Related provisions for MIPRU 4.2BA.18

61 - 80 of 125 items.

Search Term(s)

Filter by Topics

Filter by Modules

Filter by Documents

Filter by Keywords

Effective Period

Similar To

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

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.
BIPRU 3.3.3GRP
Regulation 22 of the Capital Requirements Regulations 2006 deals with recognition by the appropriate regulator of eligible ECAIs for exposurerisk weight purposes. Regulation 25 deals with revoking recognition.
BIPRU 3.3.4GRP
The criteria which the appropriate regulator must apply when assessing ECAIs for recognition for exposurerisk weighting purposes are set out in Regulation 22 and Schedule 1 to the Capital Requirements Regulations 2006. In making an assessment against those criteria and in carrying out the mapping process described in BIPRU 3.3.7 G to BIPRU 3.3.9 G the appropriate regulator will have regard to the approach set out in the Committee of European Banking Supervisors' "Guidelines on
BIPRU 3.3.6GRP
[deleted]1
GENPRU 1.3.2GRP
This section sets out, for the purposes of GENPRU and BIPRU14, rules and guidance as to how a firm should recognise and value assets, liabilities, exposures, equity and income statement items.
GENPRU 1.3.4RRP
Subject to GENPRU 1.3.9 R to GENPRU 1.3.10 R and GENPRU 1.3.36 R, except where a rule in GENPRU, BIPRU or INSPRU provides for a different method of recognition or valuation, whenever a rule in GENPRU or BIPRU14 refers to an asset, liability, exposure, equity or income statement item, a firm must, for the purpose of that rule, recognise the asset, liability, exposure, equity or income statement item and measure its value in accordance with whichever of the following are applicable:(1)
GENPRU 1.3.5GRP
Except where a rule in GENPRU or BIPRU makes a14 different provision, GENPRU 1.3.4 R applies whenever a rule in GENPRU or BIPRU14 refers to the value or amount of an asset, liability, exposure, equity or income statement item, including:(1) whether, and when, to recognise or de-recognise an asset or liability;(2) the amount at which to value an asset, liability, exposure, equity or income statement item; and(3) which description to place on an asset, liability, exposure, equity
GENPRU 1.3.16RRP
(1) 4When marking to market, a firm must use the more prudent side of bid/offer unless the firm is a significant market maker in a particular position type and it can close out at the mid-market price.(2) 4When calculating the current exposure value of a credit risk exposure for counterparty credit risk purposes:(a) a firm must use the more prudent side of bid/offer or the mid-market price and the firm must be consistent in the basis it chooses; and4(b) where the difference between
BIPRU 7.11.14RRP
(1) A firm may take full allowance when the value of two legs always move in the opposite direction and broadly to the same extent.(2) This will be the case in the following situations:(a) the two legs consist of completely identical instruments; or(b) a long cash position is hedged by a total rate of return swap (or vice versa) and there is an exact match between the reference obligation and the underlying exposure (i.e., the cash position).(3) The maturity of the swap itself
BIPRU 7.11.15RRP
An 80% offset may be applied when the value of two legs always move in the opposite direction and where there is an exact match in terms of the reference obligation, the maturity of both the reference obligation and the credit derivative, and the currency of the underlying exposure. In addition, key features of the credit derivative contract must not cause the price movement of the credit derivative materially to deviate from the price movements of the cash position. To the extent
BIPRU 7.11.16RRP
(1) A firm may take partial allowance when the value of two legs usually move in the opposite direction. This would be the case in the situations set out in (2) - (4).(2) The first situation referred to in (1) is that the position falls under BIPRU 7.11.16 R (2)(b) but there is an asset mismatch between the reference obligation and the underlying exposure. However, the positions meet the following requirements:(a) the reference obligation ranks pari passu with or is junior to
BIPRU 8.4.16RRP
Intra-group exposures must not be netted for the purpose of BIPRU 8.4.11 R.
BIPRU 8.4.18RRP
If a firm has an investment firm consolidation waiver, it must:(1) ensure that each CAD investment firm in the UK consolidation group or non-UK sub-group3 which is a firm3has in place systems to monitor and control the sources of capital and funding of all the members in the UK consolidation group or non-UK sub-group3;(2) notify the FCA of any serious risk that could undermine the financial stability of the UK consolidation group or non-UK sub-group3, as soon as the firm becomes
BIPRU 8.4.19GRP
Although an investment firm consolidation waiver switches off most of this chapter, a firm should still carry out the capital adequacy calculations in BIPRU 8.3 to BIPRU 8.8 as if those parts of this chapter still applied to the UK consolidation group or non-UK sub-group3 and report these to the FCA. It should also still monitor large exposure risk on a consolidated basis.
IFPRU 8.1.7GRP
The FCA will assess an application for individual consolidation against articles 9 and 396(2) (Compliance with large exposure requirements) of the UK CRR2 on a case-by-case basis. The FCA will assess whether it is still appropriate to permit the treatment if doing so risks conflict with its statutory objectives. The FCA will apply a high level of scrutiny to applications under article 9 of the UK CRR2, consistent with the previous solo consolidation regime.
IFPRU 8.1.14GRP
Article 113(6) of the UK CRR2 (Intra-group credit risk exemption) permits a firm, subject to conditions, to apply a 0% risk-weighting for exposures to certain entities within its FCAconsolidation group, namely its parent undertaking, its own subsidiaries and subsidiaries of its parent undertaking. Article 400(1)(f) of the UK CRR2 then fully exempts such exposures from the large exposures limit stipulated in article 395(1) of the UK CRR2 (Limits to large exposures).
IFPRU 8.1.21GRP
The FCA will expect a firm to which this section applies not to use any member of its core UK group (which is not a firm) to route lending or to have exposures to any third party in excess of the limits stipulated in article 395(1) of the UK CRR2 (Limits to large exposures).
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 9.6.2RRP
If an originator or sponsor fails to comply with BIPRU 9.6.1 R or BIPRU 9.6.1A R1 in respect of a securitisation, it must:(1) hold capital against all of the securitised exposures associated with the securitisation transaction as if they had not been securitised; and(2) disclose publicly:(a) that it has provided non-contractual support;1 and(b) the regulatory capital impact of doing so.[Note: BCD Article 101(2)]
BIPRU 9.6.3GRP
(1) Securitisation documentation should make clear, where applicable, that any repurchase of securitised exposures or securitisation positions by the originator or sponsor beyond its contractual obligations is not mandatory and may only be made at fair market value. In general, any such repurchase should be subject to a firm's credit review and approval process, which should be adequate to ensure that the repurchase complies with BIPRU 9.6.1 R.(2) If an originator or sponsor repurchases
BIPRU 7.2.44RRP

