Related provisions for BIPRU 4.4.5

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BIPRU 4.3.9RRP
All material aspects of the rating and estimation processes must be approved by the firm'sgoverning body or a designated committee thereof and senior management. These parties must possess a general understanding of the firm'srating systems and detailed comprehension of its associated management reports.[Note: BCD Annex VII Part 4 point 124]
BIPRU 4.3.10GRP
(1) A firm'sgoverning body or designated committee may choose to approve only material aspects of the firm'srating systems and material changes to the firm'srating systems.(2) Where a firm'sgoverning body or designated committee chooses to approve only material aspects of the firm'srating systems and material changes to the firm'srating systems:(a) the firm'sgoverning body or designated committee should define the firm's overall approach to material aspects of rating and estimation
BIPRU 4.3.11RRP
Senior management must provide notice to the governing body or a designated committee thereof of material changes or exceptions from established policies that will materially impact the operations of the firm'srating systems.[Note:BCD Annex VII Part 4 point 125]
BIPRU 4.3.12GRP
Where the firm'srating systems are used on a unified basis for the parent undertaking and its subsidiary undertakings under BIPRU 4.2.3 R, and approval and reporting of the ratings systems are carried out at the group level, the governance requirements in BIPRU 4.3.9 R and BIPRU 4.3.11 R may be met if:(1) the subsidiary undertakings have delegated to the governing body or designated committee of the parent institution in the UK or parent financial holding company in the UK5 responsibility
BIPRU 4.3.13RRP
Senior management must have a good understanding of the rating system's designs and operations. Senior management must ensure on an ongoing basis that the rating systems are operating properly. Senior management must be regularly informed by the credit risk control units about the performance of the rating process, areas needing improvement, and the status of efforts to improve previously identified deficiencies.[Note:BCD Annex VII Part 4 point 126]
BIPRU 4.3.15RRP
The credit risk control unit must be independent from the personnel and management functions responsible for originating or renewing exposures and report directly to senior management. The unit must be responsible for the design or selection, implementation, oversight and performance of the rating systems. It must regularly produce and analyse reports on the output of the rating systems.[Note:BCD Annex VII Part 4 point 128]
BIPRU 4.3.16RRP
The areas of responsibility for the credit risk control unit(s) must include the following:(1) testing and monitoring grades and pools;(2) production and analysis of summary reports from the firm'srating systems;(3) implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas;(4) reviewing and documenting any changes to the rating process, including the reasons for the changes;(5) reviewing the rating criteria
BIPRU 4.3.17RRP
Notwithstanding BIPRU 4.3.16 R, a firm using pooled data according to BIPRU 4.3.92 R - BIPRU 4.3.94 R (Overall requirements for estimation) may outsource the following tasks:(1) production of information relevant to testing and monitoring grades and pools;(2) production of summary reports from the firm'srating systems;(3) production of information relevant to review of the rating criteria to evaluate if they remain predictive of risk;(4) documentation of changes to the rating
BIPRU 4.3.19RRP
A firm must document the design and operational details of its rating systems. The documentation must evidence compliance with the minimum IRB standards and the firm'sIRB permission, and address topics including portfolio differentiation, rating criteria, responsibilities of parties that rate obligors and exposures, frequency of assignment reviews, and management oversight of the rating process.[Note:BCD Annex VII Part 4 point 31]
BIPRU 4.3.20RRP
A firm must ensure that all documentation relating to its rating systems or otherwise required by the rules governing the IRB approach are stored, arranged and indexed in such a way that the firm would be able to make them all available to the appropriate regulator, or to make any class or description of them specified by the appropriate regulator available to the appropriate regulator, immediately on demand or within a short time thereafter.
BIPRU 4.3.25RRP
A rating system comprises all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to grades or pools (rating), and the quantification of default and loss estimates for a certain type of exposure.[Note:BCD Annex VII Part 4 point 1]
BIPRU 4.3.26RRP
If a firm uses multiple rating systems, the rationale for assigning an obligor or a transaction to a rating system must be documented and applied in a manner that appropriately reflects the level of risk.[Note:BCD Annex VII Part 4 point 2]
BIPRU 4.3.27RRP
Assignment criteria and processes must be periodically reviewed to determine whether they remain appropriate for the current portfolio and external conditions.[Note:BCD Annex VII Part 4 point 3]
BIPRU 4.3.28RRP
Where a firm uses direct estimates of risk parameters these may be seen as the outputs of grades on a continuous rating scale.[Note:BCD Annex VII Part 4 point 4]
BIPRU 4.3.29RRP
A firm must have robust systems in place to validate the accuracy and consistency of rating systems, processes, and the estimation of all relevant risk parameters (PD, LGD, conversion factors and EL). A firm must be able to demonstrate to the appropriate regulator that the internal validation process enables it to assess the performance of internal rating and risk estimation systems consistently and meaningfully.[Note:BCD Annex VII Part 4 point 110]
BIPRU 4.3.30RRP
(1) A firm must validate its rating systems. Its validation process must include, as a minimum, the elements set out in (2) - (8).(2) A firm must establish and define standards of objectivity, accuracy, stability and conservatism that it designs its ratings systems to meet. It must have processes that establish whether its rating systems meet those standards.(3) A firm must establish and define standards of accuracy of calibration (i.e. whether outcomes are consistent with estimate)
BIPRU 4.3.32GRP
The approach to validation may vary with the significance of the exposures covered by a rating system.
BIPRU 4.3.34GRP
(1) This paragraph sets out guidance on assessing the adequacy of a rating system's discriminative power (see BIPRU 4.3.30 R (3) on the meaning of discriminative power).(2) A firm should be able to explain the performance of its rating systems against its chosen measure (or measures) of discriminative power. In making this comparison a firm should rely primarily on actual historic default experience where this is available. In particular, a firm should be able to explain:(a) the
BIPRU 4.3.35RRP
A firm must also use other appropriate quantitative validation tools and comparisons with relevant external data sources. The analysis must be based on data that is appropriate to the portfolio, is updated regularly, and covers a relevant observation period. A firm's internal assessments of the performance of its rating systems must be based on as long a period as possible.[Note:BCD Annex VII Part 4 point 112]
BIPRU 4.3.36RRP
The methods and data used for quantitative validation must be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) must be documented.[Note:BCD Annex VII Part 4 point 113
BIPRU 4.3.38RRP
Internal audit or another comparable independent auditing unit must review at least annually the firm'srating systems and its operations, including the operations of the firm and the estimation of PDs, LGDs, ELs and conversion factors. Areas of review must include adherence to all applicable minimum requirements.[Note:BCD Annex VII Part 4 point 131]
BIPRU 4.3.43RRP
A firm must have specific definitions, processes and criteria for assigning exposures to grades or pools within a rating system.[Note:BCD Annex VII Part 4 point 17 (part)]
BIPRU 4.3.44RRP
The grade or pool definitions and criteria must be sufficiently detailed to allow those charged with assigning ratings consistently to assign obligors or facilities posing similar risk to the same grade or pool. This consistency must exist across lines of business, departments and geographic locations within each rating system.[Note:BCD Annex VII Part 4 point 17 (part)]
BIPRU 4.3.45GRP
In meeting BIPRU 4.3.44 R a firm should have regard to its application to each rating system.
BIPRU 4.3.49GRP
(1) This paragraph contains guidance on BIPRU 4.3.43 R and more general guidance about the governance of rating systems.(2) In determining the assignment referred to in BIPRU 4.3.43 R, a firm should have regard to the sensitivity of the rating to movements in fundamental risk drivers.(3) A firm should, for any rating system, be able to demonstrate that it acts appropriately or has an appropriate policy, as applicable, with respect to:(a) any deficiencies caused by its not being
BIPRU 4.3.50RRP
For grade and pool assignments a firm must document the situations in which human judgement may override the inputs or outputs of the assignment process and the personnel responsible for approving these overrides. A firm must document these overrides and the personnel responsible. A firm must analyse the performance of the exposures whose assignments have been overridden. This analysis must include assessment of the performance of exposures whose rating has been overridden by
BIPRU 4.3.51RRP
(1) This paragraph applies to the use of statistical models and/or other mechanical methods to assign exposures to obligor grades, obligor pools, facility grades or facility pools.(2) A firm must be able to demonstrate to the appropriate regulator that the model has good predictive power and that capital requirements are not distorted as a result of its use.(3) The input variables to the model must form a reasonable and effective basis for the resulting predictions. The model
BIPRU 4.3.52GRP
(1) This paragraph contains guidance on BIPRU 4.3.51 R (7).(2) BIPRU 4.3.51 R (7) does not require that each individual assignment of an exposure to a pool or grade should be the subject of an open-ended review by reference to factors not covered by the model if:(a) that is not necessary in order to meet the requirements of BIPRU 4 about the ability of the rating system to predict and to discriminate (as referred to in BIPRU 4.3.29 R to BIPRU 4.3.30 R (Validation of internal estimates));
BIPRU 4.3.54RRP
A firm must collect and store data on aspects of its internal ratings as required under BIPRU 11 (Disclosure).[Note:BCD Annex VII Part 4 point 36]
