Related provisions for BIPRU 2.1.11

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GENPRU 2.1.40RRP
A BIPRU firm must maintain at all times capital resources equal to or in excess of the amount specified in the table in GENPRU 2.1.45 R (Calculation of the variable capital requirement for a BIPRU firm).
GENPRU 2.1.41RRP
A BIPRU firm must maintain at all times capital resources equal to or in excess of the base capital resources requirement (see the table in GENPRU 2.1.48 R).
GENPRU 2.1.43GRP
The purpose of the base capital resources requirement for a BIPRU firm is to act as a minimum capital requirement or floor. It has been written as a separate requirement as there are restrictions in GENPRU 2.2 (Capital resources) on the types of capital that a BIPRU firm may use to meet the base capital resources requirement which do not apply to some other parts of the capital requirement calculation. In order to preserve the base capital resources requirement's role as a floor
GENPRU 2.1.44GRP
The base capital resources requirement and the variable capital requirement in GENPRU 2.1.40 R are together called the capital resources requirement (CRR) in the case of a BIPRU firm.
GENPRU 2.1.45RRP

This table belongs to GENPRU 2.1.40 R

Firm category

Capital requirement

BIPRU firm12(including collective portfolio management investment firm9)

129

the higher of (1) and (2):

(1)

the sum of:

(a)

the credit risk capital requirement; and

(b)

the market risk capital requirement; and

(2)

