Related provisions for BIPRU 2.3.11
1 - 20 of 160 items.
This section represents merely an indication of the matters to which the appropriate regulator will have regard in considering an application for 2an intra-group liquidity modification. In considering such an application, the appropriate regulator will always take into account anything that it reasonably considers to be relevant for the purposes of assessing whether the statutory tests in section 138A of the Act are met. In doing so, it will have regard to the role and importance
In relation to an applicant firm wishing to rely on liquidity support from a parent undertaking constituted under the law of a country or territory outside the United Kingdom, the appropriate regulator will ordinarily expect to reach agreement with the authority that regulates that undertaking for liquidity purposes in a number of areas, including agreement that:(1) it will notify the appropriate regulator of any material or persistent breaches by that undertaking of that authority's
In relation to an applicant firm wishing to rely on liquidity support from a parent undertaking constituted under the law of a country or territory outside the United Kingdom, the appropriate regulator will, before granting an intra-group liquidity modification, ordinarily expect to have reached agreement with that parent undertaking that:(1) it will make available liquidity resources at all times to that applicant firm if needed;(2) it will enter into an undertaking in a suitable
The appropriate regulator also anticipates that an intra-group liquidity modification would be made subject to a number of ongoing conditions and requirements. These are likely to include:(1) the appropriate regulator receiving annual confirmation from the authority that regulates an applicant firm'sparent undertaking for liquidity purposes that it remains satisfied with the arrangements in respect of that undertaking for liquidity supervision and their operation; and(2) an annual
In assessing the adequacy of an ILAS BIPRU firm's liquidity resources, the appropriate regulator draws on more than just a review of the submitted ILAA, or in the case of a simplified ILAS BIPRU firm, the submitted ILSA. Use is made of wider supervisory knowledge of a firm and of wider market developments and practices. When forming a view of the individual liquidity guidance to be given to an ILAS BIPRU firm, the appropriate regulator will also consider the regulator’s firm risk
As part of the SLRP, the appropriate regulator will give a standard ILAS BIPRU firmindividual liquidity guidance advising it of the amount and quality of liquidity resources which the appropriate regulator considers are appropriate, having regard to the liquidity risk profile of that firm. In giving individual liquidity guidance, the appropriate regulator will also advise the firm of what it considers to be a prudent funding profile for the firm. In giving the firmindividual liquidity
The appropriate regulator will ordinarily not expect to give individual liquidity guidance to a simplified ILAS BIPRU firm. However, if after review of such a firm'sILSA, the appropriate regulator is not satisfied that the simplified buffer requirement delivers an adequate amount and quality of liquidity resources for that firm, having regard to its liquidity risk profile, the appropriate regulator will issue the firm with individual liquidity guidance and may also consider revoking
Following an internal validation process, the appropriate regulator will write to the standard ILAS BIPRU firm whose ILAA it has reviewed, providing both quantitative and qualitative feedback on the results of the appropriate regulator's assessment. This letter will notify that firm of the individual liquidity guidance that the appropriate regulator considers appropriate together with its reasons for concluding that such guidance is appropriate. The appropriate regulator will
The appropriate regulator will examine any deviation on its own facts and will always want to understand clearly the reasons for that deviation and the firm's plans for remedying it. Deviation is, however, likely to prompt a re-examination by the appropriate regulator of the firm's compliance, and likely future compliance, with threshold conditions. The appropriate regulator will have regard to the information provided by the firm and to any other relevant factors in assessing
As part of the appropriate regulator's enquiry into the reasons for a firm's deviation, or expected deviation, from its individual liquidity guidance or, as the case may be, its simplified buffer requirement, the appropriate regulator may ask for further assessments and analyses of a firm's liquidity resources and the risks faced by the firm. The appropriate regulator may consider the use of its powers under section 166 of the Act to assist in such circumstances.
The Act (section
1L) requires the FCA to "maintain
arrangements for supervising authorised persons". Section 1K of the Act also requires the FCA to
provide general guidance about
how it intends to advance its operational objectives in discharging its general
functions in relation to different categories of authorised
person or regulated activity.
One purpose of this guidance is
to discharge the duties of the FCA set
out in sections 1L and 1K of the Act.