BIPRU 4.3.55GRP
A firm should ensure that IT systems relevant to the operation of its rating systems are sound and robust. A firm's IT systems should provide rapid availability of databases and appropriate archiving. Adequate controls should be in place to prevent unauthorised changes to data being made. Contingency processes and plans should be in place to deal with events of system failure. A firm should document work-flows and procedures related to data collection and storage.
BIPRU 4.3.87GRP
A firm should be able to demonstrate to the appropriate regulator:(1) how, with respect to each rating system, both assignment of ratings and estimates of PD, LGD and conversion factors are affected by:(a) movements in the economic cycle; and(b) other cyclical effects which are material to levels of default, loss or the amount of exposures at default for the exposures covered by the rating system; and(2) the level of conservatism inherent in its ratings, as provided for by BI
BIPRU 4.3.89GRP
Estimation of PD through the use of a technique set out in BIPRU does not remove the need to make conservative adjustments, where necessary, related to the expected range of estimation errors so that capital requirements produced by the relevant model or other rating system are not understated.
BIPRU 4.3.92RRP
If a firm uses data that is pooled across institutions it must be able to demonstrate to the appropriate regulator that:(1) the rating systems and criteria of other firms in the pool are similar to its own;(2) the pool is representative of the portfolio for which the pooled data is used; and(3) the pooled data is used consistently over time by the firm for its permanent estimates.2[Note:BCD Annex VII Part 4 point 57]
BIPRU 4.3.94RRP
If a firm uses data that is pooled across institutions it remains responsible for the integrity of its rating systems. If a firm uses such data it must be able to demonstrate to the appropriate regulator that it has sufficient in-house understanding of its rating systems, including effective ability to monitor and audit the rating process.[Note:BCD Annex VII Part 4 point 58]
BIPRU 4.3.95RRP
(1) If:(a) a firm's internal experience of exposures of a type covered by a model or other rating system is 20 defaults or fewer; and(b) in the firm's view, reliable estimates of PD cannot be derived from external sources of default data, including the use of market price related data, for all the exposures covered by the rating system;the firm must estimate PD for exposures covered by that rating system in accordance with this rule.(2) A firm must use a statistical technique
BIPRU 4.3.96GRP
A firm may if appropriate also choose to use the approach in BIPRU 4.3.91 G if the internal experience on exposures covered by a rating system is greater than 20 defaults.
BIPRU 4.3.103RRP
A firm must use LGD estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver constant realised LGDs by grade or pool over time, a firm must make adjustments to its estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn.[Note:BCD Annex VII Part 4 point 74]
BIPRU 4.3.127RRP
A firm must use conversion factor estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised conversion factors at a constant level by grade or pool over time, a firm must make adjustments to its estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn.[Note:BCD Annex VII Part 4 point 88]
IFPRU 4.6.1GRP
'Rating philosophy' describes the point at which a rating system sits on the spectrum between the stylised extremes of a point in time (PiT) rating system and a through-the-cycle (TTC) rating system. To explain these concepts:(1) PiT: a firm seeks to explicitly estimate default risk over a fixed period, typically one year. Under such an approach, the increase in default risk in a downturn results in a general tendency for migration to lower grades. When combined with the fixed
IFPRU 4.6.2GRP
Most rating systems sit between these two extremes. Rating philosophy is determined by the cyclicality of the drivers/criteria used in the rating assessment and should not be confused with the requirement for grade level PDs to be "long run". The calibration of even the most PiT rating system needs to be targeted at the long run default rates for its grades; the use of long run default rates does not convert such a system into one producing TTC ratings or PDs
IFPRU 4.6.3GRP
A firm should understand where its rating systems lie on the PiT/TTC spectrum to enable it to estimate how changes in economic conditions will affect its IRB own funds requirements and it should be able to compare the actual default rates incurred against the default rate expected over the same period given the economic conditions pertaining, as implied by its PD estimate.
IFPRU 4.6.4GRP
The term "variable scalar" is used to describe approaches in which the outputs of an underlying, relatively PiT, rating system are transformed to produce final PD estimates used for regulatory capital requirements that are relatively non-cyclical. Typically, this involves basing the resulting requirement on the long run default rate of the portfolio or its segments.
IFPRU 4.6.5GRP
Article 169(3) of the UK CRR1 allows the use of direct estimates of PDs, although such a measure could be assessed over a variety of different time horizons which the EU CRR does not specify. Accordingly, the FCA considers that it acceptable in principle to use methodologies of this type in lieu of estimation of long-run averages for the grade/pool/score of the underlying rating system, where the following conditions are met. Meeting these conditions requires a firm using the
IFPRU 4.6.6GRP
The FCA will not permit a firm using a variable scalar approach to revert to using a PiT approach during more benign economic conditions.
IFPRU 4.6.7GRP
Principle 1 (in IFPRU 4.6.5 G) is the most important and challenging to achieve as it requires an ability to be able to distinguish movements not related to the economic cycle, from changes purely related to the economic cycle, and not to average these away. This is because a variable scalar approach removes the ability of a rating system to take account automatically of changes in risk through migration between its grades.
IFPRU 4.6.9GRP
The FCA considers that, until more promising account level arrears data is collected, enabling firms to better explain the movement in their arrears rate over time, the likelihood of firms being able to develop a compliant variable scalar approach for non-mortgage retail portfolios is low. This is because of the difficulty that firms have in distinguishing between movements in default rates that result from cyclical factors and those that result from non-cyclical reasons for these
IFPRU 4.6.11GRP
The FCA considers that one variable scalar approach, potentially compliant with the four principles in IFPRU 4.6.5 G, could involve:(1) segmenting a portfolio by its underlying drivers of default risk; and(2) estimating separate long-run default rates for each of these segmented pools.
IFPRU 4.6.12GRP
A firm that applied the segmentation approach properly could satisfy both Principle 1 and Principle 4 (IFPRU 4.6.5 G). The choice of the basis of segmentation and the calibration of the estimated long-run default rate for the segments would both be of critical importance.
IFPRU 4.6.14GRP
To the extent that the basis of segmentation is not sufficient completely to explain movements in non-cyclical default risk, the long-run default rate for that segment will not be stable (eg, a change in the mix of the portfolio within the segment could change the long-run default rate). In such cases, the FCA would expect a firm to make a conservative compensating adjustment to the calibration of the long-run average PD for the affected segments and be able to demonstrate that
IFPRU 4.6.15GRP
The FCA expects a firm to review and amend as necessary the long run default rate to be applied to each segment on a regular (at least an annual) basis. When reviewing the long run default rate to be applied to each segment, the FCA expects a firm to consider the extent to which:(1) realised default rates are changing due to cyclical factors and the scaling factors needs to be changed;(2) new information suggests that both the PiT PDs and the long run PDs should be changed; and(3)
IFPRU 4.6.16GRP
The FCA expects that, over time, the actual default rates incurred in each segment would form the basis of PD estimates for the segments. However, at the outset, the key calibration issue is likely to be the setting of the initial long-run default rate for each segment, as this will underpin the PD of the entire portfolio for some years to come. A firm should apply conservatism in this area and this is something on which the FCA is likely to focus on in model reviews.
IFPRU 4.6.17GRP
A firm should put in place a governance process to provide a judgemental overlay to assess its choices of segments, PD estimates and scalars, both initially and on a continuing basis. Moreover, where the basis of its estimation is a formulaic approach, the FCA considers that the act of either accepting or adjusting the estimate suggested by the formula would represent the exercise of judgement.
IFPRU 4.6.19GRP
The FCA expects a firm to consider the following issues when seeking to apply a variable scalar approach for UK mortgages:(1) in respect of Principle 2 (IFPRU 4.6.5 G), the commonly used Council for Mortgage Lenders database was based on arrears data and not defaults during a period, and the use of these data without further analysis and adjustment can undermine the accuracy of any calculations; and(2) in respect of Principle 3 (IFPRU 4.6.5 G), the historical data time period
IFPRU 4.6.20GRP
The FCA expects a firm that is including mortgage arrears data as a proxy for default data to:(1) carry out sensitivity analysis identifying the circumstances in which the assumption that arrears may be used as a proxy for default would produce inaccuracy in long-run PD estimates;(2) set a standard for what might constitute a potentially significant level of inaccuracy, and demonstrate why, in practice, the use of this proxy would not result in any significant inaccuracy;(3) establish
IFPRU 4.6.21GRP
When using historical mortgage data as a key input into variable scalar models, the FCA expects a firm to:(1) carry out sensitivity analysis identifying the implications of using different cut-off dates for the start of the reference data set; and(2) justify the appropriateness of its choice of cut-off date.
IFPRU 4.6.22GRP
Where a firm has not chosen to apply the definition of default at the level of an individual credit facility in accordance with article 178(1) of the UK CRR1, the FCA expects it to ensure that the PD associated with unsecured exposures is not understated as a result of the presence of any collateralised exposures.