the fixed overheads requirement.
GENPRU 2.1.46RRP
When a3collective portfolio management investment firm9 calculates the credit risk capital requirement and the market risk capital requirement for the purpose of calculating the variable capital requirement under GENPRU 2.1.40 R it must do so only3 in respect of designated investment business. For this purpose managing an AIF or managing a UK UCITS17 is excluded from designated investment business.39399
GENPRU 2.1.51RRP
A BIPRU firm must calculate its credit risk capital requirement as the sum of:(1) the credit risk capital component; and15(2) the counterparty risk capital component.15(3) [deleted]15
GENPRU 2.1.53RRP
A 12BIPRU firm must12 calculate a fixed overheads requirement, an amount that 12is equal to one quarter of the firm's relevant fixed expenditure calculated in accordance with GENPRU 2.1.54 R.12
GENPRU 2.1.54RRP
For the purpose of GENPRU 2.1.53 R, and subject to GENPRU 2.1.55 R to GENPRU 2.1.57 R,a BIPRU firm's12 relevant fixed expenditure is the amount described as total expenditure in its most recent audited annual report and accounts, less the following items (if they are included within such expenditure):12(1) staff bonuses, except to the extent that they are guaranteed;(2) employees' and directors' shares in profits, except to the extent that they are guaranteed;(3) other appropriations
GENPRU 2.1.55RRP
The relevant fixed expenditure of a firm in the following circumstances is:(1) where its most recent audited annual report and accounts do not represent a twelve month period, an amount calculated in accordance with GENPRU 2.1.54 R, pro-rated so as to produce an equivalent annual amount; and(2) where it has not completed twelve months' trading, an amount based on forecast expenditure included in the budget for the first twelve months' trading, as submitted with its application
GENPRU 2.1.56RRP
A firm must adjust its relevant fixed expenditure calculation so far as necessary if and to the extent that since the date covered by the most recent audited annual report and accounts or (if GENPRU 2.1.55R (2) applies) since the budget was prepared:(1) its level of fixed expenditure changes materially; or(2) its regulated activities comprised within its permission change.
GENPRU 2.1.57RRP
If a firm has a material proportion of its expenditure incurred on its behalf by third parties and such expenditure is not fully recharged to that firm then the firm must adjust its relevant fixed expenditure calculation by adding back in the whole of the difference between the amount of the expenditure and the amount recharged.
GENPRU 2.1.58GRP
For the purpose of GENPRU 2.1.57 R, the FCA would consider as material 10% of a firm's expenditure incurred on its behalf by third parties.
GENPRU 2.1.59GRP
For the purpose of GENPRU 2.1.54 R to 2.1.57 R, fixed expenditure is expenditure which is inelastic relative to fluctuations in a firm's levels of business. Fixed expenditure is likely to include most salaries and staff costs, office rent, payment for the rent or lease of office equipment, and insurance premiums. It may be viewed as the amount of funds which a firm would require to enable it to cease business in an orderly manner, should the need arise. This is not an exhaustive
GENPRU 2.1.61GRP
Where two or more banks merge, all of which individually have the benefit of GENPRU 2.1.60 R, the PRA may agree in certain circumstances that the base capital resources requirement for the bank resulting from the merger may be the sum of the aggregate capital resources of the merged banks, calculated at the time of the merger, provided this figure is less than €5 million.
GENPRU 2.1.62RRP
For the purpose of GENPRU 2.1.60 R:(1) an existing controller of a bank means:(a) a person who has been a parent undertaking of that bank since 31 December 2006 or earlier; or(b) a person who became a parent undertaking of that bank after 31 December 2006 but who, when he became a parent undertaking of that bank, was a subsidiary undertaking of an existing controller of that bank;(2) the relevant amount of capital as referred to in GENPRU 2.1.60R (2)(a) is adjusted by identifying
BIPRU 7.10.2GRP
BIPRU 7.10 provides details of when the appropriate regulator expects to allow a firm to use a VaR model (value at risk model) for the purpose of calculating part or all of its PRR. It introduces the concept of a VaR model, the methodology behind it and the link to the standard market risk PRR rules. It then goes on to detail the application and review process. The bulk of BIPRU 7.10 specifies the model standards and risk management standards that firms will be required to meet
BIPRU 7.10.46RRP
(1) If a firm'sVaR model covers the calculation of PRR with respect to specific risk the firm must meet the VaR specific risk minimum requirements in addition to the other requirements of BIPRU 7.10.(2) The VaR model must explain the historical price variation in the portfolios concerned.(3) The VaR model must capture concentration in terms of magnitude and changes of composition of the portfolios concerned.(4) The VaR model must be robust to an adverse environment.(5) The VaR
BIPRU 7.10.93GRP
Backtesting conducted only at a whole portfolio level using a single measure of profit and loss has limited power to distinguish an accurate VaR model from an inaccurate one. Backtesting should therefore be regarded as an additional safeguard rather than a primary validation tool. Such testing does however form the basis of the appropriate regulator'splus factor system. The test has been chosen as the basis of the backtesting regime because of its simplicity. A firm will therefore
BIPRU 7.10.94RRP
