Related provisions for IPRU-INV 13.1.25
21 - 40 of 181 items.
A firm that benefits from exceptional government intervention must ensure that:(1) variable remuneration is strictly limited as a percentage of net revenues when it is inconsistent with the maintenance of a sound capital base and timely exit from government support;(2) it restructures remuneration in a manner aligned with sound risk management and long-term growth, including (when appropriate) establishing limits to the remuneration of members of its management body; and(2) no
(1) A firm must ensure that any measurement of performance used to calculate variable remuneration components or pools of variable remuneration components: (a) includes adjustments for all types of current and future risks and takes into account the cost and quantity of the capital and the liquidity required; and (b) takes into account the need for consistency with the timing and likelihood of the firm receiving potential future revenues incorporated into current earnings. (2)
(1) A firm must ensure that guaranteed variable remuneration is not part of prospective remuneration plans.(2) A firm must not award, pay or provide guaranteed variable remuneration unless:(a) it is exceptional;(b) it occurs in the context of hiring new dual-regulated firms Remuneration Code staff;(c) the firm has a sound and strong capital base; and(d) it is limited to the first year of service.[Note: article 94(1)(d) and (e) of the CRD and Standard 11 of the FSB Compensation
(1) A firm must ensure that a substantial portion, which is at least 50%, of any variable remuneration consists of an appropriate balance of:(a) subject to the legal structure of the firm concerned: shares or equivalent ownership interests; or share-linked instruments or equivalent non-cash instruments2; and (b) where possible, other instruments that in each case adequately reflect the credit quality of the firm as a going concern and are appropriate for use as variable remuneration,
(1) Deferred remuneration paid in:(a) shares or share-linked instruments should be made under a scheme which meets appropriate criteria, including risk adjustment of the performance measure used to determine the initial allocation of shares;(b) cash should also be subject to performance criteria.(2) The FCA would generally expect a firm to have a firm-wide policy (and group-wide policy, where appropriate) on deferral. The proportion deferred should generally rise with the ratio
Information required under LR 13.3.1R(1) (Contents of all circulars) to be included in the circular or announcement should include an explanation of:(1) the background and reasons for the proposed transfer;(2) any changes to the issuer's business that have been made or are proposed to be made in connection with the proposal;(3) the effect of the transfer on the issuer's obligations under the listing rules;(4) how the issuer will meet any new eligibility requirements, for example
An issuer may take steps, in connection with a transfer, which require it to consider whether a prospectus is necessary, for example, if the company or its capital is reconstituted in a way that could amount to an offer of transferable securities to the public. The issuer and its advisers should consider whether obligations under the Act and the prospectus rules6 may be triggered.
(1) PRA Rulebook: Non-Solvency II firms: Insurance Company – Capital Resources 13.36 requires firms to consider first whether an asset is a derivative or quasi-derivative transaction notwithstanding that it is also capable of falling within one or more other categories in PRA Rulebook: Non-Solvency II firms: Insurance Company – Capital Resources 13.16. If it is a derivative or quasi-derivative transaction it is only admissible if it satisfies the conditions for it to be approved
A derivative or quasi-derivative is held for the purpose of efficient portfolio management if the firm reasonably believes the derivative or quasi-derivative (either alone or together with any other covered transactions) enables the firm to achieve its investment objectives by one of the following (or, in relation to permitted links, in a manner which includes but is not limited to)1:(1) generating additional capital or income in one of the ways described in INSPRU 3.2.7 R; or(2)
The generation of additional capital or income falls within INSPRU 3.2.6R (1) where it arises from:(1) taking advantage of pricing imperfections in relation to the acquisition and disposal (or disposal and acquisition) of rights in relation to assets the same as, or equivalent to, admissible assets or permitted links1; or(2) receiving a premium for selling a covered call option or its equivalent, the underlying of which is an admissible asset or permitted link1, even if that additional
For the purposes of assessing adequate quality in INSPRU 3.2.38R (3), reference should be made to the criteria for credit risk loss mitigation set out in INSPRU 2.1.16 R. The valuation rules in PRA Rulebook: Non-Solvency II firms: Insurance Company – Overall Resources and Valuation6 apply for the purpose of determining the value of both collateral received, and the securities transferred, by the firm. In addition, where collateral takes the form of assets transferred, under the
