Related provisions for BIPRU 4.3.44

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BIPRU 4.3.9RRP
All material aspects of the rating and estimation processes must be approved by the firm'sgoverning body or a designated committee thereof and senior management. These parties must possess a general understanding of the firm'srating systems and detailed comprehension of its associated management reports.[Note: BCD Annex VII Part 4 point 124]
BIPRU 4.3.11RRP
Senior management must provide notice to the governing body or a designated committee thereof of material changes or exceptions from established policies that will materially impact the operations of the firm'srating systems.[Note:BCD Annex VII Part 4 point 125]
BIPRU 4.3.13RRP
Senior management must have a good understanding of the rating system's designs and operations. Senior management must ensure on an ongoing basis that the rating systems are operating properly. Senior management must be regularly informed by the credit risk control units about the performance of the rating process, areas needing improvement, and the status of efforts to improve previously identified deficiencies.[Note:BCD Annex VII Part 4 point 126]
BIPRU 4.3.15RRP
The credit risk control unit must be independent from the personnel and management functions responsible for originating or renewing exposures and report directly to senior management. The unit must be responsible for the design or selection, implementation, oversight and performance of the rating systems. It must regularly produce and analyse reports on the output of the rating systems.[Note:BCD Annex VII Part 4 point 128]
BIPRU 4.3.16RRP
The areas of responsibility for the credit risk control unit(s) must include the following:(1) testing and monitoring grades and pools;(2) production and analysis of summary reports from the firm'srating systems;(3) implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas;(4) reviewing and documenting any changes to the rating process, including the reasons for the changes;(5) reviewing the rating criteria
BIPRU 4.3.17RRP
Notwithstanding BIPRU 4.3.16 R, a firm using pooled data according to BIPRU 4.3.92 R - BIPRU 4.3.94 R (Overall requirements for estimation) may outsource the following tasks:(1) production of information relevant to testing and monitoring grades and pools;(2) production of summary reports from the firm'srating systems;(3) production of information relevant to review of the rating criteria to evaluate if they remain predictive of risk;(4) documentation of changes to the rating
BIPRU 4.3.19RRP
A firm must document the design and operational details of its rating systems. The documentation must evidence compliance with the minimum IRB standards and the firm'sIRB permission, and address topics including portfolio differentiation, rating criteria, responsibilities of parties that rate obligors and exposures, frequency of assignment reviews, and management oversight of the rating process.[Note:BCD Annex VII Part 4 point 31]
BIPRU 4.3.25RRP
A rating system comprises all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to grades or pools (rating), and the quantification of default and loss estimates for a certain type of exposure.[Note:BCD Annex VII Part 4 point 1]
BIPRU 4.3.26RRP
If a firm uses multiple rating systems, the rationale for assigning an obligor or a transaction to a rating system must be documented and applied in a manner that appropriately reflects the level of risk.[Note:BCD Annex VII Part 4 point 2]
BIPRU 4.3.27RRP
Assignment criteria and processes must be periodically reviewed to determine whether they remain appropriate for the current portfolio and external conditions.[Note:BCD Annex VII Part 4 point 3]
BIPRU 4.3.28RRP
Where a firm uses direct estimates of risk parameters these may be seen as the outputs of grades on a continuous rating scale.[Note:BCD Annex VII Part 4 point 4]
BIPRU 4.3.29RRP
A firm must have robust systems in place to validate the accuracy and consistency of rating systems, processes, and the estimation of all relevant risk parameters (PD, LGD, conversion factors and EL). A firm must be able to demonstrate to the FSA that the internal validation process enables it to assess the performance of internal rating and risk estimation systems consistently and meaningfully.[Note:BCD Annex VII Part 4 point 110]
BIPRU 4.3.35RRP
A firm must also use other appropriate quantitative validation tools and comparisons with relevant external data sources. The analysis must be based on data that is appropriate to the portfolio, is updated regularly, and covers a relevant observation period. A firm's internal assessments of the performance of its rating systems must be based on as long a period as possible.[Note:BCD Annex VII Part 4 point 112]