A firm must have the capacity to analyse and compare its profit and loss figures3 and hypothetical profit and loss figures3 to the VaR measure, both at the level of the whole portfolio covered by the VaR model permission and at the level of individual books that contain material amounts of risk.33
BIPRU 7.10.94ARRP
3At a minimum, backtesting of hypothetical profit and loss figures must be used for regulatory backtesting and also to calculate plus factors.
BIPRU 7.10.96RRP
At a minimum, a3firm must, on each business day, compare each of its 250 most recent business days'hypothetical profit and loss figures3 (ending with the business day preceding the business day in question) with the corresponding one-day VaR measures.33
BIPRU 7.10.100RRP
The profit and loss figure3 for a particular business day is the firm's actual profit or loss for that day in respect of the trading activities within the scope of the firm'sVaR model permission, adjusted by stripping out:3(1) fees and commissions;(2) brokerage;(3) additions to and releases from reserves which are not directly related to market risk (e.g. administration reserves); and(4) any inception profit exceeding an amount specified for this purpose in the firm'sVaR model
BIPRU 7.10.102GRP
The appropriate regulator will review as part of a firm'sVaR model permission application the processes and documentation relating to the derivation of profit and loss used for backtesting. A firm's documentation should clearly set out the basis for cleaning profit and loss. To the extent that certain profit and loss elements are not updated every day (for example certain reserve calculations) the documentation should clearly set out how such elements are included in the profit
BIPRU 7.10.103RRP
A backtesting exception is deemed to have occurred for any business day if the hypothetical profit and loss figure3 for that business day shows a loss, which in absolute magnitude, exceeds the one-day VaR measure for that business day. The only exception is if that business day is identified in the firm'sVaR model permission as giving rise to an excluded backtesting exception.3
BIPRU 7.10.104RRP
If a backtesting exception occurs, the firm must notify its usual supervisory contact at the appropriate regulator orally by close of business two business days after the business day for which the backtesting exception occurred. Within five business days following the end of each Month, the firm must submit to the appropriate regulator a written account of the previous Month'sbacktesting exceptions (if any). This explanation must include the causes of the backtesting exceptions,
BIPRU 7.10.105GRP
(1) This paragraph gives guidance on the backtesting calculation and reporting process in BIPRU 7.10.96R - BIPRU 7.10.104R.(2) Let the day on which the loss referred to in BIPRU 7.10.100R is made be day n. The value-at-risk measure for that day will be calculated on day n-1, or overnight between day n-1 and day n. Profit and loss figures are produced on day n+1, and backtesting also takes place on day n+1. The firm's supervisor should be notified of any backtesting exceptions
BIPRU 7.10.106GRP
(1) This paragraph gives guidance on the process for excluding backtesting exceptions as referred to in BIPRU 7.10.103R.(2) The appropriate regulator will respond flexibly to backtesting exceptions. However, the appropriate regulator's starting assumption will be that a backtesting exception should be taken into account for the purpose of the calculation of plus factors. If the firm believes that a backtesting exception should not count for that purpose, then it should seek a
BIPRU 7.10.111RRP
A firm must perform backtesting against a hypothetical profit and loss figure3 with respect to each business day. A hypothetical profit and loss figure3 for a business day means the hypothetical profit and loss figure3 that would have occurred for that business day if the portfolio on which the VaR number for that business day is based remained unchanged.3333
BIPRU 7.10.112GRP
(1) A hypothetical profit and loss figure3 is based on the day's change in the value of the same portfolio that was used to generate the value-at-risk forecast.3(2) [deleted]33(3) The firm may also need to calculate a hypothetical profit and loss figure3 in order to produce profit attribution reports and to analyse the cause of backtesting exceptions.3
BIPRU 7.10.127GRP
Firms who gained model recognition before 1 January 2007 will be permitted to calculate PRR for specific risk in accordance with the methodology they were permitted to use immediately before that date instead of capturing event and default risk in their models (see BIPRU TP 14 (Market risk: VaR models)). This treatment will not be available to a firm that gains model recognition after that date.
BIPRU 7.10.129RRP
A firm must, no later than the number of business days after the end of each quarter specified in the VaR model permission for this purpose, submit, in respect of that quarter, a report to the appropriate regulator about the operation of the VaR model, the systems and controls relating to it and any changes to the VaR model and those systems and controls. Each report must outline as a minimum the following information in respect of that quarter:(1) methodological changes and developments
IPRU-INV 12.2.2RRP
A firm must ensure that at all times its financial resources1 are not less than its financial resources requirement1.
IPRU-INV 12.2.3RRP
The financial resources requirement1 for a firm carrying on one or more regulated activities in addition to operating an electronic system in relation to lending, is the higher of: (1) the financial resources requirement1 which is applied by this chapter; and (2) the financial resources or own funds requirement which is applied by another rule or by directly applicable legislation of the UK2 to the firm.
