Related provisions for GENPRU 1.3.20
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In particular, unless an exception applies, GENPRU 1.3.4 R should be applied for the purposes of GENPRU, BIPRU or INSPRU to determine how to account for:(1) netting of amounts due to or from the firm;(2) the securitisation of assets and liabilities (see also GENPRU 1.3.7 G);(3) leased tangible assets;(4) assets transferred or received under a sale and repurchase3 or stock lending transaction; and(5) assets transferred or received by way of initial or variation margin under a derivative
For the purposes of GENPRU, BIPRU or INSPRU, except where a rule in GENPRU, BIPRU or INSPRU provides for a different method of recognition or valuation:(1) when a firm, upon initial recognition, designates its liabilities as at fair value through profit or loss, it must always adjust any value calculated in accordance with GENPRU 1.3.4 R by subtracting any unrealised gains or adding back in any unrealised losses which are not attributable to changes in a benchmark interest rate;(2)
(1) Except to the extent that GENPRU, BIPRU or INSPRU provide for another method of valuation, GENPRU 1.3.14 R to GENPRU 1.3.34 R (Marking to market, Marking to model, Independent price verification, Valuation adjustments or, in the case of an insurer or a UK ISPV, valuation adjustments9 or reserves) apply:9(a) for the purposes set out in GENPRU 1.3.41 R;(b) for the purposes set out in GENPRU 1.3.39 R; and(c) to any balance sheet position measured at market value or fair value.(2)
Where marking to market is not possible, a firm must (in the case of a BIPRU firm, conservatively)9use mark to model in order to measure the value of the investments and positions to which this rule applies under GENPRU 1.3.13 R and GENPRU 1.3.38 R to GENPRU 1.3.41 R. Marking to model is any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input. GENPRU 1.3.18 R to GENPRU 1.3.25 R apply when marking to model.
The recognition of any gains or losses arising from valuations subject to GENPRU 1.3.13 R and GENPRU 1.3.38 R to GENPRU 1.3.41 R must be recognised for the purpose of calculating capital resources in accordance with GENPRU 1.3.14 R to GENPRU 1.3.34 R (Marking to market, Marking to model, Independent price verification, Valuation adjustments or, in the case of an insurer or a UK ISPV, valuation adjustments9 or reserves). However if GENPRU, BIPRU or INSPRU provide for another treatment
A firm must consider the need for making adjustments or, in the case of an insurer or a UK ISPV,9establishing reserves for less liquid positions and, on an ongoing basis, review their continued appropriateness in accordance with the requirements set out in GENPRU 1.3.33 R. Less liquid positions could arise from both market events and institution-related situations e.g. concentration positions and/or stale positions.
(1) This paragraph sets out the requirements referred to in GENPRU 1.3.30 R and GENPRU 1.3.32 R.(2) A firm must consider the following adjustments or, in the case of an insurer or a UK ISPV, adjustments or9 reserves: unearned credit spreads, close-out costs, operational risks, early termination, investing and funding costs, future administrative costs and, where appropriate, model risk.(3) 9(a) In the case of a BIPRU firm, a firm must establish and maintain procedures for calculating
(1) In the exercise of its judgement for the purposes of BIPRU 3.4.56 R to BIPRU 3.4.58 R, a firm may be satisfied only if the conditions in (2) to (6) are met.(2) The value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macroeconomic factors affect both the value of the property and the performance of the borrower.(3) The risk of the borrower does not materially depend upon the performance
(1) The requirements about monitoring of property values referred to in BIPRU 3.4.60 R (4)(b) are as follows:(a) the value of the property must be monitored on a frequent basis and at a minimum once every three years for residential real estate;(b) more frequent monitoring must be carried out where the market is subject to significant changes in conditions;(c) statistical methods may be used to monitor the value of the property and to identify property that needs revaluation;(d)
For the purposes of BIPRU 3.4.66 R (1)(d) and (e), the review of a property valuation is more in-depth than the normal monitoring process required by BIPRU 3.4.66 R (1)(a). This requirement is likely to include a review of the property value on an individual exposure basis. Where an exposure is secured by multiple properties, the review can be undertaken at the level of the exposure, rather than at the level of each individual property.
The property must be valued by an independent valuer at or less than the market value. In those EEA States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the property may instead be valued by an independent valuer at or less than the mortgage lending value.[Note: BCD Annex VIII Part 3 point 62]
Mortgage lending value means the value of the property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. Speculative elements must not be taken into account in the assessment of the mortgage lending value. The mortgage lending value must be documented in a transparent and clear
The methods and assumptions used in valuing the liabilities should contain no explicit margins for risk, nor should the approach be optimistic. The valuation of liabilities should be consistent with the valuation of assets. To the extent the market price includes an implicit allowance for risk, this should be included within the valuation.