The FCA's approach to
The design of these arrangements
is shaped by the FCA'sstatutory objectives in relation to the
conduct supervision of2firms as
well as the prudential supervision of firms not
supervised by the PRA. These
objectives are set out in Chapter 1 of the Act.
The FCA has one strategic objective: ensuring that the relevant
markets function well. In discharging its general functions, the FCA must, so far as is reasonably possible,
act in a way which is compatible with its strategic
objective
(1) In designing its approach to supervision,
the FCA has regard to the regulatory
principles set out in section 3B of the Act.
In particular, the FCA's regulatory
approach aims to focus and reinforce the responsibility of the senior management
of each firm (section 3B(1)(d)
of the Act) to ensure that it
takes reasonable care to organise and control the affairs of the firm responsibly and effectively, and develops
and maintains adequate risk management systems. It is the responsibility
When considering the use of this power to deal with a particular concern, the FCA will have regard to the range of regulatory tools that are available. The FCA will consider dealing with any concerns informally through discussion and agreement with the firm and the SMF manager, instead of using the own-initiative variation of approval power.
The circumstances which will lead to a condition or time limitation being imposed on a candidate for an SMF manager role will, where appropriate, also lead to an existing SMF manager’s approval being varied. SUP 10C is therefore relevant to the FCA’s use of the own-initiative variation of approval power.
This chapter sets out the FCA's3 approach to the supervision of recognised bodies and contains guidance on: 3(1) the arrangements for investigating complaints about recognised bodies made under section 299 of the Act (Complaints about recognised bodies) (REC 4.4); (2) the FCA's3approach to the exercise of its powers under:3(a) (for RIEs)2section 296 of the Act (Appropriate regulator's3 power to give directions) 4or (for RAPs) regulation 3 of the RAP regulations5 to give directions
The FCA's3 general approach to supervision is intended to ensure that:3(1) the FCA3 has sufficient assurance that recognised bodies continue at all times to satisfy the recognised body requirements; and2132(2) the FCA's3 supervisory resources are allocated, and supervisory effort is applied, in ways which reflect the actual risks to the regulatory objectives. 3
The Companies Act 1989 also gives the FCA1 powers to supervise the taking of action under default rules. Under section 166 of the Companies Act 1989 (Powers of the appropriate regulator1 to give directions) (see REC 4.5.4 G), the FCA1 may direct a UK RIE1to take, or not to take, action under its default rules. Before exercising these powers the FCA1 must consult the UK RIE.1 The FCA1 may also exercise these powers if a relevant office-holder applies to it under section 167 of
The Companies Act 1989: section 166
The FCA1 may issue a "positive" direction (to take action) under section 166(2)(a) of the Companies Act 1989: 1 |
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Where in any case a [UK RIE] has not taken action under its default rules- if it appears to [the FCA] that it could take action, [the FCA may direct it to do so,1 1 |
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but under section 166(3)(a) of the Companies Act 1989: |
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Before giving such a direction the [FCA] shall consult the [UK RIE] in question; and [the FCA] shall not give a direction unless [the FCA] is satisfied, in the light of that consultation that failure to take action would involve undue risk to investors or other participants in the market, or that the direction is necessary having regard to the public interest in the financial stability of the United Kingdom, or that the direction is necessary to facilitate a proposed or possible use of a power under Part 1 of the Banking Act 2009 or in connection with a particular exercise of a power under that Part.1 1 |
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The FCA1 may issue a "negative" direction (not to take action) under section 166(2)(b) of the Companies Act 1989: 1 |
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Where in any case a [UK RIE] has not taken action under its default rules - if it appears to the [FCA] that it is proposing to take or may take action, [the FCA] may direct it not to do so.1 1 |
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but under section 166(3)(b) of the Companies Act 1989: |
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Before giving such a direction the [FCA] shall consult the [UK RIE] in question; and the [FCA] shall not give a direction unless [the FCA] is satisfied, in the light of that consultation that the taking of action would be premature or otherwise undesirable in the interests of investors or other participants in the market, or that the direction is necessary having regard to the public interest in the financial stability of the United Kingdom, or that the direction is necessary to facilitate a proposed or possible use of a power under Part 1 of the Banking Act 2009 or in connection with a particular exercise of a power under that Part.1 1 |