(1) A firm must at all times maintain liquidity resources which are adequate, both as to amount and quality, to ensure that there is no significant risk that its liabilities cannot be met as they fall due.(2) For the purpose of (1):(a) a firm may not include liquidity resources that can be made available by other members of its group;(b) [deleted]1(c) a firm may not include liquidity resources that may be made available through emergency liquidity assistance from a central bank
For the purposes of the overall liquidity adequacy rule, liquidity resources are not confined to the amount or value of a firm's marketable, or otherwise realisable, assets. Rather, in assessing the adequacy of those resources, a firm should have regard to the overall character of the resources available to it which enable it to meet its liabilities as they fall due. Therefore, for the purposes of that rule, a firm should ensure that:(1) it holds sufficient assets which are
Table: Items which must be deducted in arriving at prudential resources
1 |
Investments in own shares |
2 |
Investments in subsidiaries (Note 1) |
3 |
Intangible assets (Note 2) |
4 |
Interim net losses (Note 3) |
5 |
Excess of drawings over profits for a sole trader or a partnership (Note 3) |
Notes |
1 Investments in subsidiaries are the full balance sheet value. 2 Intangible assets are the full balance sheet value of goodwill, capitalised development costs, brand names, trademarks and similar rights and licences. 3 The interim net losses in row 4, and the excess of drawings in row 5, are in relation to the period following the date as at which the capital resources are being computed. |
[Note: Until 31 March 2017, transitional provisions apply to CONC 10.3.3 R: see CONC TP 5.1]
A subordinated loan/debt must not form part of the prudential resources of the firm unless it meets the following conditions:(1) it has an original maturity of:(a) at least five years; or(b) it is subject to five years' notice of repayment;(2) the claims of the subordinated creditors must rank behind those of all unsubordinated creditors;(3) the only events of default must be non-payment of any interest or principal under the debt agreement or the winding up of the firm;(4) the
When calculating its prudential resources, the firm must exclude any amount by which the aggregate amount of its subordinated loans/debts exceeds the amount calculated as follows:
a - b |
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where: |
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a |
= |
Items 1 - 5 in the Table of items which are eligible to contribute to a firm's prudential resources (see CONC 10.3.2 R) |
b |
= |
Items 1 - 5 in the Table of items which must be deducted in arriving at a firm's prudential resources (see CONC 10.3.3 R) |
[Note: Until 31 March 2017, transitional provisions apply to CONC 10.3.5 R: see CONC TP 5.2]
A firm must disclose the following information regarding the scope of application of the requirements of GENPRU and BIPRU7:(1) the name of the firm which is the subject of the disclosures;(2) an outline of the differences in the basis of consolidation for accounting and prudential purposes, with a brief description of the entities that are:(a) fully consolidated;(b) proportionally consolidated;(c) deducted from capital resources;(d) neither consolidated nor deducted;(3) any current
A firm must disclose the following information regarding its capital resources:(1) summary information on the terms and conditions of the main features of all capital resources items and components thereof, including:2(a) 2hybrid capital;(b) 2capital instruments which provide an incentive for the firm to redeem them; and(c) 2capital instruments which the firm treats as tier one capital under GENPRU TP8A;(2) tier one capital resources, with separate disclosure of:22(a) 2all positive
The following information must be disclosed by a firm which calculates its market risk capital requirement using a VaR model:(1) for each sub-portfolio covered:(a) the characteristics of the models used;(b) a description of stress testing applied to the sub-portfolio;(c) a description of the approaches used for back-testing 2and validating the accuracy and consistency of the internal models and modelling processes;(d) 2for the capital charges calculated according to the incremental
A firm must disclose the following information regarding the exposures in equities not included in the trading book:(1) the differentiation between exposures based on their objectives, including for capital gains relationship and strategic reasons, and an overview of the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation and any significant changes in these practices;(2) the balance sheet value, the fair value and,
