Related provisions for SYSC 7.1.1

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SYSC 8.1.3GRP
SYSC 4.1.1 R requires a firm to have effective processes to identify, manage, monitor and report risks and internal control mechanisms. Except in relation to those functions described in SYSC 8.1.5 R, where a firm relies on a third party for the performance of operational functions which are not critical or important for the performance of relevant services and activities (see SYSC 8.1.1 R (1)) on a continuous and satisfactory basis, it should take into account, in a manner that
SYSC 8.1.8RRP
A common platform firm must in particular take the necessary steps to ensure that the following conditions are satisfied:(1) the service provider must have the ability, capacity, and any authorisation required by law to perform the outsourced functions, services or activities reliably and professionally;(2) the service provider must carry out the outsourced services effectively, and to this end the firm must establish methods for assessing the standard of performance of the service provider;(3)
SYSC 8.1.13RRP
6A management company must retain the necessary resources and expertise so as to monitor effectively the activities carried out by third parties on the basis of an arrangement with the firm, especially with regard to the management of the risk associated with those arrangements.[Note: article 5(2) of the UCITS implementing Directive]
COND 2.7.8GRP
1In deciding how they will satisfy and continue to satisfy the threshold conditions set out in paragraphs 2F and 3E of Schedule 6 to the Act, firms should consider matters including (but not limited to) the following:(1) the assumptions underlying the firm's business model and justification for it;(2) the rationale for the business the firm proposes to do or continues to do, its competitive advantage, viability and the longer-term profitability of the business;(3) the needs of
COND 2.7.10GRP
1Firms should consider scenarios which may negatively impact on the firm's business model with a view to ensuring the sustainability of the firm and, further, to consider the vulnerability of the business model to specific events and the risks and consequences that might arise. Where appropriate, this might include reverse stress-testing (see SYSC 20 ‘Reverse stress testing’). A firm should put in place a credible plan to minimise the risks that it identifies from, or in relation
COND 2.7.11GRP
1Firms should ensure that any adjustments to its business model:(1) are approved at an appropriate level in the business;(2) are considered in the light of any potential risks, impacts and consequences of the proposed changes; and(3) appropriately take into account the needs of and risks to clients and relevant consumers.
COLL 6.11.2RRP
(1) An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme must establish and maintain a permanent risk management function.(2) The function referred to in (1) must be hierarchically and functionally independent from operating units, except where such independence would not be appropriate and proportionate in view of the nature, scale and complexity of the authorised fund manager’s or UK UCITS management company’s business and of
COLL 6.11.3GRP
Where the risk management function required under COLL 6.11.2 R (1) is not hierarchically and functionally independent, the authorised fund manager or UK UCITS management company should nevertheless be able to demonstrate that its risk management process satisfies the requirements of COLL 6.12.3 R (Risk management process) and that, in particular, the appropriate safeguards have been adopted.[Note: article 12(2) third paragraph and recital (12) of the UCITS implementing Dire
COLL 6.11.4RRP
(1) The permanent risk management function must:(a) implement the risk management policy and procedures;(b) ensure compliance with the risk limit system, including statutory limits concerning global exposure and counterparty risk, as required by COLL 5.2 (General investment powers and limits for UCITS schemes) and COLL 5.3 (Derivative exposure) or, where appropriate, the relevant UCITS Home State measures implementing articles 41, 42 and 43 of the UCITS implementing Directive;(c)
SUP 4.3.13RRP