BIPRU 4.3.36RRP
The methods and data used for quantitative validation must be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) must be documented.[Note:BCD Annex VII Part 4 point 113
BIPRU 4.3.38RRP
Internal audit or another comparable independent auditing unit must review at least annually the firm'srating systems and its operations, including the operations of the firm and the estimation of PDs, LGDs, ELs and conversion factors. Areas of review must include adherence to all applicable minimum requirements.[Note:BCD Annex VII Part 4 point 131]
BIPRU 4.3.43RRP
A firm must have specific definitions, processes and criteria for assigning exposures to grades or pools within a rating system.[Note:BCD Annex VII Part 4 point 17 (part)]
BIPRU 4.3.50RRP
For grade and pool assignments a firm must document the situations in which human judgement may override the inputs or outputs of the assignment process and the personnel responsible for approving these overrides. A firm must document these overrides and the personnel responsible. A firm must analyse the performance of the exposures whose assignments have been overridden. This analysis must include assessment of the performance of exposures whose rating has been overridden by
BIPRU 4.3.51RRP
(1) This paragraph applies to the use of statistical models and/or other mechanical methods to assign exposures to obligor grades, obligor pools, facility grades or facility pools.(2) A firm must be able to demonstrate to the FSA that the model has good predictive power and that capital requirements are not distorted as a result of its use.(3) The input variables to the model must form a reasonable and effective basis for the resulting predictions. The model must not have material
BIPRU 4.3.54RRP
A firm must collect and store data on aspects of its internal ratings as required under BIPRU 11 (Disclosure).[Note:BCD Annex VII Part 4 point 36]
BIPRU 4.3.92RRP
If a firm uses data that is pooled across institutions it must be able to demonstrate to the FSA that:(1) the rating systems and criteria of other firms in the pool are similar to its own;(2) the pool is representative of the portfolio for which the pooled data is used; and(3) the pooled data is used consistently over time by the firm for its permanent estimates.2[Note:BCD Annex VII Part 4 point 57]
BIPRU 4.3.94RRP
If a firm uses data that is pooled across institutions it remains responsible for the integrity of its rating systems. If a firm uses such data it must be able to demonstrate to the FSA that it has sufficient in-house understanding of its rating systems, including effective ability to monitor and audit the rating process.[Note:BCD Annex VII Part 4 point 58]
BIPRU 4.3.103RRP
A firm must use LGD estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver constant realised LGDs by grade or pool over time, a firm must make adjustments to its estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn.[Note:BCD Annex VII Part 4 point 74]
BIPRU 4.3.127RRP
A firm must use conversion factor estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised conversion factors at a constant level by grade or pool over time, a firm must make adjustments to its estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn.[Note:BCD Annex VII Part 4 point 88]
BIPRU 4.4.6RRP
A rating system must take into account obligor and transaction risk characteristics.[Note: BCD Annex VII Part 4 point 5]
BIPRU 4.4.7RRP
A rating system must have an obligor rating scale which reflects exclusively quantification of the risk of obligor default. The obligor rating scale must have a minimum of seven grades for non-defaulted obligors and one for defaulted obligors.[Note:BCD Annex VII Part 4 point 6]
BIPRU 4.4.8RRP
An obligor grade means for the purpose of BIPRU 4 as it applies to the sovereign, institution and corporate IRB exposure class a risk category within a rating system's obligor rating scale, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of PD are derived. A firm must document both the relationship between obligor grades in terms of the level of default risk each grade implies and the criteria used to distinguish
BIPRU 4.4.15RRP
Assignments and periodic reviews of assignments must be completed or approved by an independent party that does not directly benefit from decisions to extend the credit.[Note:BCD Annex VII Part 4 point 26]
BIPRU 4.4.21RRP
In addition to complying with the material in BIPRU 4.3.54 R (Data maintenance) a firm must collect and store:(1) complete rating histories on obligors and recognised guarantors;(2) the dates the ratings were assigned;(3) the key data and methodology used to derive the rating;(4) the person responsible for the rating assignment;(5) the identity of obligors and exposures that defaulted;(6) the date and circumstances of such defaults;(7) data on the PDs and realised default rates