IFPRU 4.6.23GRP
The FCA expects the PD of a residential mortgage would typically be lower than the PD of an unsecured loan to the same borrower (see article 178(1) of the UK CRR1).
IFPRU 4.6.24GRP
Where a firm chooses to apply the definition of default at the level of an individual credit facility, in accordance with article 178(1) of the UK CRR1, and a customer has defaulted on a facility, then default on that facility is likely to influence the PD assigned to that customer on other facilities. The FCA expects a firm to take this into account in its estimates of PD (see article 178(1) of the UK CRR1).
IFPRU 4.6.25GRP
To ensure that a rating system provides a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk, the FCA expects a firm to develop country-specific mid-market PD models. Where a firm develops multi-country mid-market PD models, the FCA expects the firm to be able to demonstrate that the model rank orders risk and predicts default rates for each country where it is to be used for own funds requirements calculation.
IFPRU 4.6.26GRP
The FCA expects a firm to have challenging standards in place to meaningfully assess whether a model rank orders risk and accurately predict default rates. These standards should specify the number of defaults that are needed for a meaningful assessment to be done.
IFPRU 4.6.28GRP
In the FCA's view, a model is not likely to be compliant where the firm cannot demonstrate that it rank orders risk and predicts default rates for each country, regardless of any apparent conservatism in the model.
IFPRU 4.6.31GRP
The FCA expects a firm to estimate PD for a rating system in line with this section where the firm's internal experience of defaults for that rating system was 20 defaults or fewer, and reliable estimates of PD cannot be derived from external sources of default data, including the use of market price-related data. In PD estimation for all exposures covered by the rating system, the FCA expects the firm to:(1) use a statistical technique to derive the distribution of defaults implied
IFPRU 4.6.32GRP
The FCA expects a firm to take into account only defaults that occurred during periods that are relevant to the validation under the UK CRR1 of the model or other rating system in question when determining whether there are 20 defaults or fewer.
IFPRU 4.4.3GRP
A firm should establish quantified and documented targets and standards, against which it should test the accuracy of data used in its rating systems. Such tests should cover:(1) a report and accounts reconciliation, including whether every exposure has a PD, LGD and, if applicable, conversion factor for reporting purposes;(2) whether the firm's risk control environment has key risk indicators for the purpose of monitoring and ensuring data accuracy;(3) whether the firm has an
IFPRU 4.4.4GRP
In respect of data inputs, the testing for accuracy of data (including the reconciliation referred to above) should be sufficiently detailed so that, together with other available evidence, it gives reasonable assurance that data input into the rating system is accurate, complete and appropriate. The FCA considers that input data fails to meet the required standard if it gives rise to a serious risk of material misstatement in the own funds requirement either immediately or s
IFPRU 4.4.7GRP
For the FCA to be satisfied that a firm documents its ratings systems appropriately, in accordance with article 144(1)(e) of the UK CRR1, it would expect a firm to be able to demonstrate that it has an appropriate policy for any ratings system in relation to:(1) any deficiencies caused by its not being sensitive to movements in fundamental risk drivers or for any other reason;(2) the periodic review and action in the light of such review;(3) providing appropriate internal guidance
IFPRU 4.4.10GRP
To demonstrate that rating systems provide for meaningful assessment, the FCA expects that a firm's documentation relating to data should include clear identification of responsibility for data quality. A firm should set standards for data quality, aim to improve them over time and measure its performance against those standards. Furthermore, a firm should ensure that its data is of high enough quality to support its risk management processes and the calculation of its own funds
IFPRU 4.4.13GRP
To estimate PDs that are long run averages of one-year default rates for obligor grades or pools, the FCA expects a firm to estimate expected default rates for the grade/pool over a representative mix of good and bad economic periods, rather than simply taking the historic average of default rates actually incurred by the firm over a period of years. The FCA expects that a long run estimate would be changed when there is reason to believe that the existing long run estimate is
IFPRU 4.4.14GRP
To demonstrate compliance with article 144(1) of the UK CRR1, the FCA expects a firm to take into account the following factors in understanding differences between their historic default rates and their PD estimates, and in adjusting the calibration of their estimates as appropriate:(1) the rating philosophy of the system and the economic conditions in the period over which the defaults have been observed;(2) the number of defaults, as a low number is less likely to be representative
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 UK CRR1).
BIPRU 4.2.2RRP
A firm's systems for the management and rating of credit risk exposures must be sound and implemented with integrity and, in particular, they must meet the following standards in accordance with the minimum IRB standards:(1) the firm'srating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk;(2) internal ratings and default and loss estimates used
BIPRU 4.2.4GRP
(1) This guidance sets out the basis on which a firm may rely upon a rating system or data provided by another member of its group.(2) A firm may rely upon a rating system or data provided by another member of its group if the following conditions are satisfied:(a) the firm only does so to the extent that it is appropriate, given the nature and scale of the firm's business and portfolios and the firm's position within the group;(b) the group is an banking and investment group9;(c)
BIPRU 4.2.5GRP
(1) This paragraph provides guidance on BIPRU 4.2.2 R and in particular BIPRU 4.2.2 R (1).(2) The information that a firm produces or uses for the purpose of the IRB approach should be reliable and take proper account of the different users of the information produced (customers, shareholders, regulators and other market participants).(3) A firm should establish quantified and documented targets and standards, against which it should test the accuracy of data used in its rating
BIPRU 4.2.8GRP
This paragraph provides further guidance on BIPRU 4.2.2 R and in particular BIPRU 4.2.2 R (2). In the appropriate regulator's view risk management has an essential role in informing risk decisions. However, an essential role does not necessarily mean an exclusive role or even always a primary role. There may be justifiable differences between the IRB approach and the firm's use of rating systems for its internal purposes as referred to in BIPRU 4.2.2 R (2). For example, internal
BIPRU 4.2.11RRP
A firm must be able to demonstrate that it has been using for the IRB exposure classes in question rating systems that were broadly in line with the minimum IRB standards for internal risk measurement and management purposes for at least three years prior to the date of its IRB permission.[Note:BCD Article 84(3)]
BIPRU 4.2.12GRP
In meeting the experience requirement under BIPRU 4.2.11 R, the appropriate regulator would expect a firm to be able to demonstrate that it has been:(1) operating an internal rating system with estimates of PD;(2) meeting the standards in BIPRU 4 for senior management knowledge and reporting; and(3) meeting the standards in BIPRU 4 relating to the use of rating systems in its business;for the required minimum 3 year period.
BIPRU 4.2.14GRP
In meeting the experience requirement under BIPRU 4.2.13 R, the appropriate regulator would expect a firm to be able to demonstrate that it has been:(1) operating an internal rating system with estimates of LGD and with conversion factors; and(2) compliant with BIPRU 4.2.11 R as applied to the advanced IRB approach.for the required minimum 3 year period.
BIPRU 4.2.15GRP
In the appropriate regulator's view the standard required by BIPRU 4.2.11 R and BIPRU 4.2.13 R is for a rating system to be improved in the light of experience during the three year period so that it meets the minimum requirements more fully for the last year than for the two prior years, provided that the rating system has not changed so profoundly that experience from the first or second years becomes of marginal relevance in assessing the reliability of the changed rating
BIPRU 4.2.26RRP
(1) To the extent that its IRB permission permits this, a firm permitted to use the IRB approach in the calculation of risk weighted exposure amounts and expected loss amounts3 for one or more IRB exposure classes may apply the standardised approach in accordance with this rule.3(2) A firm may apply the standardised approach to the IRB exposure class referred to in BIPRU 4.3.2 R (1) (Sovereigns) where the number of material counterparties is limited and it would be unduly burdensome
BIPRU 4.4.6RRP
A rating system must take into account obligor and transaction risk characteristics.[Note: BCD Annex VII Part 4 point 5]
BIPRU 4.4.7RRP
A rating system must have an obligor rating scale which reflects exclusively quantification of the risk of obligor default. The obligor rating scale must have a minimum of seven grades for non-defaulted obligors and one for defaulted obligors.[Note:BCD Annex VII Part 4 point 6]
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 4.4.15RRP
Assignments and periodic reviews of assignments must be completed or approved by an independent party that does not directly benefit from decisions to extend the credit.[Note:BCD Annex VII Part 4 point 26]
BIPRU 4.4.21RRP
In addition to complying with the material in BIPRU 4.3.54 R (Data maintenance) a firm must collect and store:(1) complete rating histories on obligors and recognised guarantors;(2) the dates the ratings were assigned;(3) the key data and methodology used to derive the rating;(4) the person responsible for the rating assignment;(5) the identity of obligors and exposures that defaulted;(6) the date and circumstances of such defaults;(7) data on the PDs and realised default rates
BIPRU 4.4.27RRP