Table: specific risk position risk adjustments

This table belongs to BIPRU 7.2.43R.

Issuer

Residual maturity

Position risk adjustment

Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or United Kingdom5 regional governments or local authorities which would qualify for credit quality step 1 or which would receive a 0% risk weight under the standardised approach to credit risk.

Any

0%

(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or United Kingdom5 regional governments or local authorities which would qualify for credit quality step 2 or 3 under the standardised approach to credit risk.

(B) Debt securities issued or guaranteed by institutions which would qualify for credit quality step 1 or 2 under the standardised approach to credit risk.

(C) Debt securities issued or guaranteed by institution which would qualify for credit quality step 3 under BIPRU 3.4.34 R (Exposures to institutions: Credit assessment based method) or which would do so if it had an original effective maturity of three months or less.

(D) Debt securities issued or guaranteed by corporates which would qualify for credit quality step 1, 2 or 32 under the standardised approach to credit risk.

(E) Other qualifying debt securities (see BIPRU 7.2.49R)

2

Zero to six months

0.25%

over 6 and up to and including 24 months

1%

Over 24 months

1.6%

(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or United Kingdom5 regional governments or local authorities or institutions which would qualify for credit quality step 4 or 5 under the standardised approach to credit risk.

(B) Debt securities issued or guaranteed by corporates which would qualify for credit quality step 4 under the standardised approach to credit risk.