IPRU-INV 12.2.4RRP
On its accounting reference date in each year, a firm must calculate: (1) the total value of loaned funds outstanding on that date; and (2) the sum of: (a) 0.2% of the first £50 million of that total value; (b) 0.15% of the next £200 million of that total value; (c) 0.1% of the next £250 million of that total value; and (d) 0.05% of any remaining total value.
IPRU-INV 12.2.6RRP
The financial resources requirement1 for a firm to which this chapter applies is the higher of: (1) £50,000; and (2) the sum calculated in accordance with IPRU-INV 12.2.4R(2) for the period until (subject to IPRU-INV 12.2.9R) its next accounting reference date.
IPRU-INV 12.2.7RRP
To determine a firm’sfinancial resources requirement1 for the period beginning on the date on which it obtains a Part 4A permission and ending on the day before its next accounting reference date, the firm must carry out the calculation in IPRU-INV 12.2.4R(2) on the basis of the total value of loaned funds the firm projects will be outstanding on the day before its next accounting reference date.
IPRU-INV 12.2.8GRP
If the firm has 30,000 individuals each lending £100,000, the total value of the firm’s1loaned funds outstanding is £3,000,000,000. If the firm does not carry on any other regulated activity to which another higher financial resources or own funds requirement applies, its financial resources requirement1 is £1,900,000. This is calculated as follows: (1) 0.2% x £50,000,000 = £100,000; (2) 0.15% x £200,000,000 = £300,000; (3) 0.1% x £250,000,000 = £250,000;
IPRU-INV 12.2.9RRP
If the firm experiences a greater than 25% increase in the total value of loaned funds outstanding compared to the value used in its last financial resources requirement1 calculation, it must recalculate its financial resources requirement1 using the higher total value of loaned funds outstanding.
IPRU-INV 12.2.10RRP
A firm must notify the FCA of any change, or any likely change, in its financial resources requirement1 within 14 days of that change, or it becoming aware that the change is likely, whichever is the earlier.
MIPRU 4.2C.1RRP
This section applies to a firm carrying on any home financing connected to regulated mortgage contracts or home financing and home financing administration connected to regulated mortgage contracts see 1MIPRU 4.2.23 R where it applies credit risk mitigation1 to the calculation of its risk weighted exposure amounts under MIPRU 4.2A (Credit risk capital requirement)1.11
MIPRU 4.2C.2GRP
MIPRU 4.2C sets out the provisions a firm should comply with when calculating risk weighted exposure amounts for calculating the credit risk capital requirement1 under MIPRU 4.2.23 R.11
MIPRU 4.2C.5RRP
1A firm may recognise credit risk mitigation under this section in calculating risk weighted exposure amounts for calculating the credit risk capital requirement.
MIPRU 4.2C.17RRP
1The calculation of risk weighted exposure amounts may be modified in accordance with this section where a firm has complied with MIPRU 4.2C.7 R to MIPRU 4.2C.16 R.
MIPRU 4.2C.24RRP
(1) 1In calculating risk weighted exposure amounts, a maturity mismatch occurs where the residual maturity of the credit protection is less than that of the protected exposure.(2) Protection of less than three months residual maturity, the maturity of which is less than the maturity of the underlying exposure, must not be recognised.
MIPRU 4.2C.30RRP
(1) 1Proportional regulatory capital relief is afforded if:(a) the protected amount is less than the exposure value; and(b) the protected and unprotected portions are of equal seniority, i.e. the firm and the protection provider share losses on a pro-rata basis.(2) Under MIPRU 4.2A.9 R, MIPRU 4.2A.12 R, MIPRU 4.2A.17A R and MIPRU 4.2A.17B R, risk weighted exposure amounts must be calculated in accordance with the following formula:(E-GA) x r + GA x gwhere:(a) E is the exposure
MIPRU 4.2C.32RRP
1A firm may assign a risk weight of 0% to exposures or parts of exposures guaranteed by the UK government or its central bank if the following conditions are met: (1) the guarantee is denominated in the domestic currency of the borrower; and(2) the exposure is funded in that currency.
MIPRU 4.2C.33RRP
1Where a firm calculating risk weighted exposure amounts has more than one form of credit risk mitigation covering a single exposure: (1) it must divide the exposure into parts covered by each type of credit risk mitigation; and(2) the risk weighted exposure amount for each portion must be calculated separately in accordance with MIPRU 4.2A (Credit risk capital requirement).
BIPRU 2.1.3GRP
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.
BIPRU 2.1.7RRP
A firm that has a solo consolidation waiver must incorporate in the calculation of its requirements under the main BIPRU firm Pillar 1 rules each subsidiary undertaking to which the solo consolidation waiver applies. This does not apply to the base capital resources requirement.323
BIPRU 2.1.12RRP
A firm must calculate its capital resources requirement in accordance with BIPRU 8.7.13 R (3) (Treating group members as a single undertaking for consolidation purposes).
BIPRU 2.1.13RRP
Where GENPRU applies a different method of calculating capital resources or capital resources requirements depending on the category into which the firm in question falls, the method that applies is the one that would apply to the firm on a solo basis.
BIPRU 2.1.14GRP
For example, the effect of BIPRU 2.1.13 R is that if a firm that is applying BIPRU 2.1 is a limited licence firm it should continue to apply the capital resources and capital resources requirement applicable to a limited licence firm.