To the extent that a firm uses data on internal default experience for the estimation of PDs it must be able to demonstrate in its analysis that the estimates are reflective of underwriting standards and of any differences in the rating system that generated the data and the current rating system. Where underwriting standards or rating systems have changed, a firm must add a greater margin of conservatism in its estimate of PD.[Note:BCD Annex VII Part 4 point 63]
BIPRU 4.4.48RRP
1If a firm'sIRB permission provides for it to use the advanced IRB approach for the calculation of LGDs, its rating system must incorporate a distinct facility rating scale which exclusively reflects LGD related transaction characteristics.[Note:BCD Annex VII Part 4 point 9]
BIPRU 4.4.49RRP
1A facility grade means for the purpose of the advanced IRB approach a risk category within a rating system's facility scale to which exposures are assigned on the basis of a specified and distinct set of rating criteria from which own estimates of LGDs are derived. The grade definition must include both a description of how exposures are assigned to the grade and of the criteria used to distinguish the level of risk across grades.[Note:BCD Annex VII Part 4 point 10]
IFPRU 4.10.1GRP
The FCA expects a firm to have a validation process that includes the following:(1) standards of objectivity, accuracy, stability and conservatism that it designs its ratings systems to meet and processes that establish whether its rating systems meet those standards;(2) standards of accuracy of calibration (ie, whether outcomes are consistent with estimates) and discriminative power (ie, the ability to rank-order risk) that it designs its rating systems to meet and processes
IFPRU 4.10.2GRP
In IFPRU 4.10.1 G:(1) developmental evidence means evidence that substantiates whether the logic and quality of a rating system (including the quantification process) adequately discriminates between different levels of, and delivers accurate estimates of, PD, EL, LGD and conversion factors (as applicable); and(2) process verification means the process of establishing whether the methods used in a rating system to discriminate between different levels of risk and to quantify
IFPRU 4.10.3GRP
The FCA expects a firm to be able to explain the performance of its rating systems against its chosen measure (or measures) of discriminative power. In making this comparison, a firm should rely primarily on actual historic default experience where this is available. In particular, the FCA expects a firm to be able to explain the extent of any potential inaccuracy in these measures, caused, in particular, by small sample size and the potential for divergence in the future, whether
IFPRU 4.10.4GRP
The FCA will take into consideration the sophistication of the measure of discrimination chosen when assessing the adequacy of a rating system's performance.
IFPRU 4.10.5GRP
In the case of a portfolio for which there is insufficient default experience to provide any confidence in statistical measures of discriminative power, the FCA expects a firm to use other methods. For example, analysis of whether the firm's rating systems and an external measurement approach (eg, external ratings) rank common obligors in broadly similar ways. Where such an approach is used, the FCA would expect a firm to ensure it does not systematically adjust its individual
IFPRU 4.3.5GRP
Prior to reliance being placed by a firm on a rating system or data provided by another member of the group, the FCA expects the proposed arrangements to have been explicitly considered, and found to be appropriate, by the governing body of the firm.
IFPRU 4.3.6GRP
If a firm uses a rating system or data provided by another group member, the FCA would expect the firm'sgoverning body to delegate those functions formally to the persons or bodies that are to carry them out.
IFPRU 4.3.8GRP
(1) Where the firm's rating systems are used on a unified basis under article 20(6) of the UK CRR2, the FCA considers that the governance requirements in article 189 of the UK CRR2 can only be met if the subsidiaries have delegated to the governing body or designated committee of the UK parent institution, UK parent financial holding company or UK parent mixed financial holding company2 responsibility for approval of the firm's rating systems.(2) The FCA expects an appropriate
IFPRU 4.3.10GRP
(1) The FCA may permit the exemption of exposures to sovereigns and institutions under article 150(1)(a) and (b) of the UK CRR3 respectively only if the number of material counterparties is limited and it would be unduly burdensome to implement a rating system for such counterparties.(2) The FCA considers that the 'limited number of material counterparties' test is unlikely to be met if for the UK group total outstandings to 'higher risk' sovereigns and institutions exceed either
IFPRU 4.3.17GRP
The FCA expects a firm to ensure that all documentation relating to its rating systems (including any documentation referenced in this chapter or required by the UK CRR3 that relate to the IRB approach) is stored, arranged and indexed in such a way that it could make them all, or any subset thereof, available to the FCA immediately on demand or within a short time thereafter.
IFPRU 4.5.1GRP
The FCA expects that if a firm ordinarily assigns exposures in the corporate, institution or central government and central bank exposure classes to a member of a group, substantially on the basis of membership of that group and a common group rating, and the firm does so in the case of a particular obligor group, the firm should consider whether members of that group should be treated as a single obligor for the purpose of the definition of default in article 178(1) of the UK
IFPRU 4.5.2GRP
The FCA would not expect a firm to treat an obligor as part of a single obligor under IFPRU 4.5.1 G if the firm rates its exposures on a standalone basis or if its rating is notched. (For these purposes, a rating is notched if it takes into account individual risk factors or otherwise reflects risk factors that are not applied on a common group basis.) Accordingly, if a group has two members which are separately rated, the FCA will not expect that the default of one will necessarily
IFPRU 4.15.1GRP
For purposes of repurchase transactions and securities lending or borrowing transactions, the FCA does not consider that there are any core market participants apart from those entities listed in article 227(3) of the UK CRR1.
IFPRU 4.11.16GRP
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
IFPRU 4.11.17GRP
The FCA expects that a firm will be compliant with the validation requirements only where1it can demonstrate in respect of the calibration that:11(1) observed default rate versus PD is considered at grade level and across a range of economic environments (ie, as long as period as possible);(2) where the PD does not relate to a pure point-in-time estimate, either the PD or the observed default rate is transformed such that comparison between the two is meaningful. This transformation
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 4.1.24GRP
An IRB permission will set out firm-specific material. This will generally include:(1) details about the firm's methodology for carrying out the IRB approach, including the models and rating systems that a firm should use;(2) reporting requirements; and(3) requirements about internal control structure.
BIPRU 4.6.6RRP
Rating systems must reflect both obligor and transaction risk, and must capture all relevant obligor and transaction characteristics.[Note:BCD Annex VII Part 4 point 13]
BIPRU 4.6.18RRP
In addition to complying with BIPRU 4.3.54 R (Data maintenance) a firm must collect and store:(1) data used in the process of allocating exposures to grades or pools;(2) data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures;(3) the identity of obligors and exposures that defaulted;(4) for defaultedexposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD
BIPRU 8.8.9GRP
The governance arrangements that apply to the governing body, the senior management and any designated committee of a firm in relation to the IRB approach also apply to the body or persons with equivalent powers with respect to the UK consolidation group or non-UK sub-group4. Where the parent undertaking and its subsidiary undertakings use rating systems on a unified basis, the approval and reporting process described in BIPRU 4.3.12 G (Approval and reporting arrangements for
BIPRU 11.6.1RRP
A firm calculating risk weighted exposure amounts in accordance with the IRB approach must disclose the following information:(1) the scope of the firm'sIRB permission;(2) an explanation and review of:(a) the structure of internal rating systems and relation between internal and external ratings;(b) the use of internal estimates other than for calculating risk weighted exposure amounts in accordance with the IRB approach;(c) the process for managing and recognising credit risk
IFPRU 4.12.10GRP
Notification under IFPRU 4.12.1 G should include sufficient information to enable the FCA to assess whether the possible reduction in RWEA which would be achieved by the securitisation is justified by a commensurate transfer of credit risk to third parties. The FCA expects this to include the following:(1) details of the securitisation positions, including rating, exposure value and RWEA broken down by securitisation positions sold and retained;(2) key transaction documentation
BIPRU 4.5.11GRP
(1) If a firm applies for an IRB permission or for a variation of an IRB permission that permits the treatment in BIPRU 4.5.10 R it should demonstrate that its standards exceed those of the slotting criteria provided for in BIPRU 4.5 and result in ratings that are stronger than the benchmarks referred to in (3).(2) If a firm has an IRB permission that permits the treatment in BIPRU 4.5.10 R it should continue to be able to demonstrate the matters in (1) to the appropriate regulator
IFPRU 6.3.27GRP
The price/spread change model used to capture the profit and loss impact of migration should calibrate spread changes to long-term averages of differences between spreads for relevant ratings. These should either be conditioned on actual rating events, or using the entire history of spreads regardless of migration. Point-in-time estimates are not considered acceptable, unless they can be shown to be as conservative as using long-term averages.
IFPRU 4.8.19GRP
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.
BIPRU 4.8.3RRP
For retail exposure that are purchased receivables, the grouping referred to in BIPRU 4.6.9 R must reflect the seller's underwriting practices and the heterogeneity of its customers.
FEES 3.2.7RRP