An actuary appointed to perform the actuarial function must, in respect of those classes of the firm's long-term insurance business which are covered by his appointment1:1(1) advise the firm's management, at the level of seniority that is reasonably appropriate, on1 the risks the firm runs in1 so far as they may have a material impact on the firm's ability to meet liabilities to policyholders in respect of long-term insurance contracts as they fall due and on the capital needed
SUP 4.3.15GRP
SUP 4.3.13 R is not intended to be exhaustive of the professional advice that a firm should take whether from an actuary appointed under this chapter or from any other actuary acting for the firm. Firms should consider what systems and controls are needed to ensure that they obtain appropriate professional advice on financial and risk analysis; for example:11(1) risk identification, quantification and monitoring;1(2) stress and scenario testing;1(3) ongoing financial conditions;1(4)
SUP 4.3.16DGRP
1Firms should normally obtain advice, from the actuary appointed to perform the with-profits actuary function in respect of the affected class or classes of with-profits business, whenever they are preparing to make key decisions based on the exercise of discretion affecting their with-profits business. Firms should also have risk management processes in place to ensure that all relevant matters are referred to the actuary for advice.
BIPRU 4.1.10GRP
For the corporate exposure class there is a separate sub-class of specialised lending exposure. A firm may calculate risk weights for these exposures, where it is able to do so, in the same way as it does for the rest of its corporate exposure class, i.e. using the foundation IRB approach or the advanced IRB approach. Where a firm is not able to use this approach it may calculate risk weights for specialised lending exposures by slotting them into predetermined risk weights.
BIPRU 4.1.14GRP
(1) The appropriate regulator will only grant an IRB permission if it is satisfied that the firm's systems for the management and rating of credit risk exposures are sound and implemented with integrity and, in particular, that they meet the standards in BIPRU 4.2.2 R in accordance with the minimum IRB standards.(2) Under BIPRU 4.2.11 R, a firm applying for an IRB permission is required to demonstrate that it has been using for the IRB exposure classes in question rating systems
BIPRU 4.1.20GRP
By modifying GENPRU 2.1.51 R to allow the firm to use the IRB approach to calculate all or part of its risk weighted exposure amounts, the appropriate regulator is treating it like an application rule. The modification means that the provisions of BIPRU relating to the IRB approach supersede the rules relating to the standardised approach for exposures coming within the scope of the IRB permission.
MIPRU 4.2C.10RRP
(1) 1A firm must satisfy the FCA that it has adequate risk management processes to control the risks to which it may be exposed as a result of carrying out credit risk mitigation.(2) These processes must include appropriate stress tests and scenario analyses relating to those risks, including residual risk and the risks relating to the intrinsic value of the credit risk mitigation.
MIPRU 4.2C.11RRP
1A firm must:(1) satisfy the FCA that it has systems to manage risks arising from its use of credit protection; and(2) demonstrate how its strategy on the use of credit protection interacts with the firm's management of its overall risk profile.
MIPRU 4.2C.29RRP
1Under MIPRU 4.2A.9 R, MIPRU 4.2A.12 R, MIPRU 4.2A.17A R and MIPRU 4.2A.17B R, g is the risk weight to be assigned to an exposure, the exposure value (E) of which is fully protected by unfunded credit protection (GA), where: (1) g is the risk weight of exposures to the protection provider; (2) GA is the value of G* as calculated under MIPRU 4.2C.22 R further adjusted for any maturity mismatch under MIPRU 4.2C.24 R to MIPRU 4.2C.28 R; and(3) E is the exposure value according to
IFPRU 4.11.6GRP
The FCA expects that an IPRE rating system will only be compliant if a firm is able to demonstrate the following in respect of its treatment of interest-rate risk (IRR):(1) IRR is included as a relevant risk driver (unless the portfolio is exclusively hedged);(2) the way in which IRR is included in the deal rating is intuitive with respect to model philosophy. For example, a 'point in time' rating should consider the current interest rate and likely change over a one-year time