(C) Exposures for which a credit assessment by a nominated ECAI is not available.

2

Any

8%

(A) Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or United Kingdom5 regional governments or local authorities or institution which would qualify for credit quality step 6 under the standardised approach to credit risk.

(B) Debt securities issued or guaranteed by corporate which would qualify for credit quality step 5 or 6 under the standardised approach to credit risk.

(C) An instrument that shows a particular risk because of the insufficient solvency of the issuer of liquidity. This paragraph applies even if the instrument would otherwise qualify for a lower position risk adjustment under this table.

Any

12%

Note: The question of what a corporate is and of what category a debt security falls into must be decided under the rules relating to the standardised approach to credit risk.

[Note:CAD Annex I point 14 Table 1]2

BIPRU 7.2.48DRRP

Table: specific risk position risk adjustments - standardised approach

3Credit quality step

1

2

3

4 (only for credit assessments other than short-term credit assessments)

All other credit quality steps

Securitisations

1.6%

4%

8%

28%

100%

Resecuritisations

3.2%

8%

18%

52%

100%

A firm may only apply the position risk adjustments in this table where it would have to calculate a risk weighted exposure amount in accordance with the standardised approach to securitisation and resecuritisation positions if such positions were in its non-trading book under BIPRU 9. The appropriate position risk adjustment is calculated as 8% of the risk weight that would apply to the position under the standardised approach in BIPRU 9.11.2 R, subject to the requirements of BIPRU 9.9 to BIPRU 9.11, where appropriate.
BIPRU 7.2.48ERRP