Table of application, notification, vetting and other fees payable to the FCA32

31

31Part 1: Application, notification and vetting fees

31(1) Fee payer

(2) Fee payable (£)37

Due date

(a) Any applicant for Part 4A permission (including an incoming firm applying for top-up permission) whose fee is not payable pursuant to sub- paragraph (zza)52 of this table

26

(1) Unless (2),41 (3) or (4)41 applies, in1 respect of a particular application, the highest of the tariffs set out in FEES 3 Annex 1 part 11 which apply to that application.

When both (A) and (B) apply, 50% of the tariff payable under (1):34

(2) 50% of the tariff payable under (1) is payable when either (a) or (b) apply:

(a) the application is one referred to in paragraph p; or

(b) the application is a limited permission case under .

(A) the application only involves a simple change of legal status as set out in FEES 3 Annex 1 part 6; and34

(B) the application is:34

(i) a straightforward case under paragraph 2(d) or 3(g) of FEES 3 Annex 1;

(ii) a moderately complex case under paragraph 2(e) or 3(h) of FEES 3 Annex 1; or

(iii) a limited permission case under paragraph 3(i) of FEES 3 Annex 1.

(3) If the applicant applies for registration under article 8(1) of the MCD Order at the same time as applying for a Part 4A permission, the fee payable is the higher of: 80

(i) the fee otherwise payable in (1) or (2); and 80

(ii) the fee payable in FEES 3 Annex 10AR. 80

(4) No fee is payable if the applicant satisfies the criteria set out in FEES 4 Annex 2BR(5)(a).41

18034343434

On or before the application is made

(aa) A person who makes an application under section 24A of the Consumer Credit Act 1974 which meets the conditions of article 31 (Applications for a standard licence where no determination made before 1 April 2014) of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013 (the “relevant application”)30

As (a) above less any amount paid to the Office of Fair Trading in relation to the relevant application.

Within 30 days of the date of the invoice.

(b) [deleted]56

4

(c) Any applicant for a certificate under article 54 of the Regulated Activities Order

2,000

On or before the application is made

(d) Applicants for an authorisation order for, or recognition under section 272 of the Act27 of, a collective investment scheme

FEES 3 Annex 2R, part 227

27

On or before the application is made

(da) Applicants for the authorisation of an AIF as a LTIF58

36

FEES 3 Annex 2R, part 2A36

On or before the date the application is made36

(e) The management company27 of a scheme making a notification under section 264 of the Act

2727

FEES 3 Annex 2R, part 327

27

On or before the date the application is made28

28(ea)

(i) A non-UK AIFM56 (with a branch in the UK) notifying the FCA of its intention to market an AIF in the UK under regulation 5956 of the AIFMD UK regulation

(ii) An AIFM notifying the FCA of its intention to market an AIF in the UK under regulation 58 or 59 of the AIFMD UK regulation

FEES 3 Annex 2 R, part 4

On or before the date the notification is made

28(eb) An applicant for registration on the register of small registered UK AIFM which the FCA is required to maintain under regulation 10 of the AIFMD UK regulation

£750

On or before the date the application is made

(f) Any person seeking an order under section 326(1) of the Act to become a designated professional body.