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Under section 166(6) of the Companies Act 1989, a negative direction cannot be given if, in relation to the defaulter, either:(1) a bankruptcy order or an award of sequestration of the defaulter's estate has been made, or an interim receiver or interim trustee has been appointed; or (2) a winding-up order has been made, a resolution for voluntary winding-up has been passed or an administrator, administrative receiver or provisional liquidator has been appointed; and any previous
Under section 166(7) of the Companies Act 1989, where a UK RIE has taken action either of its own accord or in response to a direction, the FCA may direct it to do or not to do specific things subject to these being within the powers of the UK RIE under its default rules. However,11(1) 1where the UK RIE is acting in accordance with a direction given by the FCA to take action under section 166(2)(a) of the Act on the basis that failure to take action would involve undue risk to
The VaR model review process may be conducted through a series of visits covering various aspects of a firm's control and IT environment. Before these visits the appropriate regulator may ask the firm to provide some information relating to the firm'sVaR model permission request accompanied by some specified background material. The VaR model review visits are organised on a timetable that allows the firm being visited sufficient time to arrange the visit and provide the appropriate
As part of the process for dealing with an application for a VaR model permission the following may be reviewed: organisational structure and personnel; details of the firm's market position in the relevant products; revenue and risk information; valuation and reserving policies; operational controls; information technology systems; model release and control procedures; risk management and control framework; risk appetite and limit structure; future developments relevant to model
Where backtesting reveals severe problems with the basic integrity of the VaR model, the appropriate regulator may withdraw model recognition. In particular, if ten or more backtesting exceptions are recorded in a 250 business day period, the appropriate regulator may apply a plus factor greater than one or the appropriate regulator may consider revoking a firm'sVaR model permission. The appropriate regulator may also consider revoking a firm'sVaR model permission if ten or more
The minimum multiplication factor, for VaR and stressed VaR,3 will never be less than three. If the appropriate regulator does set the minimum multiplication factor, for VaR and stressed VaR,3 above three the VaR model permission will have a table that sets out the reasons for that add on and specify how much of the add on is attributable to each reason (see BIPRU 7.10.121R). If there are weaknesses in the VaR model that may otherwise be considered a breach of the minimum standards
Typically, any add on will be due to a specific weakness in systems and controls identified during the appropriate regulator's review that the appropriate regulator does not consider material enough to justify withholding overall model recognition. The firm will be expected to take action to address the reasons for any add on. The appropriate regulator will then review these periodically and, where satisfactory action has been taken, the add on will be removed through a variation
If a firm ceases to meet any of the requirements set out in BIPRU 7.10, the appropriate regulator's policy is that the VaR model permission should cease to have effect. In part this will be achieved by making it a condition of a firm'sVaR model permission that it complies at all times with the minimum standards referred to in BIPRU 7.10.26R - BIPRU 7.10.53R. Even if they are not formally included as conditions, the appropriate regulator is likely to consider revoking the VaR model
Under section 296 of the Act (FCA's4 power to give directions)5 and (for RAPs) under regulation 3 of the RAP regulations,6 the FCA4 has the power to give directions to a recognised body to take specified steps 1in order to secure its compliance with the recognised body requirements. In the case of a UK RIE (including one which operates a RAP)65those steps may include granting the FCA4 access to the UK RIE's premises for the purposes of inspecting those premises or any documents
The FCA4 is likely to exercise its power under section 296 of the Act or regulation 3 of the RAP regulations65if it considers that:43(1) there has been, or was likely to be, a failure to satisfy one or more of the recognised body requirements31which has serious consequences; (2) compliance with the direction would ensure that 1one or more of the recognised body requirements is3 satisfied; and(3) the recognised body is capable of complying with the direction.