BIPRU 2.1.15RRP
A firm must continue to calculate its base capital resources requirement and the requirement in GENPRU 2.1.42 R (Calculation of capital resources requirement on authorisation) on a solo basis.
BIPRU 2.1.18RRP
A firm must include in full any subsidiary undertaking in respect of which the firm applies BIPRU 2.1 in the calculations under BIPRU 2.1.7 R.
MIPRU 4.2.3RRP
A firm must recognise an asset or liability, and measure its amount, in accordance with the relevant accounting principles applicable to it for the purpose of preparing its annual financial statements unless a rule requires otherwise.
MIPRU 4.2.11RRP
(1) If a firm carrying on insurance distribution activity6 or home finance mediation activity1(and no other regulated activity) does not hold client money or other client assets in relation to these activities, its capital resources requirement is the higher of:1(a) £5,000; and(b) 2.5% of the annual income from its insurance distribution activity6 or home finance mediation activity1(or both).1(2) If a firm carrying on insurance distribution activity6 or home finance mediation
MIPRU 4.2.12RRP
(1) The capital resources requirement for a firm carrying on only2home financing, 1which is not connected to regulated mortgage contracts, 2or home financing1and home finance administration1 which is not connected to regulated mortgage contracts2 (and no other regulated activity) is the higher of:111111(a) £100,000; and(b) 1% of:(i) its total assets plus total undrawn commitments and unreleased amounts under the home reversion plan1; less:(ii) excluded loans or amounts 1plus intangible
MIPRU 4.2.14RRP
When calculating total assets, the firm may exclude a loan or plan 1which has been transferred to a third party only if it meets the following conditions:(1) the first condition is that the loan or the plan 1has been transferred in a legally effective manner by:(a) novation; or(b) legal or equitable assignment; or(c) sub-participation; or(d) declaration of trust; and(2) the second condition is that the home finance provider1:1(a) retains no material economic interest in the loan
MIPRU 4.2.19RRP
The capital resources requirement for a firm carrying on home finance administration only, which has all the home finance transactions1 that it administers off its balance sheet, is the higher of:11(1) £100,000; and(2) 10% of its annual income.
MIPRU 4.2.20RRP
The capital resources requirement for a firm carrying on insurance distribution activity6 and home financing1 or home finance administration1 is the sum of : 11112(1) the capital resources requirement2 for a firm carrying on insurance distribution activity6 or home finance mediation activity1 (and no other regulated activity) (see MIPRU 4.2.11 R); and21(2) (a) in the case of a firm carrying on home financing which is not connected to regulated mortgage contracts, or home finance
MIPRU 4.2.21RRP
(1) If a firm carrying on home finance mediation activity1 and home financing1 or home finance administration1 does not hold client money or other client assets in relation to itshome finance mediation activity1, the capital resources2 requirement is:1111112(a) in the case of a firm carrying on home financing which is not connected to regulated mortgage contracts or home finance administration which is not connected to regulated mortgage contracts, the amount applied to a firm
MIPRU 4.2.22RRP
The capital resources requirement for a firm carrying on any combination of regulated activities which is not set out in MIPRU 4.2.10 R to MIPRU 4.2.21 R and MIPRU 4.2.23 R is: 211112(1) 2if the combination of regulated activities includes carrying on any home financing connected to regulated mortgage contracts or home finance administration connected to regulated mortgage contracts, the sum of the amounts which are applied to a firm under:(a) MIPRU 4.2.20R (1); and(b) MIPRU 4.2.23
MIPRU 4.2.23RRP
2The capital resources requirement4for a firm carrying on any home financing which is connected to regulated mortgage contracts, or home financing and home finance administration which is connected to regulated mortgage contracts (and no other regulated activity), is the higher of:4(1) £100,000; and(2) the sum of: (a) the creditrisk capital requirement4calculated in accordance with MIPRU 4.2A; and4(b) 1% of:(i) its total assets plus total undrawn commitments and unreleased amounts
BIPRU 8.7.1GRP
The calculation of the consolidated capital resources requirement of a firm's UK consolidation group or non-UK sub-group5 involves taking the individual components that make up the capital resources requirement on a solo basis and applying them on a consolidated basis. Those components are the capital charge for credit risk (the credit risk capital requirement), the capital charge for market risk (the market risk capital requirement)4 and the fixed overheads requirement.
BIPRU 8.7.10RRP
A firm must calculate the consolidated capital resources requirement of its UK consolidation group or non-UK sub-group5 as the higher of the following consolidated requirements components:33(1) the sum of the consolidated credit risk requirement and the consolidated market risk requirement; and3(2) the consolidated fixed overheads requirement. 3
BIPRU 8.7.11RRP
A firm must calculate a consolidated requirement component by applying the risk capital requirement applicable to that consolidated requirement component to the UK consolidation group or non-UK sub-group5 in accordance with BIPRU 8.7.13 R. The5risk capital requirement must be calculated in accordance with the appropriate regulator'srules. The risk capital requirement applicable to a consolidated requirement component is the one specified in the second column of the table in BIPRU