10,000

30 days after the order is granted

(g) Any applicant for recognition as a UK recognised body:62

(i) under section 287 of the Act; or62

(ii) under regulation 2(1) of the RAP regulations6256

17781717

FEES 3 Annex 3, part 1

On or before the date the application is made26

(ga) [deleted]52

26353535

(h) Any applicant for recognition as an ROIE78 under section 287 or section 292 of the Act

7878

FEES 3 Annex 3, part 2

On or before the date the application is made

(i) [deleted]35

35		 35 35

(j) [deleted]38

38

38

(k) [deleted]35

35		 35 35

(l) [deleted]38

38

72

38

(m) [deleted]38

38

72

38

(n) Applicants to be added to the list of designated investment exchanges

50,000

On or before the date the application is made

2(o) In relation to a BIPRU firm, a firm applying to the FCA29 for permission to use one of the advanced prudential calculation approaches listed in FEES 3 Annex 6 R (or guidance on its availability), including any future proposed amendments to those approaches.56

1122952978295782929295557829295782929297829295

(1) Unless5 (2) applies, FEES 3 Annex 6.5

(2) (a) Unless5 (b) applies a1firm submitting a second application for the permission or5guidance described in column (1) within 12 months of the first application (where the fee was paid in accordance with (1)) must pay 50% of the fee applicable to it under FEES 3 Annex 6, but only in respect of that second application

(b) No fee is payable by a firm in relation to a successful application for a permission5 based on a minded to grant decision in respect of the same matter following a complete application for guidance in accordance with prescribed submission requirements.1

56

5251255578578552

Where the firm has made an application directly to the FCA29, on or before the date the application is made, otherwise within 30 days after the FCA29 notifies the firm that its EEA parent's Home State regulator has requested assistance.229

27829782978

29(oa) Either:

(i) a firm applying to the 37FCA

for permission to use one of the internal approaches listed in FEES 3 Annex 6A (or guidance on its availability), including any future proposed amendments to those approaches or (in the case of any application being made for such permission to the 37FCA

as consolidating supervisor under the UK CRR5856) any firm making such an application; or

(ii) in the case of an application to the consolidating supervisor other than the 37FCA

for the use of the IRB approach and the consolidating supervisor requesting the 37FCA's

assistance in accordance with the UK CRR58, any firm to which the 37FCA would have to apply any decision to permit the use of that approach.

3737373737

(1) Unless (2) applies, FEES 3 Annex 6A.

(2) (a) Unless (b) applies a firm submitting a second application for the permission or guidance described in column (1) within 12 months of the first application (where the fee was paid in accordance with (1)) must pay 50% of the fee applicable to it under FEES 3 Annex 6A, but only in respect of that second application.

(b) No fee is payable by a firm in relation to a successful application for a permission based on a minded to grant decision in respect of the same matter following a complete application for guidance in accordance with prescribed submission requirements.

(c) No fee is payable where the consolidating supervisor has requested the assistance described in paragraph (oa)(ii) of column 1.

37

Where the firm has made an application directly to the 37FCA , on or before the date the application is made, otherwise within 30 days after the 37FCA notifies the firm that its EEA parent's consolidating supervisor has requested assistance.

3737

(p) A firm applying for a variation of its Part 4A permission whose fee is not payable pursuant to sub- paragraphs 64(zza)52 or (zzh) 64 of this table

26

(1) Unless (2), (2A), (3), (3A), (3B), (3C), (3D) or 3(E)44 applies, if the proposed new1 business of the firm would1 fall within one or more activity groups specified in Part 1 of FEES 4 Annex 1AR not applicable before the application1, the fee is 50% of the highest of the tariffs set out in FEES 3 Annex 1R37 which apply to that application.

(2) Subject to (2A) below, if the firm's application includes an application for a Part 4A permission to carry on a new credit-related regulated activity, the fee is 50% of the highest of the tariffs set out in FEES 3 Annex 1R37

that would be payable under (1) above or, if higher, 50% of the highest of the tariffs set out in FEES 3 Annex 1R37

that would be payable in relation to the new credit-related regulated activity30.37

(2A) If an applicant which already has a Part 4A permission to carry on a credit-related regulated activity exclusively applies for a Part 4A permission to carry on a new credit-related regulated activity, that is specified in Part 3 of FEES 3 Annex 1R37

in the straightforward category (or if it exclusively applies for a number of such permissions), the fee is £25030.37

(3) If the firm is in the A.1 fee-block at the date of the application and the variation involves adding any of the regulated activities of meeting of repayment claims or managing dormant account funds (including the investment of such funds), the fee is 50% of the fee in FEES 3 Annex 1 R that applies to that application11

(3A) If the applicant had a limited permission prior to the application to vary its Part 4A permission, 100% of the highest of the tariffs set out in FEES 3 Annex 1R37

which apply to that application30.37

(3B) If the applicant has a limited permission and its application exclusively relates to another limited permission, the fee is 030

(3C) If the applicant applies for registration under article 8(1) of the MCD Order at the same time as it applies for a variation of its Part 4A permission, the fee is the highest of the fees set out in FEES 3 Annex 10AR and the amount otherwise payable in (1), (2), (2A), (3), (3A) or (3B), or (4).80

(3D) No fee is payable if the applicant satisfies the criteria set out in FEES 4 Annex 2BR(5)(a).41

(4) 11 In all other cases, other than applications by credit unions, the fee payable is 250 for firms which are not, or are not seeking to become, a PRA-authorised person, and 125 for firms which are, or are seeking to become, a PRA-authorised person,78 unless the variation involves only the reduction (and no other increases) in the scope of a Part 4A permission in which case no fee is payable.1

(3E) The fee is 12,500 if the firm applying:44

(i) is an MTF operator and the proposed new business of the firm is to be an OTF operator; or44

(ii) is an OTF operator and the proposed new business of the firm is to be an MTF operator.44

308041308080178783778378080371373030233737371137

On or before the date the application is made

30(pa) A person who makes an application under section 30(1) of the Consumer Credit Act 1974 which meets the conditions of article 33 (Variations at request of licensee where no determination made before 1 April 2014) of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013 (the “relevant variation application”)

As (a) or 31(p) above, less any amount paid to the Office of Fair Trading in relation to the relevant variation application.

Within 30 days of the date of the invoice.

2(q) [deleted]38

77137913797722227

38

38

333

2(r) [deleted]46

 66 566

5(s) In the case of an insurance business transfer scheme, a transferor.

Note - for the purpose of this paragraph an insurance business transfer scheme consists of a single transferor and a single transferee. Where however such a scheme is part of a single larger scheme, that larger scheme is treated as a single insurance business transfer scheme. If an insurance business transfer scheme includes more than one transferor in accordance with this paragraph, the transferors are liable to pay the fee under column (2) jointly.

Either (1) or (2) as set out below:

(1) In the case of an insurance business transfer scheme involving long term insurance business, 20,00059; or

(2) in the case of an insurance business transfer scheme not involving long term insurance business, 12,500.59

777737377777377737

On or before any application is made for the appointment of a person as an independent expert.

