 1987);(b) the relevant amount (as referred to in IPRU(BANK) rule 3.3.12) applicable to it was below €5 million as at 31 December 2006; and(c) on 1 January 2007 it did not comply with the base
Where two or more banks merge, all of which individually have the benefit of GENPRU 2.1.60 R, the FSA may agree in certain circumstances that the base capital resources requirement for the bank resulting from the merger may be the sum of the aggregate capital resources of the merged banks, calculated at the time of the merger, provided this figure is less than €5 million.
For the purpose of GENPRU 2.1.60 R:(1) an existing controller of a bank means:(a) a person who has been a parent undertaking of that bank since 31 December 2006 or earlier; or(b) a person who became a parent undertaking of that bank after 31 December 2006 but who, when he became a parent undertaking of that bank, was a subsidiary undertaking of an existing controller of that bank;(2) the relevant amount of capital as referred to in GENPRU 2.1.60R (2)(a) is adjusted by identifying
The following parties may be recognised as eligible providers of unfunded credit protection:(1) central governments and central banks;(2) regional governments or local authorities;(3) multilateral development banks;(4) international organisationsexposures which are assigned a 0% risk weight under the standardised approach;(5) public sector entities, claims on which are treated as claims on institutions or central governments under the standardised approach;(6) institutions;(7)
Where an exposure is protected by a guarantee which is counter-guaranteed by a central government or central bank, a regional government or local authority or a public sector entity claims on which are treated as claims on the central government in whose jurisdiction they are established under the standardised approach, a multilateral development bank to which a 0% risk weight is assigned under or by virtue of the standardised approach, or a public sector entity claims on which
Without prejudice to BIPRU 3.4.28 R to BIPRU 3.4.29 R:(1) a firm must treat exposures to multilateral development banks in the same manner as exposures to institutions in accordance with BIPRU 3.4.34 R to BIPRU 3.4.39 R (Exposures to institutions: credit assessment based method); and(2) the preferential treatment for short-term exposures specified in BIPRU 3.4.37 R, BIPRU 3.4.39 R and BIPRU 3.4.44 R must not be applied.[Note: BCD Annex VI Part 1 point 19]
Types of reports. See SUP 6.4.15 G
Category of firm |
Type of report |
a bank or building society |
• an audited balance sheet which confirms that, in the auditor's opinion, the firm has no remaining deposit liabilities to customers; • a report from auditors or reporting accountants; |
• a report from auditors or reporting accountants |
|
an insurer |
• an audited closing balance sheet which demonstrates that the firm has no insurance liabilities to policyholders; • a report from the auditors or reporting accountants; and • in some cases, an actuarial opinion as to the likelihood of any remaining liabilities to policyholders. |
The conditions referred to in INSPRU 3.2.38R (1) are that the letter of credit is:(1) direct, explicit, unconditional and irrevocable; and(2) issued by an undertaking which is:(a) not a related undertaking of the counterparty; and(b) either an approved credit institution or a bank, or a branch of a bank, whether chartered by the federal government of the United States of America or a US state, that is supervised and examined by at least one of the following US federal banking