BIPRU 8.7.20RRP
A firm may use a combination of the CCR standardised method, the CCR mark to market method and the CCR internal model method on a permanent basis with respect to the firm's UK consolidation group or non-UK sub-group5 for the purposes of calculating the consolidated credit risk requirement. In particular, where the firm is permitted to apply the CCR internal model method on a consolidated basis with respect to its UK consolidation group or non-UK sub-group5, it may combine the
BIPRU 8.7.31GRP
If a firm is calculating a risk capital requirement for an undertaking that is not a BIPRU firm it should calculate it as if the undertaking were a BIPRU firm.
BIPRU 8.7.33GRP
A firm should not use an advanced prudential calculation approach for calculating a risk capital requirement unless this is permitted as explained in BIPRU 8.8 (Advanced prudential calculation approaches).
BIPRU 8.7.34RRP
[deleted]5
BIPRU 8.7.38ARRP
(1) 2This rule applies to a firm if:(a) an institution in its UK consolidation group or non-UK sub-group5 is subject to any of the rules or requirements of, or administered by, a third-country competent authority applicable to its financial sector that correspond to the sectoral rules applicable to that financial sector (“corresponding sectoral rules”); or(b) a part of its UK consolidation group or non-UK sub-group5 constitutes the whole of a group subject to the consolidated
BIPRU 3.4.29RRP
[deleted]10
BIPRU 3.4.47RRP
Investments in equity or regulatory capital instruments issued by institutions must be risk weighted at 100%, unless deducted from capital resources.[Note: BCD Annex VI Part 1 point 39]
BIPRU 3.4.56ARRP
(1) 4A firm must not treat a lifetime mortgage as an exposure fully and completely secured on residential property for the purposes of BIPRU 3.4.56 R unless the amount of the exposure is calculated according to the following formula:exposure amount =where:(a) P is the current outstanding balance on the lifetime mortgage;(b) i is the interest rate charged on the lifetime mortgage, which for the purposes of this calculation must not be lower than the discount rate referred to in
BIPRU 3.4.81RRP
A firm may not treat an exposure as fully and completely secured by residential property located in the United Kingdom for the purpose of BIPRU 3.4.56 R or BIPRU 3.4.58 R unless the amount of the exposure or of the secured part of the exposure referred to in BIPRU 3.4.56 R or BIPRU 3.4.58 R, as the case may be, is 80% or less of the value of the residential property on which it is secured.
BIPRU 3.4.82GRP
(1) The application of BIPRU 3.4.81 R may be illustrated by an example. If a firm has a mortgage exposure of £100,000 secured on residential property in the United Kingdom that satisfies the criteria listed in BIPRU 3.4.56 R to BIPRU 3.4.80 R and the value of that property is £100,000, then £80,000 of that exposure may be treated as fully and completely secured and risk weighted at 35%. The remaining £20,000 may be risk weighted at 75% provided the exposure meets the criteria
BIPRU 3.4.87GRP
If a firm has more than one exposure secured on the same property they should be aggregated and treated as if they were a single exposure secured on the property for the purposes of BIPRU 3.4.56 R and BIPRU 3.4.58 R and BIPRU 3.4.81 R10 and BIPRU 3.4.84 R.
BIPRU 3.4.88GRP
If an exposure is secured on property that is used in part for residential purposes in accordance with BIPRU 3.4.56 R and partly for commercial purposes (such as a farm, public house, guest house or shop) it may be treated as secured by residential real estate if the firm can demonstrate that the property's main use is, or will be, residential and that the value of the property is not significantly affected by its commercial use.
BIPRU 3.4.107RRP
(1) Covered bonds means covered bonds as defined in the definition in the Glossary10 and collateralised by any of the following eligible assets:(a) exposures to or guaranteed by the UK central government, the Bank of England,10public sector entities, regional governments and local authorities in the UK10;(b) (i) exposures to or guaranteed by non-UK10 central governments, non-UK10central banks, multilateral development banks, international organisations that qualify for the credit
BIPRU 3.4.108RRP
A firm must for real estate collateralising covered bonds meet the minimum requirements set out in BIPRU 3.4.64 R to BIPRU 3.4.73 R and the valuation rules set out in BIPRU 3.4.77 R to BIPRU 3.4.80 R.[Note: BCD Annex VI Part 1 point 69]
BIPRU 3.4.125RRP
A firm may rely on a third party to calculate and report, in accordance with the methods set out in BIPRU 3.4.123 R to BIPRU 3.4.124 R, a risk weight for the CIU provided that the correctness of the calculation and report is adequately ensured.[Note: BCD Annex VI Part 1 point 81]
BIPRU 3.4.129RRP
Cash items in the process of collection must be assigned a 20% risk weight. Cash in hand and equivalent cash items must be assigned a 0% risk weight.[Note: BCD Annex VI Part 1 point 84]
BIPRU 4.10.25RRP
Where the ratio of the value of the collateral (C) to the exposure value (E) is below a threshold level of C* (the required minimum collateralisation level for the exposure) as laid down in BIPRU 4.10.28 R, LGD* must be the LGD laid down in the other sections of BIPRU 4 for uncollateralised exposures to the counterparty. For this purpose, the exposure value of items listed in BIPRU 4.4.37 R to BIPRU 4.4.39 R and BIPRU 4.8.29 R must be calculated using a conversion factor or percentage
BIPRU 4.10.28RRP