37

6(t) [deleted]46

20

(u) [deleted]34

34		 34 34

(v) [deleted]38

2222

38

38

[deleted]35

35		 35 35

(x)[deleted]38

38

388

8(y) An applicant for authorisation as an authorised payment institution under regulation 5 of the Payment Services Regulations

The highest of the tariffs set out in FEES 3 Annex 8 which apply to that application.

Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 Part 6, the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 8R.47

On or before the date the application is made.

47(ya) An applicant for registration as an account information service provider under regulation 17 of the Payment Services Regulations.

47FEES 3 Annex 8R, paragraph (2)(i).

Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 Part 6, the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 8R.

47On or before the date the application is made.

(z) An application by a small payment institution for authorisation as an authorised payment institution because regulation 16 47 of the Payment Services Regulations applies

The highest of the tariffs set out in FEES 3 Annex 8R which apply to that application.

On or before the date the application is made.

(za) An applicant for registration as a small payment institution under regulation 13 47 of the Payment Services Regulations

FEES 3 Annex 8R, paragraph (1). Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 R Part 6, the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 8R.

On or before the date the application is made.

(zb) An authorised payment institution applying to vary its authorisation under regulation 5 47 of the Payment Services Regulations.

(1) If50 prior to the variation the authorised payment institution is authorised to carry on any one or more of the payment services falling50 within paragraph (f), 47 (g) or (h) of Part 1 of Schedule 1 to the Payment Services Regulations and the authorised payment institution is applying to extend its authorisation to include any one or more of the payment services in (a) to (e)50, the fee is 50% of the highest of the tariffs set out in FEES 3 Annex 8R which apply to that application.

(2) Where the authorised payment institution50 already has authorisation to provide payment services within any one or more of paragraphs (a) to (e) of Part 1 of Schedule 1 to the Payment Services Regulations and wishes to add one or more other services in (a) to (f);50

the fee payable is £47250 irrespective of the number of agents it has.

50(3) Where the authorised payment institution already has authorisation to provide payment services within any one or more of paragraphs (a) to (f) of Part 1 of Schedule 1 to the Payment Services Regulations and wishes to add one or both of the services in (g) and (h) the fee payable is £750, irrespective of the number of agents it has.

(4)50 In cases where the variation involves only the reduction (and no increases) of the types of payment services to be carried on after the variation, no fee is payable.

4747474747

On or before the date the application is made.

(zc) A small payment institution applying to vary its registration under regulation 13 47 of the Payment Services Regulations

(1)The 47 fee is 50% of the tariff 47set out in FEES 3 Annex 8R, paragraph (1). 47

(2) 47 In cases where the variation involves only the reduction (and no increases) of the types of payment services to be carried on after the variation, no fee is payable.

4747

On or before the date the application is made.

(zd)

47		 47

[deleted]47

(ze) Any person to which the Special Project Fee for restructuring applies under FEES 3 Annex 9.12

12

Special Project Fee for restructuring in accordance with FEES 3 Annex 9 .

30 days of the date of the invoice.9

(zf) [deleted]78

78		 78 91678

16(zg) An applicant for authorisation as an authorised electronic money institution under regulation 5 of the Electronic Money Regulations.

The amount set out in FEES 3 Annex 10 R. Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 R Part 6, the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 10 R.

On or before the date the application is made.

16(zh) An applicant for registration as a small electronic money institution under regulation 12 of the Electronic Money Regulations.

The amount set out in FEES 3 Annex 10 R. Where an application only involves a simple change of legal status as set out in FEES 3 Annex 1 R Part 6, the fee payable is 50% of the tariff that would otherwise be payable in FEES 3 Annex 10 R.

On or before the date the application is made.

16(zi) An application by a small electronic money institution for authorisation as an authorised electronic money institution14because regulation 16 of the Electronic Money Regulations applies.

The amount set out in FEES 3 Annex 10 R.

On or before the date the application is made.

16(zj) An authorised electronic money institution applying to vary its authorisation under regulation 8 of the Electronic Money Regulations.

50(1) Subject to (2) below, the fee is 50% of the tariff for an electronic money institution authorisation application set out in FEES 3 Annex 10R.

50(2) Where the authorised electronic money institution applies to vary its permission so as to be able to provide one or both of the payment services in paragraphs (g) and (h) of Part 1 of Schedule 1 to the Payment Services Regulations the fee payable is £750.

On or before the date the application is made.

16(zk) A small electronic money institution applying to vary its registration under regulation 12 of the Electronic Money Regulations.

The amount set out in FEES 3 Annex 10 R.

On or before the date the application is made.

15(zl) An applicant for recognition as an accredited body.

2,500

On or before the date the application is made.18

18(zm) An issuer applying for registration of a regulated covered bond.

(1) Unless (2) or (3)41 applies, 45,000.

(2) In the case of a proposed covered bond or programme where the assets in the asset pool will consist primarily of UK residential mortgages, 25,000.

(3) No fee is payable if the issuer satisfies the criteria set out in FEES 4 Annex 2BR(5)(b).41

On or before the date the application is made.

18(zn) An issuer who proposes to make a material change to the contractual terms of a regulated covered bond under RCB 3.5.4 D.

(1) Unless (2) applies 6,500.41

(2) No fee is payable if the issuer satisfies the criteria set out in FEES 4 Annex 2BR(5)(c).41

On or before the date the notification under RCB 3.5.4 D is made.21

21(zo) In the case of persons in respect of which the FCA has given notice of its intention to take, or appoint a competent person to take, any steps under CONRED 2.5.12R, either:

(i) a Firm (as defined in CONRED 2.1.1R(1); or

(ii) a person falling within CONRED 2.1.2R(1).

An amount equal to:

(1) a sum determined by the number of hours, or part of an hour, taken by the FCA in relation to work conducted in taking steps under recorded on the FCA's systems, multiplied by the rate in FEES 3 Annex 9 (11)R; or

(2) any amount invoiced to the FCA by a competent person in relation to any work carried out by that competent person in connection with its appointment by the FCA under CONRED 2.5.12R.

Within 30 days of the date of the invoice.

78(zp) A person in respect of which the FCA37 has given notice of its intention to itself appoint a skilled person to provide it with a report pursuant to section 166(3)(b) of the Act and SUP 5.2.

37

Any amount invoiced to the FCA37 by a skilled person in relation to any work carried out by that skilled person in connection with its appointment by the FCA37 pursuant to section 166(3)(b) of the Act.

37

Within 30 days of the date of the invoice.

78(zq) A person in respect of which the FCA37 has given notice of its intention to itself appoint a skilled person to collect or update information pursuant to section 166A(2)(b) of the Act .

37

Any amount invoiced to the FCA37 by a skilled person in relation to any work carried out by that skilled person in connection with its appointment by the FCA 37 pursuant to section 166A(2)(b) of the Act.

3737

Within 30 days of the date of the invoice.33

33(zr) [deleted]38

38

38

30(zs) Applicant for FCA permission for an agreement to be enforced under section 28A(3)(a) and/or money paid or property transferred under and agreement to be retained under 3128A(3)(b) of the Act

(1) If the application is for permission for an agreement to be enforced under section 28A(3)(a) of the Act and for permission for money paid or property transferred under an agreement to be retained under section 28A(3)(b) of the Act, the fee is 31£3,500 per type of agreement specified in the application.30

(2) If the application is for permission for an agreement to be enforced under section 28A(3)(a) of the Act only, the fee is £3,500 per type of agreement specified in the application.31

(3) If the application is for permission for money paid or property transferred under an agreement to be retained under section 28A(3)(b) of the Act only, the fee is £3,500 per type of agreement specified in the application.31

Where there are a number of agreements of the same type, only one fee is payable in respect of those agreements. A number of agreements are of the same type when those agreements are entered into on the same terms and conditions.