BIPRU 4.4.27RRP
To the extent that a firm uses data on internal default experience for the estimation of PDs it must be able to demonstrate in its analysis that the estimates are reflective of underwriting standards and of any differences in the rating system that generated the data and the current rating system. Where underwriting standards or rating systems have changed, a firm must add a greater margin of conservatism in its estimate of PD.[Note:BCD Annex VII Part 4 point 63]
BIPRU 4.4.48RRP
1If a firm'sIRB permission provides for it to use the advanced IRB approach for the calculation of LGDs, its rating system must incorporate a distinct facility rating scale which exclusively reflects LGD related transaction characteristics.[Note:BCD Annex VII Part 4 point 9]
BIPRU 4.4.49RRP
1A facility grade means for the purpose of the advanced IRB approach a risk category within a rating system's facility scale to which exposures are assigned on the basis of a specified and distinct set of rating criteria from which own estimates of LGDs are derived. The grade definition must include both a description of how exposures are assigned to the grade and of the criteria used to distinguish the level of risk across grades.[Note:BCD Annex VII Part 4 point 10]
BIPRU 4.2.2RRP
A firm's systems for the management and rating of credit risk exposures must be sound and implemented with integrity and, in particular, they must meet the following standards in accordance with the minimum IRB standards:(1) the firm'srating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk;(2) internal ratings and default and loss estimates used
BIPRU 4.2.4GRP
(1) This guidance sets out the basis on which a firm may rely upon a rating system or data provided by another member of its group.(2) A firm may rely upon a rating system or data provided by another member of its group if the following conditions are satisfied:(a) the firm only does so to the extent that it is appropriate, given the nature and scale of the firm's business and portfolios and the firm's position within the group;(b) the group is an EEA banking and investment group;(c)
BIPRU 4.2.11RRP
A firm must be able to demonstrate that it has been using for the IRB exposure classes in question rating systems that were broadly in line with the minimum IRB standards for internal risk measurement and management purposes for at least three years prior to the date of its IRB permission.[Note:BCD Article 84(3)]
BIPRU 4.2.26RRP
(1) To the extent that its IRB permission permits this, a firm permitted to use the IRB approach in the calculation of risk weighted exposure amounts and expected loss amounts3 for one or more IRB exposure classes may apply the standardised approach in accordance with this rule.3(2) A firm may apply the standardised approach to the IRB exposure class referred to in BIPRU 4.3.2 R (1) (Sovereigns) where the number of material counterparties is limited and it would be unduly burdensome
BIPRU 4.6.6RRP
Rating systems must reflect both obligor and transaction risk, and must capture all relevant obligor and transaction characteristics.[Note:BCD Annex VII Part 4 point 13]
BIPRU 4.6.18RRP
In addition to complying with BIPRU 4.3.54 R (Data maintenance) a firm must collect and store:(1) data used in the process of allocating exposures to grades or pools;(2) data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures;(3) the identity of obligors and exposures that defaulted;(4) for defaultedexposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD
BIPRU 4.10.43RRP
For recognised guarantors the same requirements as for obligors as set out in BIPRU 4.3.43 R - BIPRU 4.3.48 R (Assignment to grades and pools), BIPRU 4.4.11 R - BIPRU 4.4.18 R and BIPRU 4.4.51 R (Assignment of exposures and rating systems), BIPRU 4.5.6 R (Assignment of exposures) and BIPRU 4.6.11 R and BIPRU 4.6.14 R (Assignment of exposures and rating systems) apply.[Note: BCD Annex VII Part 4 point 99]
BIPRU 11.6.1RRP
A firm calculating risk weighted exposure amounts in accordance with the IRB approach must disclose the following information:(1) the scope of the firm'sIRB permission;(2) an explanation and review of:(a) the structure of internal rating systems and relation between internal and external ratings;(b) the use of internal estimates other than for calculating risk weighted exposure amounts in accordance with the IRB approach;(c) the process for managing and recognising credit risk
FEES 3.2.7RRP

