Related provisions for IFPRU 4.12.29

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

MIPRU 4.2BA.9RRP
Policies and procedures: a firm must evaluate and address all risks, including reputational risks, through appropriate policies and procedures, to ensure in particular that the economic substance of the transaction is fully reflected in risk assessments and management decisions.
MIPRU 4.2BA.27RRP
(1) The support described in MIPRU 4.2BA.26R (1) is permitted.(2) The support described in MIPRU 4.2BA.26R (2) is not permitted.(3) The support described in MIPRU 4.2BA.26R (3) is permitted if the following conditions are met: (a) contractual and marketing documents of the securitisation expressly envisage and allow for the possibility of the firm providing such support;(b) the nature of any support that the firm may give is precisely described in the contractual and marketing
MIPRU 4.2BA.31RRP
The risk weighted exposure amount equals the on-balance sheet exposure value multiplied by the risk weight associated with the credit quality step with which the credit assessment of that exposure value is associated.
BIPRU 9.8.1RRP
The use of ECAIs' credit assessments for the calculation of a firm'srisk weighted exposure amounts under BIPRU 9 must be consistent and in accordance with BIPRU 9.8.2 RBIPRU 9.8.7 R. Credit assessments must not be used selectively.[Note:BCD Article 99]
BIPRU 9.8.2RRP
A firm may nominate one or more eligible ECAIs the credit assessments of which must be used in the calculation of its risk weighted exposure amounts under BIPRU 9 (a nominated ECAI).[Note:BCD Annex IX Part 3 point 2]
BIPRU 9.6.1RRP
An originator which, in respect of a securitisation in the non-trading book,1 has made use of BIPRU 9.3.1 R in the calculation of risk weighted exposure amounts, or a sponsor, must not, with a view to reducing potential or actual losses to investors, provide support to the securitisation beyond its contractual obligations.[Note: BCD Article 101(1)]
BIPRU 9.6.6GRP
(1) The support described in BIPRU 9.6.5 G (1) is permitted by BIPRU 9.6.1 R.(2) The support described in BIPRU 9.6.5 G (3) is not permitted by BIPRU 9.6.1 R.(3) The support described in BIPRU 9.6.5 G (2) may be permitted by BIPRU 9.6.1 R under the following conditions:(a) the fact that the firm may give it is expressly set out in the contractual and marketing documents for the securitisation;(b) the nature of the support that the firm may give is precisely described in the documentation;(c)
IFPRU 6.2.5GRP
Notional debt securities derived through this treatment should be assigned a specific risk position risk adjustment and a general market risk position risk adjustment equal to the highest that would apply to the debt securities in the basket or index.
IFPRU 6.2.6GRP
The debt security with the highest specific risk position risk adjustment within the basket might not be the same as the one with the highest general market risk position risk adjustment. A firm should select the highest percentages, even where they relate to different debt securities in the basket or index, and regardless of the proportion of those debt securities in the basket or index.
GENPRU 2.2.69FGRP
(1) 8In relation to the cancellation or deferral of the payment of a coupon in accordance with GENPRU 2.2.64R (4) and GENPRU 2.2.64R (5), GENPRU 2.2.68A R, or GENPRU 2.2.69B R, the FCA18 expects that situations where a coupon may need to be cancelled or deferred will be resolved through analysis and discussion between the firm and the FCA18. If the FCA18 and the firm do not agree on the cancellation or deferral of the payment of a coupon, then the FCA18 may consider using its
GENPRU 2.2.79HGRP
8The FCA18 considers that:(1) in order to comply with GENPRU 2.2.79G R, the firm should, at a minimum, provide the FCA18 with the following information:(a) a comprehensive explanation of the rationale for the purchase;(b) the firm's financial and solvency position before and after the purchase, in particular whether the purchase, or other foreseeable internal and external events or circumstances, may increase the risk of the firm breaching its capital resources requirement or
GENPRU 2.2.96GRP
If a firm has surplus eligible partnership capital or eligible LLP members' capital that it wishes to repay in circumstances other than those set out in GENPRU 2.2.93 R or GENPRU 2.2.94 R it may apply to the FCA18 for a waiver to allow it to do so. If a firm applies for such a waiver the information that the firm supplies with the application might include:(1) a demonstration that the firm would have sufficient capital resources to meet its capital resources requirement immediately
BIPRU 4.4.8RRP
An obligor grade means for the purpose of BIPRU 4 as it applies to the sovereign, institution and corporate IRB exposure class a risk category within a rating system's obligor rating scale, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of PD are derived. A firm must document both the relationship between obligor grades in terms of the level of default risk each grade implies and the criteria used to distinguish
BIPRU 4.4.28RRP
To the extent that a firm associates or maps its internal grades to the scale used by an ECAI or similar organisations and then attributes the default rate observed for the external organisation's grades to the firm's grades, mappings must be based on a comparison of internal rating criteria to the criteria used by the external organisation and on a comparison of the internal and external ratings of any common obligors. Biases or inconsistencies in the mapping approach or underlying
BIPRU 4.4.59RRP