Under section 298(7) of the Act (Directions and revocation: procedure), 5 the FCA4 need not follow the consultation procedure set out in the rest of section 298 (see REC 4.8) or may cut short that procedure, if it considers it reasonably necessary to do so. For RAPs, the FCA need not follow the procedure set out in regulation 5 of the RAP regulations or may cut short the procedure, if it considers it essential to do so.6534444
The FCA will
adopt a pre-emptive approach which will be based on making forward-looking
judgments about firms' business
models, product strategy and how they run their businesses, to enable the FCA to identify and intervene earlier to
prevent problems crystallising. The FCA's approach
to supervising firms will contribute
to its delivery against its objective to protect and enhance the integrity
of the UK financial system (as
set out in the Act). Where the FCA has responsibilities
(1) The FCA intends
to communicate the outcomes of its supervisory work1 to each firm within an appropriate time frame. In
the case of firms in which risks
have been identified which could have a material bearing on the FCA meeting its statutory
objectives, the FCA will
also outline a remedial programme intended to address these.(2) The FCA considers
that it would generally be inappropriate for a firm to
disclose its FCA risk assessment
to third parties, except to those who have
While respecting each regulator's
different statutory objectives and
mandates, in undertaking its supervisory activity the FCA will
co-ordinate and co-operate with the PRA as
required and necessary in the interests of the effective and efficient supervision
of regulated firms and individuals.
Both regulators will coordinate with each other as required under the Act, including on the exchange of information
relevant to each regulator's individual objectives. However, the FCA and
4As well as potentially breaching the requirements in this section, misleading statements by a firm may involve a breach of Principle 7 (Communications with clients) or section Part 7 (Offences relating to financial services) of the Financial Services Act 2012, as well as giving rise to private law actions for misrepresentation.
If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in GENPRU 3.2.3 G,1 the methods set out in MIFIDPRU or 6the UK provisions which implemented the5CRD and UK CRR45 will apply. Alternatively, 6the FCA5 may apply other methods that ensure appropriate supervision of the UK regulated entities5 in that third-country group in accordance with the aims of supplementary supervision in GENPRU 35 or consolidated
If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in GENPRU 3.2.3 G, the FCA5 may, rather than take the measures described in GENPRU 3.2.4 G, apply, by analogy, the provisions concerning supplementary supervision in GENPRU 35 or, as applicable, consolidated supervision under the applicable UK prudential sectoral legislation, to the UK regulated entities5 in the banking sector, CRR investment services
If the Part 4A permission of a firm contains a requirement obliging it to comply with this rule with respect to a third-country financial conglomerate of which it is a member, it must comply, with respect to that third-country financial conglomerate, with the rules in Part 1 of GENPRU 3 Annex 2, as adjusted by Part 3 of that annex.
If the Part 4A permission of a firm contains a requirement obliging it to comply with this rule with respect to a third-country banking and investment group of which it is a member, it must comply, with respect to that third-country banking and investment group, with the rules in Part 2 of GENPRU 3 Annex 2, as adjusted by Part 3 of that annex.
As the approval of the appropriate regulator6 is not required under the Act for a new controller of an overseas firm, the notification rules on such firms are less prescriptive than they are for UK domestic firms. Nevertheless, the appropriate regulator6 still needs to monitor such an overseas firm's continuing satisfaction of the threshold conditions, which normally includes consideration of a firm's connection with any person, including its controllers and parent undertakings
As part of the appropriate regulator's6 function of monitoring a firm's continuing satisfaction of the threshold conditions, the appropriate regulator6 needs to consider the impact of any significant change in the circumstances of one or more of its controllers, for example, in their financial standing and, in respect of corporate controllers, in their governing bodies. Consequently, the appropriate regulator6 needs to know if there are any such changes. SUP 11.8 therefore requires
Similarly, the appropriate regulator6 needs to monitor a firm's continuing satisfaction of the6threshold conditions6 set out in paragraphs 3B, 4F and 5F of Schedule 6 to the Act (as applicable) (in relation to threshold conditions for which the FCA is responsible,6 see COND 2.32), which requires that a firm's close links are not likely to prevent the appropriate regulator's6 effective supervision of that firm. Accordingly the appropriate regulator6 needs to be notified of any