Table: Minimum LGD for secured portion of exposures

This table belongs to BIPRU 4.10.24 R - BIPRU 4.10.27 R

LGD* for senior claims or contingent claims

LGD* for subordinated claims or contingent claims

Required minimum collateralisation level of the exposure (C*)

Required minimum collateralisation level of the exposure (C**)

Receivables

35%

65%

0%

125%

Residential real estate/commercial real estate

35%

65%

30%

140%

Other collateral

40%

70%

30%

140%

[Note: BCD Annex VIII Part 3 point 72 (part)]

BIPRU 4.10.30RRP
(1) Where:(a) risk weighted exposure amounts and expected loss amounts are calculated under the IRB approach; and(b) an exposure is collateralised by both financial collateral and other eligible collateral;LGD* to be taken as the LGD for the purposes of the IRB approach must be calculated in accordance with this rule.(2) A firm must subdivide the volatility-adjusted value of the exposure (i.e. the value after the application of the volatility adjustment as set out in BIPRU 5.4.28
BIPRU 4.10.34RRP
(1) This rule sets out how the calculations under BIPRU 5.6.29 R (Calculating risk-weighted exposure amounts and expected loss amounts for master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market driven transactions) must be modified under the IRB approach.(2) E* must be taken as the exposure value of the exposure to the counterparty arising from the transactions subject to the master
BIPRU 4.10.35RRP
(1) This rule sets out how the calculations under BIPRU 5.4.28 R (Calculating adjusted values under the financial collateral comprehensive method) must be modified under the IRB approach.(2) E as referred to in the provisions listed in (1) is the exposure value as would be determined under the IRB approach if the exposure was not collateralised. For this purpose, where a firm calculates risk weighted exposure amounts under the IRB approach, the exposure value of the items listed
BIPRU 4.10.42RRP
A firm must have clearly specified criteria for the types of guarantors it recognises for the calculation of risk weighted exposure amounts.[Note: Annex VII Part 4 point 98]
BIPRU 4.10.45RRP
A firm must have clearly specified criteria for adjusting grades, pools or LGD estimates, and in the case of retail exposures and eligible purchased receivables, the process of allocating exposures to grades or pools, to reflect the impact of guarantees for the calculation of risk weighted exposure amounts. These criteria must comply with the minimum requirements referred to in BIPRU 4.10.43 R.[Note: BCD Annex VII Part 4 point 101]
BIPRU 4.10.49RRP
(1) This rule relates to the calculation of risk-weighted exposure amounts and expected loss amounts in the case of unfunded credit protection.(2) BIPRU 5.7.21 R (Tranching) applies for the purpose in (1).(3) The provisions in (4) replace those in BIPRU 5.7.22 R to BIPRU 5.7.25 R (Calculating risk weighted exposure amounts under the standardised approach in the case of unfunded credit protection).(4) For the covered portion of the exposure value E3 (based on the adjusted value
BIPRU 2.2.11GRP
As part of its SREP, the appropriate regulator will consider whether the amount and quality4 of capital which a firm should hold to meet its CRR in GENPRU 2.1 (Calculation of capital resources requirements) is sufficient for that firm to comply with the overall financial adequacy rule.4
BIPRU 2.2.12GRP
After completing a review as part of the SREP, the appropriate regulator will normally give that firm individual guidance (individual capital guidance), advising it of the amount and quality4 of capital which it should hold to meet the overall financial adequacy rule.
BIPRU 2.2.16GRP
If the appropriate regulator gives individual capital guidance to a firm, the appropriate regulator will state what amount and quality of capital the appropriate regulator considers the firm needs to hold in order to comply with the overall financial adequacy rule. It will generally do so by saying that the firm should hold capital resources of an amount which is 3at least equal to a specified percentage of that firm'scapital resources requirement plus one or more static add-ons
BIPRU 2.2.17GRP
(1) Individual capital guidance may refer to two types of capital resources.(2) The first type is referred to as general capital. It refers to total tier one capital resources and tier two capital resources after deductions.(3) The second type is referred to as total capital. It refers to total tier one capital resources, tier two capital resources and tier three capital resources after deductions.
BIPRU 2.2.18GRP
(1) In both of the cases in BIPRU 2.2.17 Gcapital resources should be calculated in the same way as they are in GENPRU 2.2 (Capital resources). This includes the rules limiting the amount of capital that can be included in the various tiers of capital when capital resources are being calculated.(2) GENPRU 2.2.42 R does not allow innovative tier one capital to count as tier one capital resources for certain purposes. This restriction does not apply for the purposes in BIPRU 2.2.17
BIPRU 2.2.19AGRP
4Where the appropriate regulator notifies a firm that it should hold a capital planning buffer, the notification will state what amount and quality of capital the appropriate regulator considers that is adequate for the firm to hold as such. This will normally be notified to the firm together with its individual capital guidance and expressed as a separate amount of capital resources that the firm should hold in excess of the amount of capital resources indicated as its individual
BIPRU 2.2.40GRP
To assess its expected capital requirements over the economic and business cycles, a firm may wish to project forward its financial position taking account of its business strategy and expected growth according to a range of assumptions as to the state of the economic or business environment which it faces. For example, an ICAAP should include an analysis of the impact that the actions of a firm's competitors might have on its performance, in order to see what changes in its environment
BIPRU 2.2.41RRP
A firm with an IRB permission must ensure that there is no significant risk that it will not be able to meet its capital resource requirements for credit risk under GENPRU 2.1 (Calculation of capital resources requirements) at all times throughout an economic cycle, including the capital resources requirements for credit risk indicated by any stress test carried out under BIPRU 4.3.39 R to BIPRU 4.3.40 R (Stress tests used in assessment of capital adequacy for a firm with an IRB
