Related provisions for SYSC 7.1.1
81 - 100 of 226 items.
A firm must have clearly defined policies and procedures for determining which positions to include in the trading book for the purposes of calculating its capital requirements, consistent with the criteria set out in BIPRU 1.2.3 R to BIPRU 1.2.4 R, BIPRU 1.2.10 R to BIPRU 1.2.11 R, BIPRU 1.1.13 R and BIPRU 1.2.22 R and taking into account the firm's risk management capabilities and practices. Compliance with these policies and procedures must be fully documented and subject to
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)
The trading book policy statement may be prepared on either a consolidated or a solo (or solo-consolidated) basis. It should be prepared on a consolidated basis when a group either manages its trading risk centrally or employs the same risk management techniques in each group member. A trading book policy statement prepared on a consolidated basis should set out how it applies to each firm in the group and should be approved by each such firm'sgoverning body.
A firm should consider what use it can make of industry information. However, the firm should be seeking to measure the absolute level of, and changes to, its own default risk, rather than changes in default risk relative to the industry. Given the potential for conditions to change across in the market as a whole, a firm should not draw undue comfort from the observation that its default risk is changing in the same way as the industry as a whole. Doing so would not allow it
In accordance with BIPRU 3.2.1 R (2) and BIPRU 3.2.2 R, a firm must:(1) assign an off-balance sheet item listed in the table in BIPRU 3.7.2 R to the risk category indicated in column 1 of that table; and(2) determine the exposure value of that item as the percentage of its value for the appropriate risk category as set out in column 3 of the table in BIPRU 3.7.2 R.
This table belongs to BIPRU 3.7.1 R
[Note: BCD Annex II]
Category |
Item |
Percentage |
Full risk |
Guarantees having the character of credit substitutes Credit derivatives Acceptances Endorsements on bills not bearing the name of another credit institution Transactions with recourse Irrevocable standby letters of credit having the character of credit substitutes Assets purchased under outright forward purchase agreements Forward deposits The unpaid portion of partly-paid shares and securities Asset sale and repurchase agreements as defined in Article 12(3) and (5) of the Bank Accounts Directive Other items also carrying full risk |
100% |
Medium risk |
Documentary credits issued and confirmed (see also medium/low risk). Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes. Irrevocable standby letters of credit not having the character of credit substitutes. Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year. Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs). |
50% |
Medium/low risk |
Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions. Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. |
20% |
Low risk |
Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the firm to cancel them to the full extent allowable under consumer protection and related legislation. |
0% |
These tools may be usefully grouped
under four headings:(1) diagnostic: designed to identify,
assess and measure risks;(2) monitoring: to track the development
of identified risks, wherever these arise;(3) preventative: to limit or reduce
identified risks and so prevent them crystallising or increasing; and(4) remedial: to respond to risks when
they have crystallised.
For an originator subject to the capital requirement in BIPRU 9.13.1 R the total of the risk weighted exposure amounts in respect of its positions in the investors interest (as defined in BIPRU 9.13.4 R or BIPRU 9.13.6 R) and the risk weighted exposure amounts calculated under BIPRU 9.13.1 R must be no greater than the greater of:(1) the risk weighted exposure amounts calculated in respect of its positions in the investors interest (as so defined); and(2) the risk weighted exposure
For the purposes of articles 124(2) and 126(2) of the EU CRR, and in addition to the conditions in those regulations, a firm may only treat exposures as fully and completely secured by mortgages on commercial immovable property located in the UK1 in line with article 126 where annual average losses stemming from lending secured by mortgages on commercial property in the UK did not exceed 0.5% of risk-weighted exposure amounts over a representative period. A firm must calculate
If a firm is not a significant IFPRU firm its recovery plan must include:(1) a summary of the key elements of the recovery plan;(2) information on the governance of the firm, including: (a) how the recovery plan is integrated into the corporate governance of the firm; and (b) the firm's overall risk management framework;(3) a description of the legal and financial structures of the firm, including:(a) the core business lines; and(b) critical functions;(4) recovery options, including:(a)
In selecting the appropriate cover, the firm should ensure that both credit risk, and the risk that the value or yield in the assets will not, in all circumstances, match fluctuations in the relevant index, are within acceptable limits. Rules and guidance relating to credit risk are set out in INSPRU 2.1.