The written record of a firm'sindividual capital assessments carried out in accordance with INSPRU 7.1.15 R submitted by the firm to the appropriate regulator must:(1) in relation to the assessment comparable to a 99.5% confidence level over a one year timeframe that the value of assets exceeds the value of liabilities, document the reasoning and judgements underlying that assessment and, in particular, justify:(a) the assumptions used;(b) the appropriateness of the methodology
2Where the potential SRB agreement seller has not commissioned his own valuation of the property, a firm must ensure that he realises that there are other possible sources of information on the property's value that are available to him, including local estate agents, local newspapers which carry advertisements for the sale of residential property in the customer's locality and on-line sites where details of recent property sales in the locality may be accessed.
2A firm must ensure that the SRB agreement seller realises that there are other possible sources of information on the appropriate rental value for the property available to him, including local estate agents, local newspapers and on-line sites which carry advertisements for the rental of residential property in the customer's locality.
2What constitutes "materially altered" requires consideration of the facts of each individual case. For example, a change in the proposed purchase or valuation price of the property should normally be regarded as material, as would the introduction of an additional charge applying to the regulated sale and rent back agreement when it did not previously.
(1) This paragraph gives guidance on how the calculation under GENPRU 2.2.214R (1) should be carried out where an insurance undertaking is accounted for using the embedded value method.(2) On acquisition, any "goodwill" element (that is, the difference between the acquisition value according to the embedded value method and the actual investment) should be deducted from tier one capital resources.(3) The embedded value should be deducted from the total of tier one capital resources
(1) The purpose of this section is to set out the requirements for a firm specified in SUP 16.16.1 R to report the outcomes of its prudent valuation assessmentsunder the prudent valuation rules, in GENPRU 1.3.4 R and GENPRU 1.3.14 R to GENPRU 1.3.34 R, to the appropriate regulator7 and to do so in a standard format.7(2) The purpose of collecting this data on the prudent valuation assessments made by a firm under GENPRU 1.3.4 R and GENPRU 1.3.14 R to GENPRU 1.3.34 R is to assist
(1) 7A firm to which this section applies must submit to the appropriate regulator quarterly (on a calendar year basis and not from a firm'saccounting reference date), within six weeks of each quarter end, a Prudent Valuation Return in respect of its fair-value assessments under GENPRU 1.3.4 R and GENPRU 1.3.14 R to GENPRU 1.3.34 R in the format set out in SUP 16 Annex 31A.(2) 7A PRA-authorised person to which this section applies must submit the report via electronic mail to
(1) A valuer may be considered competent if he is a suitably qualified member of a professional body.(2) A valuer may be considered independent if:(a) the customer can choose the valuer subject to the firm objecting on reasonable grounds and to the valuer being competent;(b) he owes a duty of care to the customer in valuing the property; and(c) the customer has an appropriate remedy against him under a complaints procedure which allows the complaint to be referred to an independent
Systems and controls must include at least the following elements:(1) documented policies and procedures for the process of valuation (including clearly defined responsibilities of the various areas involved in the determination of the valuation, sources of market information and review of their appropriateness, frequency of independent valuation, timing of closing prices, procedures for adjusting valuations, month end and ad-hoc verification procedures); and(2) reporting lines
A firm must have clearly defined policies and procedures for overall management of the trading book. At a minimum these policies and procedures must address:(1) the activities the firm considers to be trading and as constituting part of the trading book for capital requirement purposes;(2) the extent to which a position can be marked-to-market daily by reference to an active, liquid two-way market;(3) for positions that are marked-to-model, the extent to which the firm can:(a)
2A listed company that is entering into a class 1 transaction which falls within LR 13.5.1 R, LR 13.5.3A R or LR 13.5.3B R but cannot comply with LR 13.5.12 R (inclusion of financial information table) or, for an investment, LR 13.5.3AR (2) (inclusion of price per security and the imputed value of the entire holding), must include an appropriate independent valuation of the target in the class 1 circular.