For exposures to companies where the total annual sales for the consolidated group of which the firm is a part is less than EUR 50 million a firm may use the following correlation formula for the calculation of risk weights for corporate exposures. In this formula S is expressed as total annual sales in millions of Euros with EUR 5 million < = S < = EUR 50 million. Reported sales of less than EUR 5 million must be treated as if they were equivalent to EUR 5 million. In accordance
BIPRU 5.4.40RRP
In the tables in BIPRU 5.4.35 R – BIPRU 5.4.38 R and in BIPRU 5.4.41 R to BIPRU 5.4.43 R, the credit quality step with which a credit assessment of the debt security is associated is the credit quality step with which the external credit assessment is associated under the standardised approach. For the purposes of this rule, BIPRU 5.4.7 R also applies.[Note:BCD Annex VIII Part 3 point 38]
BIPRU 5.4.43RRP
For unrated debt securities issued by institutions and satisfying the eligibility criteria in BIPRU 5.4.5 R the volatility adjustments are the same as for securities issued by institutions or corporates with an external credit assessment associated with credit quality steps 2 or 3.[Note:BCD Annex VIII Part 3 point 41]
BIPRU 5.4.47RRP
In determining relevant categories, a firm must take into account the type of issuer of the security the external credit assessment of the securities, their residual maturity, and their modified duration. Volatility estimates must be representative of the securities included in the category by the firm.[Note:BCD Annex VIII Part 3 point 44]
BIPRU 11.5.11RRP
A firm calculating risk weighted exposure amounts for specialised lending exposures in accordance with BIPRU 4.5.8 R to BIPRU 4.5.10 R or equity exposures in accordance with BIPRU 4.7.9 R to BIPRU 4.7.10 R (the simple risk weight approach) must disclose the exposures assigned:(1) to each category of the table in BIPRU 4.5.9 R; or(2) to each risk weight mentioned in BIPRU 4.7.9 R to BIPRU 4.7.10 R.[Note: BCD Annex XII Part 2 point 8]
BIPRU 11.5.17RRP
A firm calculating risk weighted exposure amounts in accordance with BIPRU 9 or capital resource requirements according to BIPRU 7.2.48A R to BIPRU 7.2.48K R4 must disclose the following information, where relevant separately for its trading book and non-trading book:4(1) a description of the firm's objectives in relation to securitisation activity;(1A) the nature of other risks, including liquidity risk inherent in securitised assets;4(1B) the type of risks in terms of seniority
BIPRU 14.2.14RRP
For the purposes of BIPRU 14.2.11 R, in calculating risk weighted exposure amounts a firm must not use the financial collateral simple method for the recognition of the effects of financial collateral.[Note: CAD Annex II point 8]
BIPRU 14.2.18RRP
Where a firm calculates risk weighted exposure amounts for the purposes of BIPRU 14 in accordance with the IRB approach, then for the purposes of the calculation provided for in BIPRU 4.3.8 R, the following will apply:44(1) value adjustments made to take account of the credit quality of the counterparty may be included in the sum of value adjustments and provisions made for the exposures indicated in BIPRU 14; and(2) unless the firm'sIRB permission does not permit it, if the credit
RCB 2.3.12GRP
(1) The FCA will assess each risk factor separately and then assess any inter-dependencies and correlations to form a judgment on the quality of the asset pool as a whole. For example, an asset pool which is of high credit quality and so low risk due to a combination of factors such as owner occupation, low income multiples, full valuation methodologies, and a strong payments track record, may permit another factor such as high loan-to-value ratios, that would otherwise be considered
RCB 2.3.13GRP
In assessing whether the asset pool is of sufficient quality, the FCA will have regard to the requirements in relation to the collateralisation of real estate2referred to in article 208 of the EUCRR2 and the valuation rules in article 229(1) of the EUCRR2. 22
BIPRU 12.9.2GRP
In assessing the adequacy of an ILAS BIPRU firm's liquidity resources, the appropriate regulator draws on more than just a review of the submitted ILAA, or in the case of a simplified ILAS BIPRU firm, the submitted ILSA. Use is made of wider supervisory knowledge of a firm and of wider market developments and practices. When forming a view of the individual liquidity guidance to be given to an ILAS BIPRU firm, the appropriate regulator will also consider the regulator’s firm risk
BIPRU 12.9.15GRP
As part of the appropriate regulator's enquiry into the reasons for a firm's deviation, or expected deviation, from its individual liquidity guidance or, as the case may be, its simplified buffer requirement, the appropriate regulator may ask for further assessments and analyses of a firm's liquidity resources and the risks faced by the firm. The appropriate regulator may consider the use of its powers under section 166 of the Act to assist in such circumstances.
BIPRU 12.6.21RRP
(1) A simplified ILAS BIPRU firm must regularly carry out an ILSA which contains an assessment of the firm's compliance with the standards set out in BIPRU 12.3 and BIPRU 12.4, including the results of the stress tests required by the rules in BIPRU 12.4.(2) The firm must make a written record of its ILSA.(3) The ILSA must be proportionate to the nature, scale and complexity of that firm's activities.(4) The ILSA must take into account group-wide liquidity resources only to the
BIPRU 12.6.22GRP
For the purpose of BIPRU 12.6.21R, a firm should carry out an ILSA 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 the firm's usual supervisory contact at the appropriate regulator will ask for the ILSA to be submitted as part of the ongoing supervisory process.
REC 2.5.1UKRP