IFPRU 4.11.7GRP
The FCA expects that an IPRE rating system will only be compliant if a firm is able to demonstrate the following in respect of its treatment of refinance risk:(1) refinance risk is included as a relevant risk driver (unless the portfolio contains only amortising loans);(2) the model rates interest only and amortising deals differently in the final year and that the magnitude of the difference in these ratings is intuitive;(3) given the time horizon associated with IRB estimates
IFPRU 4.11.18GRP
The FCA also expects that a firm will be compliant with the validation requirements only where1it can demonstrate that:11(1) appropriate stability metrics should be considered across a range of economic environments (ie, longest period possible including most recent data);(2) the tolerances for the degree of divergence, and associated actions for what should happen when they are not met, is pre-defined; and(3) subsections of portfolios by characteristics affecting risk profile,
DTR 4.1.8RRP
The management report must contain:(1) a fair review of the issuer's business; and(2) a description of the principal risks and uncertainties facing the issuer.
DTR 4.1.11RRP
The management report required by DTR 4.1.8 R must also give an indication of:(1) any important events that have occurred since the end of the financial year;(2) the issuer's likely future development;(3) activities in the field of research and development;(4) the information concerning acquisitions of own shares prescribed by Article 22 (2) of Directive 77/91/EEC;(5) the existence of branches of the issuer; and(6) in relation to the issuer's use of financial instruments and where
DTR 4.1.12RRP
(1) Responsibility statements must be made by the persons responsible within the issuer.(2) The name and function of any person who makes a responsibility statement must be clearly indicated in the responsibility statement.(3) For each person making a responsibility statement, the statement must set out that to the best of his or her knowledge:(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the
SYSC 19C.2.1RRP
A firm must establish, implement and maintain remuneration policies, procedures and practices that are consistent with and promote sound and effective risk management.
SYSC 19C.2.2GRP
(1) If a firm'sremuneration policy is not aligned with effective risk management, it is likely that employees will have incentives to act in ways that might undermine effective risk management. (2) The BIPRU Remuneration Code covers all aspects of remuneration that could have a bearing on effective risk management including salaries, bonuses, long-term incentive plans, options, hiring bonuses, severance packages and pension arrangements. In applying the BIPRU Remuneration Code,
SYSC 19C.2.3GRP
(1) The specific remuneration requirements in this chapter may apply only to certain categories of employee. However, the FCA expects firms, in complying with the BIPRU Remuneration Codegeneral requirement, to apply certain principles on a firm-wide basis.(2) In particular, the FCA considers that firms should apply the principle relating to guaranteed variable remuneration on a firm-wide basis (Remuneration Principle 12(c); SYSC 19C.3.40 R to SYSC 19C.3.43 G. (3) The FCA also
IFPRU 4.4.8GRP
To be satisfied that the requirements in article 179(1) of the EU CRR are met, the FCA expects a firm to collect data on what it considers to be the main drivers of the risk parameters of probability of default (PD), loss given default (LGD), conversion factors (CFs) and expected loss (EL) for each group of obligors or facilities, to document the identification of the main drivers of risk parameters, and be able to demonstrate that the process of identification is reasonable and
IFPRU 4.4.9GRP
In its processes for identifying the main drivers of risk parameters, the FCA expects that a firm should set out its reasons for concluding that the data sources chosen provide in themselves sufficient discriminative power and accuracy and why additional potential data sources do not provide relevant and reliable information that would be expected materially to improve the discriminative power and accuracy of its estimates of the risk parameter in question. This process need not