Table of application, notification and vetting fees

(1) Fee payer

(2) Fee payable

Due date

(a) Any applicant for Part IV permission (including an incoming firm applying for top-up permission)

(1) Unless (2) applies, in1 respect of a particular application, the highest of the tariffs set out in FEES 3 Annex 1 part 11 which apply to that application.

(2) In respect of a particular application which is:

(i) a straightforward or moderately complex case for the purposes of FEES 3 Annex 1 part 1, and

(ii) only involves a simple change of legal status as set out in FEES 3 Annex 1 part 6,

the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 1 part 11

1

On or before the application is made

(b) Any Treaty firm that wishes to exercise a Treaty right to qualify for authorisation under Schedule 4 to the Act (Treaty rights) in respect of regulated activities for which it does not have an EEA right, except for a firm providing cross border services only4

(1) Where no certificate has been issued under paragraph 3(4) of Schedule 4 to the Act the fee payable is, in respect of a particular exercise, set out in FEES 3 Annex 1, part 4

(2) Where a certificate in (i) has been issued no fee is payable

On or before the notice of exercise is given

(c) Any applicant for a certificate under article 54 of the Regulated Activities Order

2,000

On or before the application is made

(d) Applicants for an authorisation order for, or recognition of, a collective investment scheme

FEES 3 Annex 2, part 1

On or before the application is made

(f) Any person seeking an order under section 326(1) of the Act to become a designated professional body.

10,000

30 days after the order is granted

(g) Any applicant for recognition as a UK recognised body under section 287 or section 288 of the Act

FEES 3 Annex 3, part 1

On or before the date the application is made

(h) Any applicant for recognition as an overseas recognised body under section 287 or section 288 and section 292 of the Act

FEES 3 Annex 3, part 2

On or before the date the application is made

(i) An applicant for listing (under the listing rules)

FEES 3 Annex 4, part 1

On or before the date the application is made

(j) Applicant for approval as sponsor (under the listing rules)

FEES 3 Annex 4, part 2

On or before the date the application is made

(k) Issuers of tranches from debt issuance programmes and securitised derivative tranches

FEES 3 Annex 4, part 1

An upfront fee is required per tranche for draw downs in the following 12 months

(l) Under the listing rules, an issuer involved in specific events or transactions during the year where documentation is subject to a transaction vetting

FEES 3 Annex 5, part 1, unless the transaction would come within the definition of significant transaction under category (v) or super transaction under category 7(q) in this table, in which case the fee payable under that category.2

On or before the date that relevant documentation is first submitted to the FSA

(m) Under the prospectus rules, an issuer or person requesting approval or vetting of the documents arising in relation to specific events or transactions that it might be involved in during the year

FEES 3 Annex 5, part 2, unless the transaction would come within the definition of significant transaction under category (v) or super transaction under category 7(q) in this table, in which case the fee payable under that category.2

On or before the date that relevant documentation is first submitted to the FSA

(n) Applicants to be added to the list of designated investment exchanges

50,000

On or before the date the application is made

2(o) Either:5

(i) a firm applying to the FSA for permission to use one of the advanced prudential calculation approaches listed in FEES 3 Annex 6 R (or guidance on its availability), including any future proposed amendments to those approaches or (in the case of any application being made for such permission to the FSA as EEA consolidated supervisor under the ) any firm making such an application ;5 or

(ii) in the case of an application to 5a Home State regulator other than the FSA5for the use of the Internal Ratings Based approach and the Home State regulator requesting the FSA's assistance in accordance with the Capital Requirements Regulations 2006 , any firm to which the FSA would have to apply any decision to permit the use of that approach.5

112555

(1) Unless5 (2) applies, FEES 3 Annex 6.5

(2) (a) Unless5 (b) applies a1firm submitting a second application for the permission or5guidance described in column (1) within 12 months of the first application (where the fee was paid in accordance with (1)) must pay 50% of the fee applicable to it under FEES 3 Annex 6, but only in respect of that second application