Schedule to the Recognition Requirements Regulations, paragraphs 3 – 3H4

Paragraph 3 – Systems and controls4

(1)

The [UK RIE] must ensure that the systems and controls, including procedures and arrangements,4 used in the performance of its functions and the functions of the trading venues it operates are adequate, effective4 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.

4(f)

the resilience of its trading systems;

4[Note:MiFID RTS 7 contains requirements on the resilience of trading systems operated by trading venues that enable algorithmic trading]

4(g)

the ability to have sufficient capacity to deal with peak order and message volumes;

4[Note:MiFID RTS 7 contains requirements on the adequacy of capacity of trading systems operated by trading venues that enable algorithmic trading]

4(h)

the ability to ensure orderly trading under conditions of severe market stress;

4(i)

the effectiveness of business continuity arrangements to ensure the continuity of the [UK RIE’s] services if there is any failure of its trading systems including the testing of the [UK RIE’s] systems and controls;

4(j)

the ability to reject orders that exceed predetermined volume or price thresholds or which are clearly erroneous;

4(k)

the ability to ensure algorithmic trading systems cannot create or contribute to disorderly trading conditions on trading venues operated by the [UK RIE];

4(l)

the ability to ensure disorderly trading conditions which arise from the use of algorithmic trading systems, including systems to limit the ratio of unexecuted orders to transactions that may be entered into the [UK RIE’s] trading system by a member or participant are capable of being managed;

[Note:MiFID RTS 9 contains requirements on the ratio of unexecuted orders to transactions to be taken into account by a trading venue that operates electronic continuous auction order book, quote-driven or hybrid trading systems]

4(m)

the ability to ensure the flow of orders is able to be slowed down if there is a risk of system capacity being reached;

4(n)

the ability to limit and enforce the minimum tick size which may be executed on its trading venues; and

4(o)

the requirement for members and participants to carry out appropriate testing of algorithms.