The originator of a traditional securitisation may exclude securitised exposures from the calculation of risk weighted exposure amounts and expected loss amounts if either of the following conditions is fulfilled:(1) 2significant credit risk associated with the securitised exposures is considered to have been transferred to third parties; or(2) 2the originator applies a 1250% risk weight to all securitisation positions it holds in the securitisation or deducts these securitisation
2Significant credit risk will be considered to be transferred for an originator in the following cases:(1) 2the risk weighted exposure amounts of the mezzanine securitisation positions held by the originator in the securitisation do not exceed 50% of the risk weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;(2) 2where there are no mezzanine securitisation positions in a given securitisation and the originator can demonstrate that
2An originator's application for a waiver of the requirements in BIPRU 9.4.11R and BIPRU 9.4.12R must demonstrate that the following conditions are satisfied.(1) 2it has policies and methodologies in place which ensure that the possible reduction of capital requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties; and(2) 2that such a transfer of credit risk to third parties is also recognised for the
(1) A firm must hold own funds of at least one quarter of the fixed overheads of the preceding year.3(2) A firm must calculate its fixed overheads using the methodology for calculating relevant expenditure in MIFIDPRU 4.5 (Fixed overheads requirement).3(3) A firm that has not been in business for one year may use its projected fixed overheads in accordance with the approach in MIFIDPRU 4.5.11R.3
(1) An AIFM shall implement effective internal operational risk management policies and procedures in order to identify, measure, manage and monitor appropriately operational risks including professional liability risks to which the AIFM is or could be reasonably exposed. The operational risk management activities shall be performed independently as part of the risk management policy.(2) An AIFM shall set up a historical loss database, in which any operational failures,
(1) Economic substance: the risk management and capital treatment of a securitisation must be determined on the basis of its economic substance and not its legal form.(2) Eligible structures: only standalone traditional securitisations are eligible.(3) Eligible underlying assets: term assets (e.g. residential mortgages) originated by the firm are eligible. (4) Effective credit-risk transfer: the securitisation mechanism (e.g. true sale) must effectively transfer the risks of the
(1) The support described in MIPRU 4.2BA.26R (1) is permitted.(2) The support described in MIPRU 4.2BA.26R (2) is not permitted.(3) The support described in MIPRU 4.2BA.26R (3) is permitted if the following conditions are met: (a) contractual and marketing documents of the securitisation expressly envisage and allow for the possibility of the firm providing such support;(b) the nature of any support that the firm may give is precisely described in the contractual and marketing
A waiver of the right to future margin income will not breach the prohibition against implied future support in MIPRU 4.2BA.5R (6) provided that:(1) the degree of support that can be given can be defined precisely by reference to the contractual documentation for the securitisation, even if the amount of support may not be ascertainable in absolute monetary terms; and(2) no adjustment to the firm'scapital resources or capital resources requirement is required, as a firm should
If a firm is found to have provided support to a securitisation it will be required to: (1) hold capital resources against all of the securitised exposures associated with the securitisation transaction as if they had not been securitised; and(2) disclose publicly in a timely fashion: (a) where it has provided such support; and(b) the regulatory capital impact of doing so.
4Without prejudice to SYSC 4.3A.1R, a common platform firm must ensure that the management body defines, approves and oversees:(1) the organisation of the firm for the provision of investment services and/or activities and ancillary services, including the skills, knowledge and expertise required by personnel, the resources, the procedures and the arrangements for the provision of services and activities, taking into account the nature, scale and complexity of its business and
A common platform firm4 that is a significant SYSC firm8 must:(1) establish a nomination committee composed of members of the management body who do not perform any executive function in the firm;(2) ensure that the nomination committee is able to use any forms of resources the nomination committee deems appropriate, including external advice; and(3) ensure that the nomination committee receives appropriate funding. [Note: article 88(2) of CRD and article 9(1) of MiFID4]
The rules in GENPRU and BIPRU do not allow a firm that is a parent undertaking to incorporate the capital and requirements of a subsidiary undertaking in the calculation of that firm'scapital resources and capital resources requirement. A firm that wishes to incorporate a subsidiary undertaking for this purpose should therefore apply for a solo consolidation waiver.