(b) No fee is payable by a firm in relation to a successful application for a permission5 based on a minded to grant decision in respect of the same matter following a complete application for guidance in accordance with prescribed submission requirements.1

(c) No fee is payable where the Home State regulator has requested the assistance of the FSAas described in paragraph (o)(ii) of column 1 except in the cases specified in 5FEES 3 Annex 6.2

5251255555

Where the firm has made an application directly to the FSA, on or before the date the application is made, otherwise within 30 days after the FSA notifies the firm that its EEA parent's Home State regulator has requested the FSA's assistance.2

2

(p) A firm applying for a variation of its Part IV permission

(1) Unless (2) applies, if the proposed new1 business of the firm would1 fall within one or more activity groups specified in Part 1 of FEES 4 Annex 1 not applicable before the application1, the fee is 50% of the highest of the tariffs set out in which apply to that application.

(2) If the only change is that the1 A.12 activity group tariff applied to the firm's business before the variation and the A.13 activity group will apply after variation, no fee is payable(3) In all other cases, other than applications by credit unions, the fee payable is 250, unless the variation involves only the reduction (and no other increases) in the scope of a Part IV permission in which case no fee is payable.1

11

On or before the date the application is made

2(q) A super7transaction, being one where:

(i) the issuer has a market capitalisation in excess of 1.5 billion and it is a new applicant for a primary listing under the listing rules, or involved in a reverse or hostile takeover or a significant restructuring; or

(ii) the issuer has a market capitalisation in excess of 5 billion and is involved in a class 1 transaction,7 a transaction requiring vetting of an equity prospectus or equivalent document or a transaction requiring vetting of a prospectus in relation to a Depositary Receipt.7

777

50,000

On or before the date that the relevant documentation is first submitted to the FSA.3

33

2(r) Providers of reporting or trade matching systems applying for recognition under MiFID as an Approved Reporting Mechanism.

100,0006

6

Having received its application, within 30 days after the FSA has notified the applicant that it is to commence testing of the applicants systems.6

56

5(s) In the case of an insurance business transfer scheme, a transferor.

Note - for the purpose of this paragraph an insurance business transfer scheme consists of a single transferor and a single transferee. Where however such a scheme is part of a single larger scheme, that larger scheme is treated as a single insurance business transfer scheme. If an insurance business transfer scheme includes more than one transferor in accordance with this paragraph, the transferors are liable to pay the fee under column (2) jointly.

Either (1) or (2) as set out below:

(1) In the case of an insurance business transfer scheme involving long term insurance business, 18,500; or

(2) in the case of an insurance business transfer scheme not involving long term insurance business, 10,000.

On or before any application is made to the FSA for the appointment of a person as an independent expert.

6(t) A firm, a third party acting on a firm's behalf, an operator of a regulated market or an operator of an MTF applying to the FSA to report transaction reports directly to the FSA other than through the FSA's Transaction Reporting System (see FEES 4.2.11 R and FEES 4 Annex 3 for the fees payable for firms using the FSA's Transaction Reporting System).

100,000

Having received its application, within 30 days after the FSA has notified the applicant that it is to commence testing of the applicants systems.

7(u) Any of the following:

(i) an operator of an approved reporting mechanism;

(ii) a firm;

(iii) a third party acting on behalf of a firm;

(iv) a market operator; or

(v) an MTF operator;

that satisfies the following conditions:

(1) it provides transaction reports directly to the FSA; and

(2) having made changes to its reporting systems, it asks the FSA to support the testing of the compatibility of its systems with the FSA's systems.

As set out in FEES 3 Annex 7.

Within 30 days of the date of the invoice.

(v) A significant transaction, being one where:

(i) the issuer has a market capitalisation in excess of 500 million and is producing an equity prospectus, a prospectus in relation to a Depository Receipt or a document in relation to a class 1 transaction; or

(ii) the issuer is producing a document for vetting in relation to a reverse takeover, a hostile takeover or a significant restructuring.