4[Note:MiFID RTS 7 contains requirements on the appropriate testing of algorithms to ensure that trading systems, when they enable algorithmic trading, cannot create or contribute to disorderly trading conditions]

4(3)

For the purposes of sub-paragraph 2(c), the [UK RIE] must -

4(a)

establish and maintain effective arrangements and procedures including the necessary resource for the regular monitoring of the compliance by members or participants with its rules; and

4(b)

monitor orders sent including cancellations and the transactions undertaken by its members or participants under its systems in order to identify infringements of those rules, disorderly trading conditions or conduct that may indicate behavior that is prohibited under the market abuse regulation or system disruptions in relation to a financial instrument.

4(4)

For the purpose of sub-paragraph (2)(o) the [UK RIE] must provide environments to facilitate such testing.

4(5)

The [UK RIE] must be adequately equipped to manage the risks to which it is exposed, to implement appropriate arrangements and systems to identify all significant risks to its operation, and to put in place effective measures to mitigate those risks.

4Paragraph 3A – Market making arrangements

4(1)

The [UK RIE] must -

4(a)

have written agreements with all investment firms pursuing a market making strategy on trading venues operated by it (“market making agreements”);

4(b)

have schemes, appropriate to the nature and scale of a trading venue, to ensure that a sufficient number of investment firms enter into such agreements which require them to post firm quotes at competitive prices with the result of providing liquidity to the market on a regular and predictable basis;

4(c)

monitor and enforce compliance with the market making agreements;

4(d)

inform the FCA of the content of its market making agreements; and

4(e)

provide the FCA with any information it requests which is necessary for the FCA to satisfy itself that the market making agreements comply with paragraphs (c) and (d) of this sub-paragraph and sub-paragraph 2.

4(2)

A market making agreement must specify-

4(a)

the obligations of the investment firm in relation to the provision of liquidity;

4(b)

where applicable, any obligations arising from the participation in a scheme mentioned in sub-paragraph (1)(b);

4(c)

any incentives in terms of rebates or otherwise offered by the [UK RIE] to the investment firm in order for it to provide liquidity to the market on a regular and predictable basis; and

4(d)

where applicable, any other rights accruing to the investment firm as a result of participation in the scheme referred to in sub-paragraph (1)(b).

4(3)

For the purposes of this paragraph, an investment firm pursues a market making strategy if -

4(a)

the firm is a member or participant of one or more trading venues;

4(b)

the firm’s strategy, when dealing on own account, involves posting firm, simultaneous two-way quotes of comparable size at competitive prices relating to one or more financial instruments on a single trading venue, across different trading venues; and

4(c)

the result is providing liquidity on a regular and frequent basis to the overall market.

4Paragraph 3B – Halting trading

4(1)

The [UK RIE] must be able to -

4(a)

temporarily halt or constrain trading on any trading venue operated by it if there is a significant price movement in a financial instrument on such a trading venue or a related trading venue during a short period; and

4(b)

in exceptional cases be able to cancel, vary, or correct any transaction.

4(2)

For the purposes of sub-paragraph (1), the [UK RIE] must ensure that the parameters for halting trading are appropriately calibrated in a way which takes into account -

4(a)

the liquidity of different asset classes and subclasses;

4(b)

the nature of the trading venue market model; and

4(c)

the types of users,

4to ensure the parameters are sufficient to avoid significant disruptions to the orderliness of trading.

4(3)

The [UK RIE] must report the parameters mentioned in sub-paragraph (2) and any material changes to those parameters to the FCA in a format to be specified by the FCA.