Where a firm buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record offsetting deterioration in the value of the asset that is protected (either through reductions in fair value or by an addition to reserves), the credit protection must not be recognised as eligible.[Note: BCD Annex VIII Part 1 point 31]
For a credit derivative to be met the following conditions must also be met.(1) Subject to (2), the credit events specified under the credit derivative must at a minimum include:(a) the failure to pay the amounts due under the terms of the underlying obligation that are in effect at the time of such failure (with a grace period that is closely in line with or shorter than the grace period in the underlying obligation);(b) the bankruptcy, insolvency or inability of the obligor
In the actuarial valuation under INSPRU 1.2.7 R, a firm must use methods and prudent assumptions which:(1) are appropriate to the business of the firm;(2) are consistent from year to year without arbitrary changes (see INSPRU 1.2.11 G);(3) are consistent with the method of valuing assets (see GENPRU 1.3);(4) include appropriate margins for adverse deviation of relevant factors (see INSPRU 1.2.12 G);(5) recognise the distribution of profits (that is, emerging surplus) in an appropriate
In a prospective valuation, a firm must:(1) include in the cash flows to be valued the following:(a) future premiums (see INSPRU 1.2.35 G to INSPRU 1.2.47 G);(b) expenses, including commissions (see INSPRU 1.2.50 R to INSPRU 1.2.58 G);(c) benefits payable (see INSPRU 1.2.29 R); and(d) subject to (2), amounts to be received or paid in respect of the long-term insurance contracts under contracts of reinsurance or analogous non-reinsurance financing agreements (see INSPRU 1.2.77A
A firm (other than the Society ) must notify to the FCA (in its own capacity and, if applicable, in its capacity as collection agent for the PRA) the value (as at the valuation date specified in Part 5 of FEES 4 Annex 1AR in relation to fees payable to the FCA or Part 5 of FEES 4 Annex 1BR in relation to fees payable to the PRA)15 of each element of business on which the periodic fee payable by the firm is to be calculated.
3A fee-paying payment service provider and a fee-paying electronic money issuer4 must notify to the FCA the value (as at the valuation date specified in Part 4 of FEES 4 Annex 11) of each element of business on which the periodic fee (other than a flat fee)4 payable by the firm under 1 R4 is to be calculated, including any payment services carried on by its agents from an establishment in the United Kingdom. 4
A related party circular must also include:(1) in all cases the following information referred to in the PD Regulation relating to the company:Paragraph of Annex 1 of the PD Regulation;(a) Annex 1 item 5.1.1 – Issuer name;(b) Annex 1 item 5.1.4 – Issuer address;(c) Annex 1 item 18.1 – Major shareholders;(d) Annex 1 item 20.9 – Significant changes;(e) Annex 1 item 22 – Material contracts (if it is information which shareholders of the company would reasonably require to make a
Subject to BIPRU 13:(1) the exposure value of an asset item must be its balance-sheet value, subject to any value adjustments required by GENPRU 1.3; and(2) the exposure value of an off-balance sheet item listed in the table in BIPRU 3.7.2 R must be the percentage of its value set out in that table.[Note: BCD Article 78(1) part]
The FCA will:(1) expect the issuer to demonstrate that it has in place appropriate systems, controls, procedures and policies, including in relation to risk management, underwriting, arrears and valuation; (2) expect the issuer to demonstrate that the cash-flows generated by the assets would be sufficient to meet the payments due in a timely manner including under conditions of economic stress and in the event of the failure of the issuer;(3) take account of any over collateralisation
This section sets capital resources requirements for a firm. GENPRU 2.2 (Capital resources) sets out how, for the purpose of meeting capital resources requirements, the amounts or values of capital, assets and liabilities are to be determined. More detailed rules relating to capital, assets and liabilities are set out in GENPRU 1.3 (Valuation) and, for an insurer, INSPRU and, for a BIPRU firm, BIPRU.
4The financial risk assessment should be based on a methodology which provides a reasonable estimate of the potential business losses which a UK RIE might incur in stressed but plausible market conditions. The FCA5 would expect a UK RIE to carry out a financial risk assessment at least once in every twelve-month period, or more frequently if there are material changes in the nature, scale or complexity of the UK RIE's operations or its business plans that suggest such financial
The calculation of the potential change in value must be subject to the following minimum standards:(1) at least daily calculation of the potential change in value;(2) a 99th percentile, one-tailed confidence interval;(3) a 5-day equivalent liquidation period, except in the case of transactions other than securities repurchase transaction or securities lending or borrowing transactions where a 10-day equivalent liquidation period should be used;(4) an effective historical observation
The summary described in LR 15.6.3 R must include:(1) the total value of properties held at the year end;(2) totals of the cost of properties acquired;(3) the net book value of properties disposed of during the year; and(4) an indication of the geographical location and type of properties held at the year end.