A firm must be able to demonstrate fully to the appropriate regulator the circumstances and arrangements, including legal arrangements, by virtue of which there are no material practical or legal impediments, and none are foreseen, to the prompt transfer of the capital resources of the subsidiary undertaking referred to in BIPRU 2.1.19 R or repayment of liabilities when due by the subsidiary undertaking to the firm.
Where a firm is not aware of the underlying exposures of a CIU, it may calculate an average risk weight for the CIU in accordance with the standardised approach subject to the following rules: it will be assumed that the CIU first invests, to the maximum extent allowed under its mandate, in the standardised credit risk exposure classes attracting the highest capital requirement, and then continues making investments in descending order until the maximum total investment limit
The risk weighted exposure amounts for credit risk for exposures belonging to one of the exposure classes referred to in (1) to (4) must, unless deducted from capital resources, be calculated in accordance with the following provisions:(1) for exposures in the sovereign, institution and corporate IRB exposure class, BIPRU 4.4.57 R to BIPRU 4.4.60 R, BIPRU 4.4.79 R, BIPRU 4.5.8 R to BIPRU 4.5.10 R (for specialised lending exposures), BIPRU 4.9.3 R and BIPRU 4.8.16 R to BIPRU 4.8.17
(1) A firm using own estimates of conversion factors should take into account all facility types that may result in an exposure when an obligor defaults, including uncommitted facilities.(2) A firm should treat a facility as an exposure from the earliest date at which a customer is able to make drawings under it.(3) To the extent that a firm makes available multiple facilities, it should be able to demonstrate:(a) how it deals with the fact that exposures on one may become exposures
A firm must ensure that:(1) it regularly carries out an ILAA;(2) it makes a written record of its ILAA;(3) its ILAA is proportionate to the nature, scale and complexity of its activities; (4) its ILAA takes into account whole-firm and group-wide liquidity resources only to the extent that reliance on these is permitted by the appropriate regulator;(5) its ILAA includes an assessment of the results of the stress tests required by BIPRU 12.5.6 R; and(6) its ILAA includes an assessment
A firm should carry out an ILAA at least annually, or more frequently if changes in its business or strategy or the nature, scale or complexity of its activities or the operational environment suggest that the current level of liquidity resources is no longer adequate. A firm should expect that its usual supervisory contact at the appropriate regulator will ask for the ILAA to be submitted as part of the ongoing supervisory process.
A firm must ensure that in carrying out its ILAA it considers how that firm's liquidity resources change as a result of:(1) the stress in BIPRU 12.5.8 R (the first liquidity stress);(2) the stress in BIPRU 12.5.11 R (the second liquidity stress); and(3) the first and second liquidity stresses occurring simultaneously.
The appropriate regulator will review the results of a firm'sILAA, including the results of the stress tests required by BIPRU 12.5.6R, as part of its Supervisory Liquidity Review Process (SLRP). The appropriate regulator's review of the stress test results will assist it assessing the adequacy of a firm's liquidity resources relative to other ILAS BIPRU firms and, consequently, in calibrating the individual liquidity guidance that it gives to that firm. BIPRU 12.9.2G sets out
A firm'sVaR model must capture accurately all material price risks for positions within the scope of its VaRpermission, including risks relating to options or option-like positions. The firm must ensure that, if its VaR model does not accurately capture any material risk, the firm has capital resources adequate to cover that risk. These capital resources must be additional to those required to meet its capital resources requirement.
For example, BIPRU 7.10.53R might involve creating and documenting a prudent incremental PRR charge for the risk not captured in the VaR model and holding sufficient capital resources against this risk. In that case the firm should hold capital resources at least equal to its capital resources requirement as increased by adding this incremental charge to the model PRR. Alternatively the firm may make valuation adjustments through its profit and loss reserves to cover this material
A firm is expected ultimately to move towards full revaluation of option positions. For portfolios containing path dependent options, an instantaneous price shock applied to a static portfolio will be acceptable provided that the risks not captured by such an approach are not material. Where a risk is immaterial and does not justify further capital resources, that immaterial risk should still be documented.