4(4)

If a trading venue operated by the [UK RIE] is material in terms of liquidity of the trading of a financial instrument and it halts trading in an EEA State in that instrument it must have systems and procedures in place to ensure that it notifies the FCA.

4[Note:MiFID RTS 12 contains requirements for when a regulated market is material in terms of liquidity in a financial instrument for purposes of trading halt notifications]

4Paragraph 3C – Direct electronic access

4Where the [UK RIE] permits direct electronic access to a trading venue it operates, it must -

4(1)

(a)

ensure that a member of, or participant in that trading venue is only permitted to provide direct electronic access to the venue if the member or participant -

4(i)

is an investment firm, as defined by Article 4.1.1 of the markets in financial instruments directive (definitions), authorised in accordance with the directive;

4(ii)

is a credit institution authrised in accordance with the capital requirements directive;

4(iii)

comes within Article 2.1(a), (e), (i), or (j) of the markets in financial instruments directive (exemptions) and has a Part 4A permission relating to investment services and activities;

4(iv)

is a third country firm providing the direct electronic access in the course of exercising rights under Article 46.1 (general provisions) or 47.3 (equivalence decision) of the markets in financial instruments regulation;

4(v)

is a third country firm and the provision of the direct electronic access by that firm is subject to the exclusion in Article 72 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; or

4(vi)

is a third country firm which does not come within paragraph (iv) or (v) and is otherwise permitted to provide the direct electronic access under the Act;

4(b)

ensure that appropriate criteria are set and applied for the suitability of persons to whom direct electronic access services may be provided;

4(c)

ensure that a member of, or participant in, the trading venue retains responsibility for adherence to the requirements of the markets in financial instruments directive in respect of orders and trades executed using the direct electronic access service;

4(d)

set appropriate standards regarding risk controls and thresholds on trading through direct electronic access;

4(e)

be able to distinguish and if necessary stop orders or trading on that trading venue by a person using direct electronic access separately from -

4(i)

other orders; or

4(ii)

trading by the member or participant providing the direct electronic access; and

4(f)

have arrangements in place to suspend or terminate the provision to a client of direct electronic access to that trading venue by a member of, or participant in, the trading venue in the case of non-compliance with this paragraph.

4[Note:MiFID RTS 7 contains requirements on direct electronic access permitted through a trading venue’s systems]

4Paragraph 3D – Co-location services

4(1)

The [UK RIE’s] rules on colocation services must be transparent, fair and nondiscriminatory.

4[Note:MiFID RTS 10 contains requirements to ensure co-location services are transparent, fair and non-discriminatory]

4Paragraph 3E – Fee structures

4(1)

The [UK RIE’s] fee structure, for all fees it charges including execution fees and ancillary fees and rebates it grants, must -

4(a)

be transparent, fair and non-discriminatory;

4[Note:MiFID RTS 10 contains requirements to ensure fee structures are transparent, fair and non-discriminatory]

4(b)

not create incentives to place, modify or cancel orders, or execute transactions, in a way which contributes to disorderly trading conditions or market abuse; and

4[Note:MiFID RTS 10 contains requirements concerning prohibited fee structures]

4(c)

impose market making obligations in individual shares or suitable baskets of shares for any rebates that are granted.

4(2)

Nothing in sub-paragraph (1) prevents the [UK RIE] from -

4(a)

adjusting its fees for cancelled orders according to the length of time for which the order was maintained;

4(b)

calibrating its fees to each financial instrument to which they apply;

4(c)

imposing a higher fee -

4(i)

for placing an order which is cancelled than an order which is executed;

4(ii)

on participants placing a high ratio of cancelled orders to executed orders; or

4(iii)

on a person operating a high-frequency algorithmic trading technique,

4in order to reflect the additional burden on system capacity.

4Paragraph 3F – Algorithmic trading

4(1)

The [UK RIE] must require members of and participants in trading venues operated by it to flag orders generated by algorithmic trading in order for it to be able to identify the -

4(a)

the different algorithms used for the creation of orders; and

4(b)

the persons initiating those orders.