A significant transaction does not include a super transaction.

20,000

On or before the date that the relevant documentation is first submitted to the FSA.

(w) A listed issuer that requests or whose representative requests the FSA to amend the Official List, or any records held by the FSA in relation to the Official List, otherwise than pursuant to an application for listing.

FEES 3 Annex 4 part 3

On or before the date the request is made.

(x)

(i) An issuer or person who:

(1) is a fee payer under one or more of the categories set out in (ii); and

(2) requests the FSA's approval or vetting of a document that includes a mineral expert's report.

(ii) The categories are (1), (m) (q), and (v) of this table.

(iii) A fee under this category is payable in addition to any fee payable under the categories set out in (ii).

5,000

On or before the date the relevant documentation is first submitted to the FSA.8

8(y) An applicant for authorisation as an authorised payment institution under regulation 5 of the Payment Services Regulations

The highest of the tariffs set out in FEES 3 Annex 8 which apply to that application.

Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 Part 6, the fee payable is 50% of the tariff that would otherwise be payable in

FEES 3 Annex 8R

On or before the date the application is made.

(z) An application by a small payment institution for authorisation as an authorised payment institution because regulation 15 of the Payment Services Regulations applies

The highest of the tariffs set out in FEES 3 Annex 8R which apply to that application.

On or before the date the application is made.

(za) An applicant for registration as a small payment institution under regulation 12 of the Payment Services Regulations

FEES 3 Annex 8R, paragraph (1). Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 R Part 6, the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 8R.

On or before the date the application is made.

(zb) An authorised payment institution applying to vary its authorisation under regulation 8 of the Payment Services Regulations.

(1) If the payment services carried on by the authorised payment institution prior to the variation only fall within paragraph (f) or (g) or (h) of Part 1 of Schedule 1 to the Payment Services Regulations and any of the payment services in paragraphs (a) to (e) of that Schedule will apply after variation, the fee is 50% of the highest of the tariffs set out in FEES 3 Annex 8R which apply to that application.

(2) Where the

authorised payment institution:(i) already has authorisation to provide payment services within any one or more of paragraphs (a) to (e) of Part 1 of Schedule 1 to the Payment Services Regulations and wishes to add one or more other services in (a) to (g); or

(ii) has authorisation to provide payment services in either paragraph (f) or (g) of Part 1 of Schedule 1 to the Payment Services Regulations and wishes to extend its authorisation to include the other paragraph ((f) or (g));

the fee payable is 250 irrespective of the number of agents it has.

(3) In cases where the variation involves only the reduction (and no increases) of the types of payment services to be carried on after the variation, no fee is payable.

On or before the date the application is made.

(zc) A small payment institution applying to vary its registration under regulation 12 of the Payment Services Regulations

(1) If the payment services carried on by the small payment institution prior to the variation only fall within paragraph (f) or (g) of Part 1 of Schedule 1 to the Payment Services Regulations and any of the payment services in paragraphs (a) to (e) of that Schedule will apply after variation, the fee is 50% of the highest of the tariffs set out in FEES 3 Annex 8Rwhich apply to that application.

(2) Where the small payment institution:

(i) is already registered to provide payment services within any one or more of paragraphs (a) to (e) of Part 1 of Schedule 1 to the Payment Services Regulations and wishes to add one or more other of the services in (a) to (g); or

(ii) is registered to provide payment services in either paragraph (f) or (g) of Part 1 of Schedule 1 to the Payment Services Regulations and wishes to extend its registration to include the other paragraph ((f) or (g));the fee payable is 250 irrespective of the number of agents it has.

(2)

(3) In cases where the variation involves only the reduction (and no increases) of the types of payment services to be carried on after the variation, no fee is payable.

On or before the date the application is made.

A financial institution notifying the FSA in accordance with regulation 121(2)(a) of the Payment Services Regulations.

50% of the highest of the tariffs set out in FEES 3Annex 8R, paragraphs (2) to (5) which apply to that application.

On or before the date the application is made.