IFPRU 4.4.17GRP
To demonstrate that a rating system provides for a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk, the FCA expects a firm would have regard to the sensitivity of the rating to movements in fundamental risk drivers, in assigning exposures to grades or pools within a rating system (see article 171 of the EU CRR).
SYSC 13.7.5GRP
IT systems include the computer systems and infrastructure required for the automation of processes, such as application and operating system software; network infrastructure; and desktop, server, and mainframe hardware. Automation may reduce a firm's exposure to some 'people risks' (including by reducing human errors or controlling access rights to enable segregation of duties), but will increase its dependency on the reliability of its IT systems.
SYSC 13.7.6GRP
A firm should establish and maintain appropriate systems and controls for the management of its IT system risks, having regard to:(1) its organisation and reporting structure for technology operations (including the adequacy of senior management oversight);(2) the extent to which technology requirements are addressed in its business strategy;(3) the appropriateness of its systems acquisition, development and maintenance activities (including the allocation of responsibilities
SYSC 13.7.9GRP
Operating processes and systems at separate geographic locations may alter a firm's operational risk profile (including by allowing alternative sites for the continuity of operations). A firm should understand the effect of any differences in processes and systems at each of its locations, particularly if they are in different countries, having regard to:(1) the business operating environment of each country (for example, the likelihood and impact of political disruptions or
SYSC 6.1.1RRP
1A firm must establish, implement and maintain adequate policies and procedures sufficient to ensure compliance of the firm including its managers, employees and appointed representatives (or where applicable, tied agents)3 with its obligations under the regulatory system and for countering the risk that the firm might be used to further financial crime.2[Note: article 13(2) of MiFID and article 12(1)(a) of the UCITS Directive]8242
SYSC 6.1.1AGRP
10The FCA provides guidance on steps that a firm can take to reduce the risk that it might be used to further financial crime in FC (Financial crime: a guide for firms).
SYSC 6.1.2RRP
A common platform firm and a management company8 must, taking into4account the nature, scale and complexity of its business, and the nature and range of financial services and activities8 undertaken in the course of that business, establish, implement and maintain adequate policies and procedures designed to detect any risk of failure by the firm to comply with its obligations under the regulatory system, as well as associated risks, and put in place adequate measures and procedures
SYSC 19C.1.5RRP
(1) This rule applies to a firm that is unable to comply with the BIPRU Remuneration Code because of an obligation it owes to a BIPRU Remuneration Code staff member under a provision of an agreement made on or before 29 July 2010. (2) A firm must take reasonable steps to amend or terminate the provision in (1) in a way that enables it to comply with the BIPRU Remuneration Code at the earliest opportunity.(3) Until the provision in (1) ceases to prevent the firm from complying
SYSC 19C.1.6GRP
The aim of the BIPRU Remuneration Code is to ensure that firms have risk-focused remuneration policies, which are consistent with and promote effective risk management and do not expose them to excessive risk. It expands upon the general organisational requirements in SYSC 4.
SYSC 19C.1.8GRP
The FCA's policy on individual guidance is set out in SUP 9. Firms should particularly note the policy on what the FCA considers to be a reasonable request for guidance (see SUP 9.2.5 G). For example, where a firm is seeking guidance on a proposed remuneration structure, the FCA will expect the firm to provide a detailed analysis of how the structure complies with the BIPRU Remuneration Code, including the general requirement for remuneration policies, procedures and practices
IFPRU 6.1.8GRP
