Related provisions for MIPRU 3.2.15
41 - 60 of 205 items.
A firm seeking to achieve capital relief by deducting or applying a 1250% risk weight where permitted under articles 243 or 244 of the EU CRR does not need to make the notification in IFPRU 4.12.1 R.1 However, in such cases, a firm should consider whether the characteristics of the transaction are such that the FCA would reasonably expect prior notice of it.1
The information the FCA expects a firm to provide in a permission application includes the following:(1) details of the firm's governance processes for significant risk transfer, including details of any relevant committees and the seniority and expertise of key persons involved in sign-off;(2) a copy of the firm's significant risk transfer policy, including details of the significant risk transfer calculation policies, methodologies and any models used to assess risk transfer
Permissions relating to individual transactions do not need to be granted prior to the execution of a transaction. The FCA does not intend to specify the timeframe in which a firm should submit an individual transaction permission, but the firm should note that capital relief from a specific transaction will not be available until a firm has obtained permission covering the significant risk transfer assessment and capital treatment (unless the transaction is being notified under
The FCA will seek to ensure that the securitisation framework is not used to undermine or arbitrage other parts of the prudential framework. For other similar credit protection arrangements (eg, those subject credit risk mitigation or trading book requirements), the impact of certain features (such as significant premiums or call options) may cast doubt on the extent of risk transferred and the resulting capital assessment. Features which result in inadequate own funds requirements
Information required under LR 13.3.1R(1) (Contents of all circulars) to be included in the circular or announcement should include an explanation of:(1) the background and reasons for the proposed transfer;(2) any changes to the issuer's business that have been made or are proposed to be made in connection with the proposal;(3) the effect of the transfer on the issuer's obligations under the listing rules;(4) how the issuer will meet any new eligibility requirements, for example
An issuer may take steps, in connection with a transfer, which require it to consider whether a prospectus is necessary, for example, if the company or its capital is reconstituted in a way that could amount to an offer of transferable securities to the public. The issuer and its advisers should consider whether directive obligations may be triggered.
The risk weighted exposure amounts for credit risk for exposures belonging to one of the exposure classes referred to in (1) to (4) must, unless deducted from capital resources, be calculated in accordance with the following provisions:(1) for exposures in the sovereign, institution and corporate IRB exposure class, BIPRU 4.4.57 R to BIPRU 4.4.60 R, BIPRU 4.4.79 R, BIPRU 4.5.8 R to BIPRU 4.5.10 R (for specialised lending exposures), BIPRU 4.9.3 R and BIPRU 4.8.16 R to BIPRU 4.8.17
(1) A firm using own estimates of conversion factors should take into account all facility types that may result in an exposure when an obligor defaults, including uncommitted facilities.(2) A firm should treat a facility as an exposure from the earliest date at which a customer is able to make drawings under it.(3) To the extent that a firm makes available multiple facilities, it should be able to demonstrate:(a) how it deals with the fact that exposures on one may become exposures
A firm'sVaR model must capture accurately all material price risks for positions within the scope of its VaRpermission, including risks relating to options or option-like positions. The firm must ensure that, if its VaR model does not accurately capture any material risk, the firm has capital resources adequate to cover that risk. These capital resources must be additional to those required to meet its capital resources requirement.
For example, BIPRU 7.10.53R might involve creating and documenting a prudent incremental PRR charge for the risk not captured in the VaR model and holding sufficient capital resources against this risk. In that case the firm should hold capital resources at least equal to its capital resources requirement as increased by adding this incremental charge to the model PRR. Alternatively the firm may make valuation adjustments through its profit and loss reserves to cover this material
A firm is expected ultimately to move towards full revaluation of option positions. For portfolios containing path dependent options, an instantaneous price shock applied to a static portfolio will be acceptable provided that the risks not captured by such an approach are not material. Where a risk is immaterial and does not justify further capital resources, that immaterial risk should still be documented.
3If the results of the stress tests carried out in accordance with BIPRU 7.10.55Z R indicate a material shortfall in the amount of capital required under the all price risk measure, a firm must notify the appropriate regulator of this circumstance by no later than two business days after the business day on which the material shortfall occurred.
Exposures fully and completely secured, to the satisfaction of the firm, by shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of residential property which is or shall be occupied or let by the owner must be assigned a risk weight of 35%.[Note: BCD Annex VI Part 1 point 46]
Where a firm is not aware of the underlying exposures of a CIU, it may calculate an average risk weight for the CIU in accordance with the standardised approach subject to the following rules: it will be assumed that the CIU first invests, to the maximum extent allowed under its mandate, in the standardised credit risk exposure classes attracting the highest capital requirement, and then continues making investments in descending order until the maximum total investment limit
A firm must not use both the financial collateral simple method and the financial collateral comprehensive method, unless such use is for the purposes of BIPRU 4.2.17 R to BIPRU 4.2.19 R and BIPRU 4.2.26 R, and such use is provided for by the firm'sIRB permission. A firm must demonstrate to the appropriate regulator that this exceptional application of both methods is not used selectively with the purpose of achieving reduced minimum capital requirements and does not lead to regulatory
This table belongs to BIPRU 5.4.34 R.