Table: specific risk Position Risk Adjustments - IRB approach

3Credit Quality Step

Securitisation positions

Resecuritisation positions

Credit assessments other than short term

Short-term credit assessments

A

B

C

D

E

1

1

0.56%

0.96%

1.6%

1.6%

2.4%

2

0.64%

1.20%

2%

2%

3.2%

3

0.8%

1.44%

2.8%

2.8%

4%

4

2

0.96%

1.6%

3.2%

5.2%

5

1.60%

2.8%

4.8%

8%

6

2.8%

4%

8%

12%

7

3

4.8%

6%

12%

18%

8

8%

16%

28%

9

20%

24%

40%

10

34%

40%

52%

11

52%

60%

68%

all other unrated

100%

A firm may only apply the position risk adjustments in this table where it would have to calculate a risk weighted exposure amount in accordance with the IRB approach to securitisation and resecuritisation positions if such positions were in its non-trading book under BIPRU 9. The appropriate position risk adjustment is calculated as 8% of the risk weight that would apply to the position under the IRB approach in BIPRU 9.12.11 R, subject to the requirements in BIPRU 9.12 where appropriate.
BIPRU 7.2.48KRRP
3A securitisation exposure in the trading book that would be subject to deduction in accordance with GENPRU 2.2. (Capital resources) or to a 1250% risk weight in accordance with BIPRU 9 (Securitisation) is subject to a capital charge that is no less than that set out under those provisions, capped at the maximum possible default-risk-related loss. Unrated liquidity facilities are subject to a capital charge that is no less than that set out in BIPRU 9.
GENPRU 1.2.42BGRP
6A BIPRU firm with an IRB permission which has any material credit exposures excluded from its IRB models should also include these exposures in its stress and scenario testing to meet its obligations under the general stress and scenario testing rule. A BIPRU firm without an IRB permission,15 should conduct analyses to assess risks to the credit quality of its counterparties, including any protection sellers, considering both on and off-balance sheet exposures.
GENPRU 1.2.66GRP
There are three broad purposes of stress testing and scenario analysis. Firstly, it can be used as a means of quantifying how much capital might be absorbed if an adverse event or events occurred. As such it represents a simple ‘what if’ approach to estimating exposure to risks. This might be a proportionate approach to risk management for an unsophisticated business. Secondly, it can be used to provide a check on the outputs and accuracy of risk models; particularly, in identifying
GENPRU 1.2.69GRP
Both stress testing and scenario analyses are forward-looking analysis techniques, which seek to anticipate possible losses that might occur if an identified risk crystallises. In applying them, a firm should decide how far forward to look. This should depend upon:(1) how quickly it would be able to identify events or changes in circumstances that might lead to a risk crystallising resulting in a loss; and(2) after it has identified the event or circumstance, how quickly and effectively
GENPRU 1.2.70GRP
Where a firm is exposed to market risk, the6 time horizon over which stress tests and scenario analyses 6should be carried out will 6depend on, among other things,6 the maturity and liquidity of the positions stressed. For example, for the market risk arising from the holding of investments, this will 6depend upon:6666(1) the extent to which there is a regular, open and transparent market in those assets, which would allow fluctuations in the value of the investment to be more
BIPRU 7.10.40RRP
For interest rate risk, a VaR model must incorporate a set of risk factors corresponding to the interest rate curves in each currency in which the firm has interest rate sensitive positions. A firm must ensure that it captures the variations of volatility of rates along the yield curve. In order to achieve this, a firm must divide the yield curves of, at a minimum, the major currencies and markets in which it has material interest rate exposures into a minimum of six maturity
BIPRU 7.10.43RRP
For commodity risk, the VaR model must use a separate risk factor at least for each commodity in which the firm has material positions. The VaR model must also capture the risk of less than perfectly correlated movements between similar, but not identical, commodities and the exposure to changes in forward prices arising from maturity mismatches. It must also take account of market characteristics, notably delivery dates and the scope provided to traders to close out position
BIPRU 7.10.60RRP
The VaR model must be fully integrated into the daily risk management process of the firm, and serve as the basis for reporting risk exposures to senior management of the firm.
BIPRU 7.10.84GRP
Stress testing is a way of identifying the risk to a firm posed by a breakdown of model assumptions or by low-probability events. Where stress tests reveal unacceptable vulnerability to a given set of circumstances, a firm should take prompt steps to manage those risks appropriately, for example by hedging against the outcome or reducing the size of the firm'sexposure.
BIPRU 2.2.30GRP
A firm should assess its exposure to changes in interest rates, in particular risks arising from the effect of interest rate changes on non-trading book activities that are not captured by the CRR. In doing so, a firm may wish to use stress tests to determine the impact on its balance sheet of a change in market conditions.
BIPRU 2.2.31GRP
A firm should assess its exposure to risks transferred through the securitisation of assets should those transfers fail for whatever reason. A firm should consider the effect on its financial position of a securitisation arrangement failing to operate as anticipated or of the values and risks transferred not emerging as expected.
BIPRU 2.2.32GRP
A firm should assess its exposure to residual risks that may result from the partial performance or failure of credit risk mitigation techniques for reasons that are unconnected with their intrinsic value. This could result from, for instance, ineffective documentation, a delay in payment or the inability to realise payment from a guarantor in a timely manner. Given that residual risks can always be present, a firm should assess the appropriateness of its CRR against its assumptions