The level of sophistication of the pricing models used to calculate own estimates of delta for use in the standardised approach for options should be proportionate to the complexity and risk of each option, and the overall risk of the firm's options trading business. In general, it is considered that the risk of sold options will be higher than the risk of the same options when bought.
IFPRU 6.1.14GRP
A firm should ensure its risk management functions are aware of weaknesses of the model used to calculate deltas. Where weaknesses are identified, the firm should ensure that estimates of delta result in prudent own funds requirements being held. The outcome should be prudent across the whole portfolio of options and underlying positions at a given time.
IFPRU 6.1.16GRP
For the purpose of IFPRU 6.1.15 R, the convertible should be:(1) treated as a position in the equity into which it converts; and(2) the firm's own funds requirement for the general and specific risk in its equity instruments should be adjusted by making: (a) an addition equal to the current value of any loss which the firm would make if it did convert to equity; or(b) a deduction equal to the current value of any profit which the firm would make if it did convert to equity (subject
BIPRU 9.11.4RRP
Subject to BIPRU 9.11.6 RBIPRU 9.11.12 R, the risk weighted exposure amount of an unratedsecuritisation position must be calculated by applying a risk weight of 1250%.[Note:BCD Annex IX Part 4 point 7]
BIPRU 9.11.5RRP
For an originator or sponsor, the risk weighted exposure amounts calculated in respect of its positions in a securitisation may be limited to the risk weighted exposure amounts which would be calculated for the securitised exposures had they not been securitised subject to the presumed application of a 150% risk weight to all past due items and items belonging to regulatory high risk categories (see BIPRU 3.4.104 R and BIPRU 3 Annex 3 R) amongst the securitised exposures.[Note:BCD
BIPRU 9.11.6RRP
(1) A firm having an unratedsecuritisation position may apply the treatment set out in this paragraph for calculating the risk weighted exposure amount for that position provided the composition of the pool of exposuressecuritised is known at all times.(2) A firm may apply the weighted-average risk weight that would be applied to the securitised exposures referred to in (1) under the standardised approach by a firm holding the exposures multiplied by a concentration ratio.(3)
GENPRU 3.1.1RRP
1(1) GENPRU 3.1 applies to every firm that is a member of a financial conglomerate other than:(a) an incoming EEA firm;(b) an incoming Treaty firm;(c) a UCITS qualifier; and(d) an ICVC.(2) GENPRU 3.1 does not apply to a firm with respect to a financial conglomerate of which it is a member if the interest of the financial conglomerate in that firm is no more than a participation.(3) GENPRU 3.1.25 R (Capital adequacy requirements: high level requirement), and GENPRU 3.1.35 R (Risk
GENPRU 3.1.32GRP
GENPRU 3.1.35 R implements Article 7(4) and Article 8(4) of the Financial Groups Directive, which provide that where a financial conglomerate is headed by a mixed financial holding company, the sectoral rules regarding risk concentration and intra-group transactions of the most important financial sector in the financial conglomerate, if any, shall apply to that sector as a whole, including the mixed financial holding company.
GENPRU 3.1.33GRP
Articles 7(3) (Risk concentration) and 8(3) (Intra-group transactions) and Annex II (Technical application of the provisions on intra-group transactions and risk concentration) of the Financial Groups Directive say that Member States may apply at the level of the financial conglomerate the provisions of the sectoral rules on risk concentrations and intra-group transactions. GENPRU 3.1 does not take up that option, although the appropriate regulator may impose such obligations
GENPRU 3.1.35RRP
Afirm must ensure that the sectoral rules regarding risk concentration and intra-group transactions of the most important financial sector in the financial conglomerate referred to in GENPRU 3.1.34 R are complied with with respect to that financial sector as a whole, including the mixed financial holding company. The sectoral rules for these purposes are those identified in the table in GENPRU 3.1.36 R.4
REC 2.5.1UKRP