3If the results of the stress tests carried out in accordance with BIPRU 7.10.55Z R indicate a material shortfall in the amount of capital required under the all price risk measure, a firm must notify the appropriate regulator of this circumstance by no later than two business days after the business day on which the material shortfall occurred.
A firm must not use both the financial collateral simple method and the financial collateral comprehensive method, unless such use is for the purposes of BIPRU 4.2.17 R to BIPRU 4.2.19 R and BIPRU 4.2.26 R, and such use is provided for by the firm'sIRB permission. A firm must demonstrate to the appropriate regulator that this exceptional application of both methods is not used selectively with the purpose of achieving reduced minimum capital requirements and does not lead to regulatory
This table belongs to BIPRU 5.4.34 R.
Other collateral or exposure types |
|||
20 day liquidation period (%) |
10 day liquidation period (%) |
5 day liquidation period (%) |
|
Main index equities, main index convertible bonds |
21.213 |
15 |
10.607 |
Other equities or convertible bonds listed on a recognised investment exchange or designated investment exchange |
35.355 |
25 |
17.678 |
Cash |
0 |
0 |
0 |
Gold |
21.213 |
15 |
10.607 |
In relation to repurchase transaction and securities lending or borrowing transactions, where a firm uses the supervisory volatility adjustments approach or the own estimates of volatility adjustments approach and where the conditions set out in (1) – (8) are satisfied, a firm may, instead of applying the volatility adjustments calculated under BIPRU 5.4.30 R to BIPRU 5.4.61 R, apply a 0% volatility adjustment:(1) both the exposure and the collateral are cash or debt securities
Core market participant means the following entities:(1) the entities mentioned in BIPRU 5.4.2 R (2)exposures to which are assigned a 0% risk weight under the standardised approach to credit risk;(2) institutions;(3) other financial companies (including insurance companies) exposures which are assigned a 20% risk weight under the standardised approach;(4) regulated CIUs that are subject to capital or leverage requirements;(5) regulated pension funds; and(6) a recognised clearing
The purpose of this annex is to amplify Principle 8 (Financial resources) which requires a firm to maintain adequate financial resources to meet its investment business commitments and to withstand the risks to which its business is subject. This annex imposes various conditions that must be satisfied for members' capital to count as "Tier 1" or equivalent grade capital in meeting the limited liability partnership's financial resources requirement. These conditions are made up
The following rules allow inclusion of members' capital within a firm's capital if it meets the conditions in this annex:
Chapter |
IPRU(INV) rule |
How eligible LLP members' capital should be treated for the purposes of the IPRU(INV) rule |
3 |
Table 3-61 |
Eligible LLP members' capital may be counted as Tier 1 capital under item "A" within Table 3-61. |
5 |
Table 5.2.2 (1): Item (1A) |
Eligible LLP members' capital may be counted as Tier 1 capital within Category A of Table 5.2.2(1). |
11 |
Table 11.4 |
Eligible LLP members' capital may be counted as Item (5) in Table 11.4. |
13 |
Table 13.15.3(1)4 111 |
Eligible LLP members' capital may be counted as capital resources relating to companies in IPRU-INV 13.15.3(1). |
OPS firms (see Note 1 below) |
Non-OPS Life Offices and Non-OPS Local Authorities |
Individuals admitted to membership collectively |
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Financial resources rules |
||||
No |
No |
Yes |
||
Individuals whose sole investment business is giving investment advice to institutional or corporate investors |
Firms subject to "lead regulator arrangements" |
All other firms |
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Financial resources rules |
||||
No |
No |
Yes |
||
(see Note 2 below) |
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Accounting records rules |
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IPRU-INV 5.3.1R (1) to 5.3.1R(6) |
No |
Yes |
Yes |
|
Note 1. Firms are referred to the specific compliance reports for OPS firms required by Chapter 16 of the Supervision manual4. |
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Note 2. A firm subject to "lead regulator arrangements" whereby a body other than the FCA is responsible for its financial regulation shall comply with the corresponding financial resources rules and financial returns rules of that body, and a breach of such rules shall be treated as a breach of the rules of the FCA. |
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