A pure reinsurer must invest its assets in accordance with the following requirements:(1) the assets must take account of the type of business carried out by the firm, in particular the nature, amount and duration of expected claims payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its investments;(2) the firm must ensure that the assets are diversified and adequately spread and allow the firm to respond adequately
A firm may treat contractual netting as risk-reducing only under the following conditions:(1) the firm must have a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the firm would have a claim to receive or an obligation to pay only the net sum of the positive and
Subject to DTR 7.2.11 R, an issuer which is required to prepare a group directors’ report within the meaning of section 415(2) of the Companies Act 2006 must include in that report a description of the main features of the group’s internal control and risk management systems in relation to the process for preparing consolidated accounts. In the event that the issuer presents its own annual report and its consolidated annual report as a single report, this information must be
The appointment of a skilled person to produce a report under section 166 of the Act (Reports by skilled persons) is one of the appropriate regulator's6 regulatory tools. The tool may be used:6(1) for diagnostic purposes, to identify, assess and measure risks; (2) for monitoring purposes, to track the development of identified risks, wherever these arise;(3) in the context of preventative action, to limit or reduce identified risks and so prevent them from crystallising or increasing;
The decision by the appropriate regulator6 to require a report by a skilled person under section 166 of the Act (Reports by skilled persons) 6will normally be prompted by a specific requirement for information, analysis of information, assessment of a situation,4 expert advice or recommendations or by a decision to seek assurance in relation to a regulatory return4. It may4 be part of the risk mitigation programme applicable to a firm, or the result of an event or development
A business illustration or high net worth illustration3provided to a customer must:(1) use the headings and prescribed text in MCOB 5 Annex 1 (except as provided in MCOB 5.7) but need not follow the format;(2) include the content required by MCOB 5.6.3 R to MCOB 5.6.130 G (except MCOB 5.6.5 R, MCOB 5.6.101 R, MCOB 5.6.109 R to MCOB 5.6.112 G, MCOB 5.6.120 R and MCOB 5.6.121 R);1(3) use the key facts logo followed by the text 'about this [term used by the firm to describe the
(1) MCOB 5.7.2 R(1) means that firms do not have to follow the ordering of sections set down in MCOB 5.6, although they may choose to do so.(2) In accordance with MCOB 5.7.2 R(8) an example of an appropriate variation to the risk warning would be:'Your home may be repossessed if you are unable to fulfil the terms of this secured overdraft'.(3) A firm may also choose to include other information beyond that required by MCOB 5.6. However, when adding additional material a firm should
The systems and controls function is the function of acting in the capacity of an employee of the firm with responsibility for reporting to the governing body of a firm, or the audit committee (or its equivalent) in relation to:(1) its financial affairs;(2) setting and controlling its risk exposure (see SYSC 3.2.10 G and SYSC 7.1.6 R);(3) adherence to internal systems and controls, procedures and policies (see SYSC 3.2.16 G and SYSC 6.2).
1For a full-scope UK AIFM, the requirement to have an employee responsible for reporting to the governing body of the firm or the audit committee for matters in SUP 10A.8.1R (2) and SUP 10A.8.1R (3) is derived from the AIFMD level 2 regulation, which imposes obligations on such firms to have a permanent risk management function and, where appropriate and proportionate for their business, an internal audit function.
Behaviour
of the type referred to in APER 4.6.3 E includes, but is not limited to:(1) permitting transactions without a sufficient understanding
of the risks involved;(2) permitting
expansion of the business without reasonably assessing the potential risks
of that expansion;(3) inadequately
monitoring highly profitable transactions or
business practices or unusual transactions or
business practices;(4) accepting
implausible or unsatisfactory explanations from subordinates without
(1) It
is important for the approved person performing
a significant influence function to
understand the business for which he is responsible (APER 4.6.4 E).
An approved person performing
a significant influence function is
unlikely to be an expert in all aspects of a complex financial services business.
However, he should understand and inform himself about the business sufficiently
to understand the risks of its trading, credit or other business activities.(2) It
is important
1A firm operating an MTF must have:(1) transparentand non-discretionary rules and procedures for fair and orderly trading;[Note:Article 14(1) of MiFID](2) objective criteria for the efficient execution of orders;[Note: Article 14(1) of MiFID](3) transparent rules regarding the criteria for determining the financial instruments that can be traded under its systems;[Note: Subparagraph 1 of Article 14(2) of MiFID](4) transparent rules, based on objective criteria, governing access
More generally, having adequate prudential resources gives the firm a degree of resilience and some indication to customers of creditworthiness, substance and the commitment of its owners. Prudential standards aim to ensure that a firm has prudential resources which can provide cover for operational and compliance failures and pay redress, as well as reducing the possibility of a shortfall in funds and providing a cushion against disruption if the firm ceases to trade.
(1) [deleted]88(2) In this context, the FCA will interpret the term 'appropriate88' as meaning sufficient in terms of quantity, quality and availability, and 'resources' as including all financial resources (though only in the case of firms not carrying on, or seeking to carry on, a PRA-regulated activity)8, non-financial resources and means of managing its resources; for example, capital, provisions against liabilities, holdings of or access to cash and other liquid assets, human
(1) [deleted]88(2) Relevant matters to which the FCA may have regard when assessing whether a firm will satisfy, and continue to satisfy, this threshold condition8may include but are not limited to:(a) (in relation to a firm other than a firm carrying on, or seeking to carry on, a PRA-regulated activity),8 whether there are any indications that the firm may have difficulties if the application is granted, at the time of the grant or in the future, in complying with any of the
2Where an authorised fund manager of a UCITS scheme uses the commitment approach for the calculation of global exposure, it must:(1) ensure that it applies this approach to all derivative and forward transactions (including embedded derivatives as referred to in COLL 5.2.19R (3A) (Derivatives: general)), whether used as part of the scheme's general investment policy, for the purposes of risk reduction or for the purposes of efficient portfolio management in accordance with the
2Authorised fund managers of UCITS schemes6 are advised that ESMA has6 have issued guidelines which, in accordance with the UCITS implementing Directive, authorised fund managers should comply with in applying the rules in this section in relation to UCITS schemes:6Guidelines: Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS (CESR/10-788)http://www.esma.europa.eu/content/Guidelines-Risk-Measurement-and-Calculation-Global-Exposure-and-Counterparty-Risk-UCITSGuidelines