Schedule to the Recognition Requirements Regulations, paragraph 3

2(1)

The [UK RIE] must ensure that the systems and controls used in the performance of its [relevant functions] are adequate, and appropriate for the scale and nature of its business.

(2)

Sub-paragraph (1) applies in particular to systems and controls concerning -

(a)

the transmission of information;

(b)

the assessment, mitigation and management of risks to the performance of the [UK RIE'srelevant functions];

(c)

the effecting and monitoring of transactions on the [UK RIE];

(ca)

the technical operation of the [UK RIE], including contingency arrangements for disruption to its facilities;

(d)

the operation of the arrangements mentioned in paragraph 4(2)(d); and

(e)

(where relevant) the safeguarding and administration of assets belonging to users of the [UK RIE's] facilities.

REC 2.5.4GRP
The following paragraphs set out other matters to which the FCA3 may have regard in assessing the systems and controls used for the transmission of information, risk management, the effecting and monitoring of transactions, the operation of settlement arrangements (the matters covered in paragraph 4(2)(d) of the Schedule to the Recognition Requirements Regulations) and the safeguarding and administration of assets .33
REC 2.5.6GRP
In assessing a UK recognised body's systems and controls for assessing and managing risk, the FCA3 may also have regard to the extent to which these systems and controls enable the UK recognised body to:3(1) identify all the general, operational, legal and market risks wherever they arise in its activities;(2) measure and control the different types of risk;(3) allocate responsibility for risk management to persons with appropriate knowledge and expertise; and(4) provide sufficient,
CONC 2.10.12GRP
Where a firm understands, or reasonably suspects, a customer has or may have a mental capacity limitation the firm should use its business practices and procedures to: (1) assist the customer, where possible, to make an informed borrowing decision; and (2) ensure its lending decision is informed and responsible in the circumstances and mitigates the potential risks to the customer.[Note: paragraphs 4.3 and 4.5 of MCG]
CONC 2.10.18GRP
Where a firm understands, or reasonably suspects, a customer has or may have a mental capacity limitation it should apply a high level of scrutiny to the customer's application for credit, in order to mitigate the risk of the customer entering into unsustainable borrowing (see CONC 5.2 and CONC 5.3). [Note: paragraphs 4.32 and 4.33 of MCG]
CONC 2.10.19GRP
(1) A firm should balance the risk of a customer taking on unsustainable borrowing against inappropriately or unnecessarily denying credit to a customer. (2) Where a firm understands or reasonably suspects a customer has or may have a mental capacity limitation, it should undertake an appropriate and effective creditworthiness assessment or assessment required by CONC 5.2.2R (1) and it would be appropriate not to place over-reliance on information provided by the customer for
BIPRU 4.4.9RRP
A firm with portfolios concentrated in a particular market segment and range of default risk must have enough obligor grades within that range to avoid undue concentrations of obligors in a particular grade. Significant concentrations within a single grade must be supported by convincing empirical evidence that the obligor grade covers a reasonably narrow PD band and that the default risk posed by all obligors in the grade falls within that band.[Note:BCD Annex VII Part 4 point
BIPRU 4.4.13RRP
Separate exposures to the same obligor must be assigned to the same obligor grade, irrespective of any differences in the nature of each specific transaction. Exceptions, where separate exposures are allowed to result in multiple grades for the same obligor are:(1) country transfer risk, this being dependent on whether the exposures are denominated in local or foreign currency;(2) where the treatment of associated guarantees to an exposure may be reflected in an adjusted assignment
BIPRU 4.4.39RRP
For all off-balance sheet items other than mentioned in BIPRU 4.4.37 R, BIPRU 4.4.45 R, BIPRU 4.4.71 R - BIPRU 4.4.78 R, BIPRU 4.6.44 R, BIPRU 4.8.28 R and BIPRU 4.8.29 R, the exposure value must be the following percentage of its value:(1) 100% if it is a full risk item;(2) 50% if it is a medium risk item;(3) 20% if it is a medium/low risk item; and(4) 0% if it is a low risk item.For the purposes of this rule the off-balance sheet items must be assigned to risk categories as
BIPRU 4.4.57RRP
Subject to BIPRU 4.4.59 R to BIPRU 4.4.60 R, BIPRU 4.5.6 R, BIPRU 4.5.8 R - BIPRU 4.5.10 R (Risk weights for specialised lending), BIPRU 4.8.16 R, BIPRU 4.8.17 R (Risk weights for corporate exposure purchased receivables) and BIPRU 4.9.3 R (Securitisation: provision of credit protection), risk weighted exposure amounts must be calculated according to the formulae in the table in BIPRU 4.4.58 R and the adjustment formula in BIPRU 4.4.79 R (Double default).[Note:BCD Annex VII Part
BIPRU 5.4.57RRP
The volatility estimates must be used in the day-to-day risk management process of a firm including in relation to its internal exposure limits.[Note:BCD Annex VIII Part 3 point 53]
BIPRU 5.4.58RRP
If the liquidation period used by a firm in its day-to-day risk management process is longer than that set out in BIPRU 5.4 for the type of transaction in question, the firm's volatility adjustments must be scaled up in accordance with the square root of time formula set out in BIPRU 5.4.52 R.[Note: BCD Annex VIII Part 3 point 54]
BIPRU 5.4.59RRP
A firm must have established procedures for monitoring and ensuring compliance with a documented set of policies and controls for the operation of its system for the estimation of volatility adjustments and for the integration of such estimations into its risk management process.[Note:BCD Annex VIII Part 3 point 55]
BIPRU 5.4.60RRP
An independent review of a firm's system for the estimation of volatility adjustments must be carried out regularly in the firm's own internal auditing process. A review of the overall system for the estimation of volatility adjustments and for integration of those adjustments into the firm's risk management process must take place at least once a year and must specifically address, at a minimum:(1) the integration of estimated volatility adjustments into daily risk management;(2)