Related provisions for IPRU-INV 5.2.1
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The FCA expects the time horizon for additional drawings to be the same as the time horizon for defaults. This means that EAD estimation need cover only additional drawings that might take place in the next year, such that:(1) no own funds requirements need be held against facilities, or proportions of facilities that cannot be drawn down within the next year; and(2) where facilities can be drawn down within the next year, firms may, in principle, reduce their estimates to the
If the availability of a facility is subject to a further credit assessment by the firm, an EAD/CF may not be required. However, the FCA expects this to be the case only if the subsequent credit assessment was of substantially equivalent rigour to that of the initial credit approval and if this includes a re-rating or a confirmation of the rating of the borrower.
Both trading book9 positions and other fair-valued positions9are subject to prudent valuation rules as specified in 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). In accordance with those rules, a firm must ensure that the value applied to each of its trading book positionsand other fair-valued positions9 appropriately
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
The FCA expects that a firm will be compliant with the validation requirements only where1it can demonstrate, in respect of discriminatory power, that:11(1) appropriate minimum standards that the rating system is expected to reach are defined, together with reasoning behind the adoption of such standards and that the factors considered when determining the tests are clearly documented;(2) an objective rank-ordering metric, measured using an appropriate time horizon (eg, using
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 4.3.13 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)
(1) If a CRD implementation measure in another EEA State implements the discretion in point 58 of Part 1 of Annex VI of the Banking Consolidation Directive to dispense with the condition in point 54(b) for exposures fully and completely secured by mortgages on commercial property situated in that EEA State, a firm may apply the same treatment as that CRD implementation measure to exposures fully and completely secured by mortgages on commercial property situated in that EEA State
A firm must disclose the following information regarding compliance with BIPRU 3, BIPRU 4, 5, BIPRU 7, 5 and the overall Pillar 2 rule:(1) a summary of the firm's approach to assessing the adequacy of its internal capital to support current and future activities;(2) for a firm calculating risk weighted exposure amounts in accordance with the standardised approach to credit risk, 8% of the risk weighted exposure amounts for each of the standardised credit risk exposure classes;(3)
(1) 2The FCAthreshold conditions apply to a person that carries on, or seeks to carry on, only relevant credit activities (within paragraph 2G of Schedule 6 to the Act) and which therefore has, or is applying for, limited permission with a number of modifications (see article 10(19) of the Regulated Activities Amendment Order). Regulated activities a person carries on in relation to which sections 20(1) and (1A) and 23(1A) of the Act do not apply as a result of section 39(1D)
Although an investment firm consolidation waiver switches off most of this chapter, a firm should still carry out the capital adequacy calculations in BIPRU 8.3 to BIPRU 8.8 as if those parts of this chapter still applied to the UK consolidation group or non-EEA sub-group and report these to the FCA. It should also still monitor large exposure risk on a consolidated basis.
(1) A BIPRU firm that is a subsidiary undertaking of a BIPRU firm or of a financial holding company or of a mixed financial holding company3 must apply the requirements laid down in GENPRU 1.2 (Adequacy of financial resources) and4 the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) on a sub-consolidated basis if the BIPRU firm, or the parent undertaking where it is a financial holding company or a mixed financial holding company3, have a third
(1) A listed company in severe financial difficulty may find itself with no alternative but to dispose of a substantial part of its business within a short time frame to meet its ongoing working capital requirements or to reduce its liabilities. Due to time constraints it may not be able to prepare a circular and convene an extraordinary general meeting to obtain prior shareholder approval.(2) The FCA may modify the requirements in LR 10.5 to prepare a circular and to obtain shareholder
The appropriate regulator expects most disagreements about the adequacy of capital will be resolved through further analysis and discussion. The appropriate regulator may consider the use of its powers under section 166 of the Act (Reports by skilled persons) to assist in such circumstances. If the appropriate regulator and the firm still do not agree on an adequate level of capital, then the appropriate regulator may consider using its powers under section 55J of the Act to,
The table below sets out the format, reporting frequency and due date for submission in relation to regulatory returns that apply to authorised payment institutions and small payment institutions.
(1) |
(2) |
(3) |
(4) |
(5) |
Type of firm |
Return |
Format |
Reporting Frequency |
Due date |
Authorised Payment Institution Capital Adequacy Return |
FSA056 (Note 1) |
Annual (Note 2) |
30 business days (Note 3) |
|
Payment Services Directive Transactions |
FSA057 (Note 4) |
Annual (Note 5) |
1 month (Note 3) |
|
Note 1 |
When submitting the completed return required, the authorised payment institution must use the format of the return set out in SUP 16 Annex 27A D. Guidance notes for the completion of the return are set out in SUP 16 Annex 27B G. |
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Note 2 |
This reporting frequency is calculated from an authorised payment institution'saccounting reference date. |
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Note 3 |
The due dates are the last day of the periods given in column (5) of the table above following the relevant reporting frequency period set out in column (4) of the table above. |
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Note 4 |
When submitting the completed return required, the small payment institution must use the format of the return set out in SUP 16 Annex 28A D. Guidance notes for the completion of the return are set out in SUP 16 Annex 28B G. |
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Note 5 |
This reporting frequency is calculated from 31 December each calendar year. |
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When a firm purchases credit derivative protection against a non-trading book ,exposure or against a CCRexposure, it must compute its capital requirement for the hedged asset in accordance with:(1) BIPRU 5.7.16 R to BIPRU 5.7.25 R and BIPRU 4.10.49 R (4) to (6) (Unfunded credit protection: Valuation and calculation of risk-weighted exposure amounts and expected loss amounts); or1(2) 1where a firm calculates risk weighted exposure amounts in accordance with the IRB approach:1(a)
The FCA considers that the reference in PERG 9.6.5 G (3) to corresponding provisions in force in another EEA State will include provisions that derive from the maintenance of capital requirements of the Second Council Directive on co-ordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies (77/91/EEC).
An indirect or synthetic holding includes a holding of a firm of shares, any other interest in the capital and subordinated debt, whether in the trading book or non-trading book, in:(1) an institution ; or(2) a financial institution; that satisfies the following conditions:(3) the holding is the subject of an agreement or arrangement between the firm and either the issuer of the instrument in question or a member of the group to which the issuer belongs;(4) under the terms of
A firm that is a member of a UK consolidation group must comply, to the extent and in the manner prescribed in BIPRU 8.5, with the obligations laid down in GENPRU 1.2 (Adequacy of financial resources) and4 the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) on the basis of the consolidated financial position of:424(1) where either Test 1A or Test 1B in BIPRU 8 Annex 1 (Decision tree identifying a UK consolidation group) apply, the parent institution
(1) A significant IFPRU firm must update its recovery plan at least annually.(2) A firm that is not a significant IFPRU firm must update its recovery plan at least once every two years.(3) A firm must also update its recovery plan after a change to any of the following which could materially affect its recovery plan:(a) its legal or organisational structure; (b) its business; or(c) its financial situation.[Note: articles 4(1)(b) and 5(2) RRD]