The FCA3 will usually consider revoking a recognition order if:3(1) the recognised body is failing or has failed to satisfy 2one or more of the recognised body requirements1and that failure has or will have serious consequences; or2(2) it would not be possible for the recognised body to comply with a direction under section 296 of the Act (FCA's3 power to give directions) or (for RAPs) regulation 3 of the RAP regulations5; or342(3) for some other reason, it would not be appropriate
The FCA3 would be likely to consider the conditions in REC 4.7.3 G (2) or REC 4.7.3 G (3) to be triggered1in the following circumstances:31(1) the recognised body appears not to have the resources or management to be able to organise its affairs so as to satisfy one or more of the recognised body requirements; or212(2) the recognised body does not appear to be willing to satisfy one or more of the recognised body requirements; or212(3) the recognised body is failing or has failed
In addition to the relevant 1factors set out in REC 4.7.4 G, the FCA3 will usually consider that it would not be able to secure an ROIE's3 compliance with the recognition requirements or other obligations in or under the Act by means of a direction under section 296 of the Act, if it appears to the FCA3 that the ROIE3 is prevented by any change in the legal framework or supervisory arrangements to which it is subject in its home territory from complying with the recognition requirements
In complying with Principle 11, the FCA4 considers that a firm should, in relation to the discharge by the FCA4 of its functions under the Act:(1) make itself readily available for meetings with representatives or appointees of the FCA4 as reasonably requested;(2) give representatives or appointees of the FCA4 reasonable access to any records, files, tapes or computer systems, which are within the firm's possession or control, and provide any facilities which the representatives
(1) A firm must take reasonable steps to ensure that each of its suppliers under material outsourcing arrangements deals in an open and cooperative way with the FCA in the discharge of its functions under the Act in relation to the firm.6(2) The requirement in (1) does not apply to a regulated benchmark administrator where the material outsourcing arrangements relate to the carrying on of the regulated activity of administering a benchmark.64
The cooperation that a firm is expected to procure from such suppliers is similar to that expected of the firm, in the light of the guidance in SUP 2.3.3 G to SUP 2.3.4 G, but does not extend to matters outside the scope of the FCA's4 functions in relation to the firm. SUP 2.3.5 R (2) also requires a firm to take reasonable steps regarding access to the premises of such suppliers.
When a firm appoints or renews the appointment of a supplier under a material outsourcing arrangement, it should satisfy itself that the terms of its contract with the supplier require the supplier to give the FCA4 access to its premises as described in SUP 2.3.5 R (2), and to cooperate with the FCA4 as described in SUP 2.3.7 R. The FCA4 does not consider that the 'reasonable steps' in SUP 2.3.7 R would require a firm to seek to change a contract, already in place either7 when
The appropriate regulator recognises that it may not always be appropriate to apply BIPRU 12.5 (Individual Liquidity Adequacy Standards) to every ILAS BIPRU firm. For a firm which operates a relatively simple business model, it may instead be appropriate to allow the firm to calculate the size and content of its liquid assets buffer according to a simplified approach prescribed in the Handbook in advance of any review of that firm'sliquidity risk conducted by the appropriate regulator.
Before applying for a simplified ILAS waiver, a firm must prepare a written policy statement recording its approach to assessing the likelihood of withdrawal of its retail deposits in the circumstances described in BIPRU 12.6.11R (2)(a) and ensure that:(1) the firm'sgoverning body approves and conducts appropriate reviews of the policy statement; and(2) the firm submits a copy of the policy statement to its usual supervisory contact at the appropriate regulator.
In considering a firm's application for a simplified ILAS waiver, the appropriate regulator will take into account the firm's policy statement submitted to it under BIPRU 12.6.13R and form a view about the appropriateness of the assumptions on which the policy statement is based. Where a policy statement submitted after the grant of a simplified ILAS waiver reflects a materially different assessment to that set out in the policy statement considered as part of a firm'swaiver
For the purpose of BIPRU 12.6.21R, a firm should carry out an ILSA at least annually, or more frequently if changes in its business or strategy or the nature, scale or complexity of its activities or the operational environment suggest that the current level of liquidity resources is no longer adequate. A firm should expect that the firm's usual supervisory contact at the appropriate regulator will ask for the ILSA to be submitted as part of the ongoing supervisory process.