On or before the date the application is made.

(zt) An applicant for registration in the Financial Services Register under article 8(1) of the MCD Order. 80

Unless (1), or (2) applies, the fee as set out in FEES 3 Annex 10A. 80

(1) If the applicant is applying for a Part 4A permission at the same time as it applies for registration under article 8(1) of the MCD Order, the fee payable in row (a), column (2) paragraph (3) of this Table. 80

(2) If the applicant is applying for a variation of a Part 4A permission at the same time as it applies for registration under article 8(1) of the MCD Order, the fee payable in row (p), column 2 paragraph (3)(c) of this Table. 80

On or before the application is made.80

(zu)40 Any person to which the Designated Credit Reference Agencies and Finance Platform42 Fee applies under FEES 3 Annex 10B.

39

Designated Credit Reference Agencies and Finance Platform42 Fee in accordance with FEES 3 Annex 10B.

Within 30 days of the date of the invoice.

43(zv) Any firm that meets the test in FEES 3 Annex 10C(1)R(1) (PPI campaign fees).

The amount set out in FEES 3 Annex 10C(1) R(2).

Within 30 days of the date of the invoice.

45(zw) An applicant for authorisation under regulation 7 of the DRS Regulations, or the operator of a trading venue seeking verification of their compliance with the DRS Regulations 6349 under regulation 8 of those regulations 63 or an applicant for variation of an authorisation under regulation 12 of the DRS Regulations.

63

Either (1), (2), or (3) applies as set out below:

(1) If the applicant is applying for permission to operate one data reporting service, 5,000.

(2) If the applicant is applying for permission to operate more than one data reporting services, 50% of the fee at (1) for each additional service plus the fee at (1).

(3) If the applicant is applying for variation of an authorisation, 50% of the fee at (1) for each additional service.

On the date the application is made.

46(zx) (1) Unless (2) applies any person applying to connect to the market data processor system to make transaction reports directly to the FCA under MiFIR.

(2) If a person has previously applied as stated in (zx)(1) above and has been connected then no further fee is payable for any further such applications.

1) 20,00063

On the date the application is made

46(zy) (1) Subject to (2) and (3) below, any person applying to connect to the market data processor system to provide markets data (other than transaction reports) under MAR 1056.

(2) If a person has previously applied as stated in (zy)(1) above and has been connected then no further fee is payable for any further such applications in relation to reporting the same data.

(3) If a person has previously applied as stated in (zy)(1) above and makes a further application in relation to the provision of different data then a separate fee is payable for such application.

49

10,0006356

On the date the application is made.

51(zz) an applicant for registration under regulation 14 of the Risk Transformation Regulations as a protected cell company.

500

On or before the date the application is made.

52(zza) An application for authorisation as a regulated benchmark administrator.

The highest of the applicable tariffs set out in FEES 3 Annex 1R.

Where an applicant intends to administer benchmarks falling into different complexity groupings, it will pay one fee only, for the highest category applied for. If, once authorised, a regulated benchmark administrator notifies the FCA of its intention to administer other/additional benchmarks no further application fee is payable (even if the other/additional benchmark falls into a higher complexity category).

On the date the application is made.

52(zzb) An application for recognition of an administrator in accordance with article 32 of the benchmarks regulation.

5,000

On the date the application is made.

52(zzc) An application for endorsement of a benchmark or family of benchmarks in accordance with article 33 of the benchmarks regulation.

1,500

On the date the application is made.

54(zzd) applications for claims management companies

(1) £1,200 for claims management companies with annual turnover of up to and including £1,000,000; and

(2) £10,000 for claims management companies with annual turnover of over £1,000,000.

Firms which already have Part 4A permissions and are applying to vary their permissions will

receive a 50% reduction in the relevant fee.

On the date the application is made.

55(zze) An application for authorisation as a third party verifier

(1) Unless (2) applies, 1,500.

(2) Firms which already have Part 4A permissions will not receive a 50% reduction in the authorisation fee.

On the date the application is made.

61(zzf) UK-based applicants for registration as a trade repository; a securitisation repository, or a third country applicant seeking recognition as a trade repository.

5,000

Applicants for registration as a trade repository who already hold registration as a securitisation repository, or vice versa, will receive a 50% discount on the relevant application fee.

Applicants for registration as a trade repository to carry on activity for the purposes of UK SFTR who already hold registration as a trade repository under EMIR or vice versa, will receive a 50% discount on the relevant application fee.

On the date the application is made.

61(zzg) UK-based applicants for registration as a credit rating agency or a third country applicant seeking certification as a credit rating agency.

The fee set out in FEES 3 Annex 13R.

On the date the application is made.

64(zzh) Permission for

(1) carrying on funeral plan distribution;

(2) carrying out a funeral plan contract as provider; or

(3) carrying out a funeral plan contract as provider and entering as provider into a funeral plan contract.

(1) The highest of the tariffs set out in FEES 3 Annex 1R part 3A which apply to that application, subject to (2) and (3) below.

(2) Unless (3) below applies, where an applicant was carrying out any of the activities referred to in (zzh)(1)-(3) on 1 September 2021, and makes an application for permission for any of those activities after 1 November 2021, the application fees shall be:

(a) £3,500 for (zzh)(1) or zzh(2);

(b) £14,000 for (zzh)(3).

(3) If an applicant which already has any of the permissions referred to in (zzh) applies to vary its permission, the application fees shall be:

(a) £500 for (zzh)(1);

(b) £1,250 for (zzh)(2); and

(c) £5,000 for (zzh)(3).

On or before the application is made.

32Part 2: UKLA38 fees

(1) Fee payer

(2) Fee payable

(3) Due date

(a)

(i) An issuer which has not made public its annual financial report before the latest time specified in DTR 4.1.3 R.

(ii) An issuer which has not made public its half-yearly financial report before the latest time specified in DTR 4.2.2 R (2).

FEES 3 Annex 12R38

Within 30 days of the date of the invoice.

38(b) An applicant for approval as a sponsor.

FEES 3 Annex 12R

On or before the date the application is made.

38(c) For the purposes of48 the listing rules:48

(i)48 an issuer requesting approval of a document arising in relation to a specific event or transaction, which is not a significant transaction or a super transaction; or48

48(ii) an issuer or person applying for eligibility for listing of its securities.

FEES 3 Annex 12R

On or before the date that relevant document is first submitted to the FCA.

38(d) Under the Prospectus Rules or the Prospectus Regulation60, an issuer or a person requesting approval or review of a document arising in relation to a specific event or transaction, which is not a significant transaction or a super transaction.

FEES 3 Annex 12R

On or before the date that relevant document is first submitted to the FCA.

38(e) An issuer requesting the approval or review of a document in connection with a super transaction.

FEES 3 Annex 12R

On or before the date that relevant document is first submitted to the FCA.

38(f) An issuer requesting the approval or review of a document in connection with a significant transaction.

FEES 3 Annex 12R

On or before the date that relevant document is first submitted to the FCA.

38(g) A person who requests the FCA’s approval of a document that includes a mineral expert’s report and who is a fee payer under one or more of the categories (c), (d), (e), and (f) above must additionally pay a fee under this category.

FEES 3 Annex 12R

On or before the date that relevant document is first submitted to the FCA.

38(h) An applicant for approval as a primary information provider.

FEES 3 Annex 12R

On or before the date the application is made.

[Note:Guidance on how a firm liable to pay a fee under both rows (s) and (ze) of this table for the same transaction should expect to be treated is set out in FEES 3 Annex 11 G.]19