Other collateral or exposure types |
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20 day liquidation period (%) |
10 day liquidation period (%) |
5 day liquidation period (%) |
|
Main index equities, main index convertible bonds |
21.213 |
15 |
10.607 |
Other equities or convertible bonds listed on a recognised investment exchange or designated investment exchange |
35.355 |
25 |
17.678 |
Cash |
0 |
0 |
0 |
Gold |
21.213 |
15 |
10.607 |
In relation to repurchase transaction and securities lending or borrowing transactions, where a firm uses the supervisory volatility adjustments approach or the own estimates of volatility adjustments approach and where the conditions set out in (1) – (8) are satisfied, a firm may, instead of applying the volatility adjustments calculated under BIPRU 5.4.30 R to BIPRU 5.4.61 R, apply a 0% volatility adjustment:(1) both the exposure and the collateral are cash or debt securities
Core market participant means the following entities:(1) the entities mentioned in BIPRU 5.4.2 R (2)exposures to which are assigned a 0% risk weight under the standardised approach to credit risk;(2) institutions;(3) other financial companies (including insurance companies) exposures which are assigned a 20% risk weight under the standardised approach;(4) regulated CIUs that are subject to capital or leverage requirements;(5) regulated pension funds; and(6) a recognised clearing
A firm must ensure that:(1) it regularly carries out an ILAA;(2) it makes a written record of its ILAA;(3) its ILAA is proportionate to the nature, scale and complexity of its activities; (4) its ILAA takes into account whole-firm and group-wide liquidity resources only to the extent that reliance on these is permitted by the appropriate regulator;(5) its ILAA includes an assessment of the results of the stress tests required by BIPRU 12.5.6 R; and(6) its ILAA includes an assessment
A firm should carry out an ILAA at least annually, or more frequently if changes in its business or strategy or the nature, scale or complexity of its activities or the operational environment suggest that the current level of liquidity resources is no longer adequate. A firm should expect that its usual supervisory contact at the appropriate regulator will ask for the ILAA to be submitted as part of the ongoing supervisory process.
A firm must ensure that in carrying out its ILAA it considers how that firm's liquidity resources change as a result of:(1) the stress in BIPRU 12.5.8 R (the first liquidity stress);(2) the stress in BIPRU 12.5.11 R (the second liquidity stress); and(3) the first and second liquidity stresses occurring simultaneously.
The appropriate regulator will review the results of a firm'sILAA, including the results of the stress tests required by BIPRU 12.5.6R, as part of its Supervisory Liquidity Review Process (SLRP). The appropriate regulator's review of the stress test results will assist it assessing the adequacy of a firm's liquidity resources relative to other ILAS BIPRU firms and, consequently, in calibrating the individual liquidity guidance that it gives to that firm. BIPRU 12.9.2G sets out
2The strategies, policies, processes and systems referred to in BIPRU 12.3.4 R should include those which enable it to assess and maintain on an ongoing basis the amounts, types and distribution of liquidity resources that it considers adequate to cover:(1) the nature and level of the liquidity risk to which it is or might be exposed;(2) the risk that the firm cannot meet its liabilities as they fall due; and(3) in the case of an ILAS BIPRU firm, the risk that its liquidity resources
(1) 2[deleted]2(2) 2[deleted]2(3) A firm should ensure that its strategies, policies, processes and systems in relation to liquidity risk enable it to identify, measure, manage and monitor its liquidity risk positions for:(a) all sources of contingent liquidity demand (including those arising from off-balance sheet activities);(b) all currencies in which that firm is active; and(c) correspondent, custody and settlement activities.(4) 2[deleted]2(5) A firm should ensure that it
As part of the SLRP, the appropriate regulator will assess the appropriateness of the liquidity risk tolerance adopted by an ILAS BIPRU firm to ensure that this risk tolerance is consistent with maintenance by the firm of adequate liquidity resources for the purpose of the overall liquidity adequacy rule. The appropriate regulator will expect a firm to provide it with an adequately reasoned explanation for the level of liquidity risk which that firm'sgoverning body has decided
(1) A firm that does not meet the combined buffer must:(a) calculate the MDA in accordance with (4); and (b) report the MDA to the FCA in writing no later than five business days after the firm identified that it did not meet the combined buffer. (2) A firm that does not meet the combined buffer must not undertake any of the following actions before it has calculated the MDA:(a) make a distribution in connection with common equity tier 1 capital;(b) create an obligation to pay
Financial resources requirements for individual entities in the group are: (1) for firms regulated by the FCA, their regulatory capital requirement under FCA
rules;
(2) for entities regulated by an EEA regulator and which is subject to the local regulatory capital requirement of that regulator, that local regulatory capital requirement;
(2A) for entities that are recognised third country credit institutions or recognised
(1) For the purposes of rule 14.5.2(3) the notional financial resources requirements of group entities should normally be calculated as if the entities were subject to the financial rules in IPRU-INV relevant to the main firm in the group. The interpretation of 'main' given in 14.4.4 G applies here. (2) For the purposes of calculating an expenditure-based requirement, no account should be taken of expenses that have been recharged to another entity included in the scope of consolidation.