Information is needed to support the FCA's1 risk based approach to the supervision of all regulated entities. Risk based supervision is intended to ensure that the allocation of supervisory resources and the supervisory process are compatible with the regulatory objectives and the FCA's1 general duties under the Act. The central element of the process of risk based supervision is a systematic assessment by the FCA1 (a risk assessment) of the main supervisory risks and concerns
The risk assessment will guide the FCA's1 supervisory focus. It is important, therefore, that there is good dialogue between the FCA1 and the recognised body. The FCA1 expects to review its risk assessment with the staff of the UK recognised body to ensure factual accuracy and a shared understanding of the key issues, and may discuss the results of the risk assessment with members of the management body2 of the UK recognised body. If appropriate, the FCA1 may send a detailed letter
The FCA will consider exercising its own-initiative variation of approval power as a matter of urgency where:(1) the information available to it indicates serious concerns about the SMF manager or their firm that need to be addressed immediately; and(2) circumstances indicate that it is appropriate to use statutory powers immediately to require and/or prohibit certain actions by the SMF manager to ensure these concerns are addressed.
A decision to: (1) revoke a recognition order under section 297 of the Act (Revoking recognition) or (for RAPs) regulation 4 of the RAP regulations7; or63(2) make a direction under section 296 (FCA's4powers to give directions) or (for RAPs) regulation 3 of the RAP regulations7; or463(3) refuse to make a recognition order under section 290 (Recognition orders) or 290A (Refusal of recognition on ground of excessive regulatory provision) or (for RAPs) regulation 2 of the RAP regulations7;263is
In considering whether it would be appropriate to exercise the powers under section 296 or section 297 of the Act or (for RAPs) regulation 3 or 4 of the RAP regulations,7 the FCA4 will have regard to all relevant information and factors including:634(1) its guidance to recognised bodies;(2) the results of its routine supervision of the body concerned;(3) the extent to which the failure or likely failure to satisfy one or more of the recognised body requirements31may affect the
7For RAPs, key steps in the regulation 5 procedure
6The FCA will: |
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(1) |
give written notice to the RAP (or applicant); |
The notice will state why the FCA intends to take the action it proposes to take, and include an invitation to make representations, and the date by which representations should be made. |
(2) |
take such steps as it considers reasonably practicable to bring the notice to the attention of the members of the RAP or of the applicant, as the case may be; |
The FCA will also notify persons individually (as far as it considers it reasonably practicable to do so) if it considers that the action it proposes to take would affect them adversely in a way which would be different from its effect on other persons of the same class. |
(3) |
publish the notice so as to bring it to the attention of other persons likely to be affected; |
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(4) |
receive representations from the RAP or applicant concerned, any member of the RAP or applicant, and any other person who is likely to be affected by the action the FCA proposes to take; |
The FCA will not usually consider oral representations without first receiving written representations from the person concerned. It will normally only hear oral representations from the RAP (or applicant) itself or of a person whom it has notified individually, on request. |
(5) |
write promptly to any person who requests the opportunity to make oral representations if it decides not to hear that person's representations; |
The FCA will indicate why it will not hear oral representations and the FCA will allow the person concerned further time to respond. |
(6) |
have regard to representations made; |
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(7) |
(when it has reached its decision) notify the RAP (or applicant) concerned in writing; |
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(8) |
(if it has decided to give a direction, or revoke or refuse to make a recognition order) take such steps as it considers reasonably practicable to bring its decision to the attention of members of the RAP or applicant and to other persons likely to be affected. |
The FCA will usually give notice of its decision to the same persons and in the same manner as it gave notice of its intention to act. |
A firm which is seeking: 8(1) to vary its Part 4A permission8 substantially; or8(2) to8 cancel its Part 4A permission; or88(3) the imposition of a new requirement and/or the variation or cancellation of any existing requirement;8should discuss its plans with its supervisory contact at the relevant regulator8 as early as possible before making an application, in order to comply with Principle 11 (see SUP 15.3.7 G). These discussions will help the relevant regulator8 and the firm
A firm which is winding down (running off) its activities should contact its supervisory contact at the appropriate regulator8 to discuss its circumstances. Discussions will focus on8 the firm's winding down plans and the need for the firm to vary or cancel itsPart 4A permission and/or the need to impose a new requirement, vary any existing requirement or cancel such a requirement. Following these discussions the firm should usually make the relevant application, as appropria