4Paragraph 3G – Tick size regimes

4(1)

The [UK RIE] must adopt tick size regimes in respect of trading venues operated by it in -

4(a)

shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments traded on each trading venue; and

4[Note:MiFID RTS 11 contains requirements on the tick size regime for shares, depositary receipts, exchange traded funds and certificates5]

4(b)

any financial instrument for which regulatory technical standards are adopted by the European Commission pursuant to Article 49.3 or 4 of the markets in financial instruments directive which is traded on that trading venue.

[Note:MiFID RTS 11]

4 (2)

The tick size regime must -

4(a)

be calibrated to reflect the liquidity profile of the financial instrument in different markets and the average bid-ask spread taking into account desirability of enabling reasonably stable prices without unduly constraining further narrowing of spreads; and

4(b)

adapt the tick size for each financial instrument appropriately.

4(3)

The tick size regime must comply with any regulatory technical standards adopted by the European Commission pursuant to Article 49.3 or 4 of the markets in financial instruments directive.

4[Note:MiFID RTS 11]

4Paragraph 3H – Syncronisation of business clocks

4(1)

The [UK RIE] must synchronise the business clocks it uses to record the date and time of any reportable event in accordance with regulatory technical standards adopted by the European Commission pursuant to Article 50 of the markets in financial instruments directive.

4[Note:MiFID RTS 25]
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,
BIPRU 12.5.52RRP
For the purposes of assessing its franchise-viability risk, a firm must assess, under the liquidity stresses required by BIPRU 12.5.6 R, the liquidity resources required to maintain its core business franchise and reputation.
BIPRU 12.5.72RRP
In complying with BIPRU 12.5.63R, a firm must in particular assess the non-marketable assets risk associated with asset securitisations, having regard to:(1) the existence of early amortisation triggers and the consequences of their operation; and(2) its financing of assets which are warehoused prior to their securitisation.
MIPRU 4.2F.26GRP
For MIPRU 4.2F.25 R:(1) reliable standards for the valuation of residential property include internationally recognised valuation standards, in particular those developed by the International Valuation Standards Committee (IVSC), the European Group of Valuers’ Associations (EGoVA) or the Royal Institution of Chartered Surveyors (RICS) as well as the standards in MIPRU 4.2F.27 R to MIPRU 4.2F.29 R; and(2) the requirement to use reliable standards of valuation of residential property
FEES 3.1.6GRP
Applications for Part 4A permission (and exercises of Treaty rights) other than in respect of credit-related regulated activities7 are categorised by the 9FCA for the purpose of fee raising as straightforward, moderately complex and complex7 as identified in FEES 3 Annex 1. This differentiation is based on the permitted activities sought and does not reflect the 9FCA's risk assessment of the applicant (or Treaty firm).979
IFPRU 10.3.1RRP
A firm must calculate a countercyclical capital buffer of common equity tier 1 capital equal to its total risk exposure amount multiplied by the weighted average of the countercyclical buffer rates that apply to exposures in the jurisdictions where the firm'srelevant credit exposures are located. [Note: article 130(1) (part) of CRD]
SYSC 14.1.29AGRP
10When determining the adequacy of its internal controls, a firm should consider both the potential risks that might hinder the achievement of the objectives listed in SYSC 14.1.28 G, and the extent to which it needs to control these risks. More specifically, this should normally include consideration of:(1) the appropriateness of its reporting and communication lines (see SYSC 3.2.2 G);(2) how the delegation or contracting of functions or activities to employees, appointed representatives
IFPRU 6.3.6GRP
Data may be deemed insufficient if, for example, it contains missing data points, or data points which contain stale data. With regard to less liquid risk factors or positions, the FCA expects the firm to make a conservative assessment of those risks, using a combination of prudent valuation techniques and alternative VaR estimation techniques to ensure there is a sufficient cushion against risk over the close-out period, which takes account of the illiquidity of the risk factor