Exempt CAD firms |
OPS firms (see Note 1 below) |
Non-OPS Life Offices and Non-OPS Local Authorities |
Individuals admitted to membership collectively |
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Financial resources rules |
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No (see Note 3 below) |
No |
No |
Yes |
|
Individuals whose sole investment business is giving investment advice to institutional or corporate investors |
Firms subject to "lead regulator arrangements" |
All other firms |
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Financial resources rules |
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No |
No |
Yes |
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(see Note 2 below) |
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Accounting records rules |
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IPRU-INV 5.3.1R (1) to 5.3.1R(6) |
No |
Yes |
Yes |
|
Note 1. Firms are referred to the specific compliance reports for OPS firms required by Chapter 16 of the Supervision Manual. |
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Note 2. A firm subject to "lead regulator arrangements" whereby a body other than the FCA is responsible for its financial regulation shall comply with the corresponding financial resources rules and financial returns rules of that body, and a breach of such rules shall be treated as a breach of the rules of the FCA. |
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Note 3. The financial and non-financial resources rules for an exempt CAD firm are set out in IPRU-INV chapter 9. However, IPRU-INV 5.2.1R to 5.7.3R apply to an exempt CAD firm for the purpose of calculating its own funds (see IPRU-INV 9.2.9R(2)(a)) (although the Category A items of Tier 1 capital as set out in IPRU-INV 5.8.1R are replaced by all the items in IPRU-INV 9.3.1R) and if it carries on any regulated activity other than MiFID business (see IPRU-INV 9.2.3R). |
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(1) Business plan failure in the context of reverse stress testing should be understood as the point at which the market loses confidence in a firm and this results in the firm no longer being able to carry out its business activities. Examples of this would be the point at which all or a substantial portion of the firm's counterparties are unwilling to continue transacting with it or seek to terminate their contracts, or the point at which the firm's existing shareholders are
(1) The FSAappropriate regulator may request a firm to submit the design and results of its reverse stress tests and any subsequent updates as part of its ARROW risk assessment. (2) In the light of the results of a firm's reverse stress tests, the FSAappropriate regulator may require the firm to implement specific measures to prevent or mitigate the risk of business failure where that risk is not sufficiently mitigated by the measures adopted by the firm in accordance with SYSC
A firm must hold capital resources with respect to a free delivery, as set out in the Table in BIPRU 14.4.3 R, if:(1) it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securitiesforeign currencies or commodities before receiving payment for them; and(2) in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery.[Note: CAD Annex II point 2]
Table: Capital treatment for free deliveries
This table belongs to BIPRU 14.4.2 R.
Transaction Type |
Up to first contractual payment leg or delivery leg |
From first contractual payment leg or delivery leg up to four days after second contractual payment leg or delivery leg |
From 5 business days post second contractual payment leg or delivery leg until extinction of the transaction |
No capital charge in the trading book |
Treat as an exposure |
Deduct value transferred plus current positive exposure from capital resources |
[Note: CAD Annex II Table 2]
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) An originator of a synthetic securitisation may calculate risk weighted exposure amounts1, and, as relevant, expected loss amounts, for the securitised exposures in accordance with BIPRU 9.5.3 R and BIPRU 9.5.4 R, if either of the following conditions is fulfilled:1(a) 1significant credit risk is considered to have been transferred to third parties, either through funded or unfunded credit protection; or(b) 1the originator applies a 1250% risk weight to all securitisation
1An originator's application for a waiver of the requirements in BIPRU 9.5.1R (6) and (7) must demonstrate that the following conditions are satisfied:(1) it has policies and methodologies in place which ensure that the possible reduction of capital requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties; and(2) that such transfer of credit risk to third parties is also recognised for the purposes
(1) A collective portfolio management investment firm may undertake the following MiFID business: portfolio management; investment advice; safekeeping and administration in relation to shares or units of collective investment undertakings; and (if it is an AIFM investment firm) reception and transmission of orders in relation to financial instruments.(2) Subject to the conditions that the firm is not authorised to provide safekeeping and administration in relation to shares or
A collective portfolio management investment
firm is required to comply with the applicable requirements of the sourcebooks set out in IPRU-INV 11.6.1G, in parallel with its requirements under IPRU-INV 11. This means that a capital instrument may be used to meet either or both sets of requirements provided it meets the conditions set out in the relevant sourcebook.
When considering whether a business unit is significant, the firm should take into account all relevant factors in the light of the firm's current circumstances and its plans for the future, including:(1) the risk profile of the unit; or(2) its use or commitment of a firm's capital; or(3) its contribution to the profit and loss account; or(4) the number of employees or approved persons in the unit; or(5) the number of customers of the unit; or(6) any other factor which makes the
The significant management function is the function of acting as a senior manager with significant responsibility for a significant business unit that:(1) carries on designated investment business or other activities not falling within (2) to (4);(2) effects contracts of insurance (other than contractually based investments);(2A) carries on credit-related regulated activity;1(3) makes material decisions on the commitment of a firm's financial resources, its financial commitments,