BIPRU 2.2.33GRP
A firm should assess, and monitor, in detail its exposure to sectoral, geographic, liability and asset concentrations. The appropriate regulator considers that concentrations in these areas increase a firm's exposure to credit risk. Where a firm identifies such concentrations it should consider the adequacy of its CRR.
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]
IFPRU 10.3.2RRP
(1) To calculate the weighted average in IFPRU 10.3.1 R, a firm must apply to each applicable countercyclical buffer rate its total own funds requirements for credit risk, specific risk, incremental default and migration risk that relates to the relevant credit exposures in the jurisdiction in question, divided by its total own funds requirements for credit risk that relates to all of its relevant credit exposures.(2) For the purposes of (1), a firm must calculate its total own
LR 15.2.7RRP
An applicant must have a published investment policy that contains information about the policies which the closed-ended investment fund will follow relating to asset allocation, risk diversification, and gearing, and that includes maximum exposures.
LR 15.2.8GRP
The information in the investment policy, including quantitative information concerning the exposures mentioned in LR 15.2.7 R, should be sufficiently precise and clear as to enable an investor to:(1) assess the investment opportunity;(2) identify how the objective of risk spreading is to be achieved; and(3) assess the significance of any proposed change of investment policy.
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 4.6.31GRP
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 4.6.33GRP
The FCA expects a firm to assign exposures to the risk weight category for specialised lending exposures based on the criteria set out in the tables in IFPRU 4 Annex 1G(Slotting criteria).
IFPRU 4.14.4GRP
(1) This guidance sets out the FCA's expectations for granting permission to a firm to use its own one-sided credit valuation adjustment internal models (an "internal CVA model") for the purpose of estimating the maturity factor "M", as proposed under article 162(2)(h) of the UK CRR1 (Maturity).(2) In the context of counterparty credit risk, the maturity factor "M" is intended to increase the own funds requirements to reflect potential higher risks associated with medium and long-term
IFPRU 4.14.5GRP
(1) This guidance sets out the FCA's expectations for permitting a firm with the permission to use the Internal Model Method set out in Part Three, Title II, Chapter 6, Section 6 (Internal model method) and the permission to use an internal VaR model for specific risk set out in Part Three, Title IV, Chapter 5 (Use of internal models) associated with traded debt instruments to set to 1 the maturity factor "M" defined in article 162 of the UK CRR1. (2) In the context of counterparty
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 9.7.3GRP
The guidance in BIPRU 3.3 (Recognition of ratings agencies) applies for the purposes of BIPRU 9 as it does to exposurerisk weighting in BIPRU 3, save that the reference in BIPRU 3.3 to the regulation 221 of the Capital Requirements Regulations 20061 should be read as a reference to regulation 231 of the Capital Requirements Regulations 20061 for the purposes of BIPRU 9.
BIPRU 9.7.4GRP
2Where BIPRU 9.7.2R (5) applies to securitisation positions in an ABCP programme, the firm may be granted a waiver which allows it to use the risk weight assigned to a liquidity facility in order to calculate the risk weighted exposure amount for the positions in the ABCP programme, provided that the liquidity facility ranks pari passu with the positions in the ABCP programme so that they form overlapping positions and 100% of the commercial paper issued by the ABCP programme
BIPRU 3.1.3GRP
BIPRU 3.1 sets out how a firm should calculate the credit risk capital component, which is one of the elements that make up the credit risk capital requirement under GENPRU 2.1.51 R. Part of that calculation involves calculating risk weighted exposure amounts for exposures in the firm'snon-trading book. The rest of BIPRU 3 sets out how the firm should carry out that calculation.
BIPRU 3.1.5RRP
The credit risk capital component of a firm is 8% of the total of its risk weighted exposure amounts for exposures falling into BIPRU 3.1.6 R, calculated in accordance with BIPRU 3.
APER 4.2.6GRP
3Undertaking, recommending or providing advice on transactions without a reasonable understanding of the risk exposure of the transaction to a customer falls within APER 4.2.2 G.
APER 4.2.8GRP
3Undertaking transactions without a reasonable understanding of the risk exposure of the transaction to the APER employer4 falls within APER 4.2.2 G.
BIPRU 7.9.38GRP
A firm may offset gamma and vega exposures arising from the products listed in BIPRU 7.9.37G (5) where it can demonstrate that it trades different types of interest rate-related options as a portfolio and takes steps to control the basis risk between different types of implied volatility. To the extent that this is the case an individual matrix is not required for each of the products listed in BIPRU 7.9.37G (5) and a combined scenario matrix may be used.
BIPRU 7.9.39GRP
Where it is imprudent fully to offset long-dated and short-dated vega exposure owing to the risk of non-parallel shifts in the yield curve, a firm should use an appropriate number of scenario matrices to take account of non-parallel shifts in the yield curve according to the maturity of the option or underlying.
BIPRU 7.9.43GRP
In using the scenario matrix approach, none of the steps followed will take specific account of a firm's exposure to rho risk. Where a firm can demonstrate that for interest rate-related options the rho sensitivity is effectively included in the delta sensitivities produced, there is no separate capital requirement relating to rho. For all other options except commodity options, a firm should calculate a rho sensitivity ladder by currency using its CAD 1 model and either feed