BIPRU 2.2.43RRP
If BIPRU 2.2.41 R applies to a firm on a consolidated basis the following adjustments are made to BIPRU 2.2.41 R in accordance with the general principles of BIPRU 8 (Group risk - consolidation):(1) references to capital resources are to the consolidated capital resources of the firm'sUK consolidation group or, as the case may be, its non-UK sub-group7; and(2) references to the capital requirements in GENPRU 2.1 (Calculation of capital resources requirements) are to the consolidated
BIPRU 2.2.74GRP
In relation to the use of an ECM (see BIPRU 2.2.27 G), the appropriate regulator is likely to place more reliance on a firm'sICAAP if the firm provides the following information:(1) a comparison of the amount of capital that the ECM generates in respect of each of the risks captured in the CRR before aggregation with the corresponding components of the CRR calculation; and(2) evidence that the guidance in BIPRU 2.2.71 G to BIPRU 2.2.78 G has been followed.
BIPRU 3.2.15GRP
In deciding what steps are reasonable for the purposes of BIPRU 3.2.11 R, a firm may take into account complexity and cost, as well as the materiality of the impact upon its capital calculation. A firm should be able to demonstrate to the appropriate regulator that it has complied with the obligation to take reasonable steps under BIPRU 3.2.11 R in the way it takes these factors into account.
BIPRU 3.2.18GRP
Where an exposure is denominated in a currency other than the euro, a firm may calculate the euro equivalent for purposes of BIPRU 3.2.10 R using any appropriate set of exchange rates provided its choice has no obvious bias and that the firm is consistent in its approach to choosing rates.
BIPRU 3.2.20RRP
(1) To calculate risk weighted exposure amounts, risk weights must be applied to all exposures, unless deducted from capital resources, in accordance with the provisions of BIPRU 3.4.(2) The application of risk weights must be based on the standardised credit risk exposure class to which the exposure is assigned and, to the extent specified in BIPRU 3.4, its credit quality.(3) Credit quality may be determined by reference to:(a) the credit assessments of eligible ECAIs in accordance
BIPRU 3.2.24RRP
Exposures the calculation of risk weighted exposure amounts for which is not otherwise provided for under the standardised approach must be assigned a risk weight of 100%.[Note: BCD Article 80(6)]
BIPRU 3.2.27ARRP
(1) 2For the purpose of BIPRU 3.2.25R (1)(e), a firm must be able on an ongoing basis 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 capital resources or repayment of liabilities from the counterparty to the firm. (2) In relation to a counterparty that is not a firm, the arrangements referred
BIPRU 3.2.33GRP
A firm that has chosen to apply the treatment in BIPRU 3.2.25 R should monitor the exposures to which a 0% risk weight is applied under that treatment and report these to the appropriate regulator as required.
BIPRU 3.2.34GRP
If a firm has an IRB permission and exposures are exempted from the IRB approach under BIPRU 4.2.26 R (6) the firm may apply a 0% risk weight to them under BIPRU 3.2.25 R (2) (Zero risk weighting for intra-group exposures) if the conditions in BIPRU 3.2.25 R (1) are satisfied.
BIPRU 7.5.4RRP
(1) The following are excluded from a firm'sforeign currency PRR calculation:(a) foreign currency assets which have been deducted in full from the firm'scapital resources under the calculations under the capital resources table;(b) positions hedging (a);(c) positions that a firm has deliberately taken in order to hedge against the adverse effect of the exchange rate on the ratio of its capital resources to its capital resources requirement; and(d) transactions to the extent that
BIPRU 7.5.15RRP
Where included in BIPRU 7.5's PRR calculation (see the table in BIPRU 7.5.5R), a foreign currencyoption or warrant must be treated as a foreign currencyforward.
BIPRU 7.5.18RRP
(1) This rule deals with positions in CIUs.(2) The actual foreign currencypositions of a CIU must be included in a firm'sforeign currency PRR calculation under BIPRU 7.5.1 R1.(3) A firm may rely on third party reporting of the foreign currencypositions in the CIU, where the correctness of this report is adequately ensured.(4) If a firm is not aware of the foreign currencypositions in a CIU, the firm must assume that the CIU is invested up to the maximum extent allowed under the
BIPRU 7.5.19RRP
A firm must calculate its open currency position by:(1) calculating the net position in each foreign currency;(2) converting each such net position into its base currency equivalent at current spot rates;(3) summing all short net positions and summing all long net positions calculated under (1) and (2); and(4) selecting the larger sum (ignoring the sign) from (3).
BIPRU 7.5.20RRP
A firm must calculate its net gold position by:(1) valuing all gold positions using the prevailing spot price for gold (regardless of the maturity of the positions);(2) offsetting long and short positions; and(3) converting the resulting net position into the base currency equivalent using the current spot foreign currency rate.
BIPRU 5.6.4RRP
BIPRU 5.6.5 R to BIPRU 5.6.11 R set out the calculation of the fully adjusted exposure value under the supervisory volatility adjustments approach and the own estimates of volatility adjustments approach.
BIPRU 5.6.5RRP
In calculating the ‘fully adjusted exposure value’ (E*) for the exposures subject to an eligible master netting agreement covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions, a firm must calculate the volatility adjustments to be applied in the manner set out in BIPRU 5.6.6 R to BIPRU 5.6.11 R either using the supervisory volatility adjustments approach or the own estimates of volatility
BIPRU 5.6.11RRP
E* must be calculated according to the following formula:E* = max {0, [(∑(E) -∑ (C)) + ∑ (|net position in each security| x Hsec) + (∑|Efx| x Hfx)]}where:(1) (where risk weighted exposure amounts are calculated under the standardised approach) E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection;(2) C is the value of the securities or commodities borrowed, purchased or received or the cash borrowed or received
BIPRU 5.6.16RRP
The master netting agreement internal models approach1 is an alternative to using the supervisory volatility adjustments approach or the own estimates of volatility adjustments approach in calculating volatility adjustments for the purpose of calculating the ‘fully adjusted exposure value’ (E*) resulting from the application of an eligible master netting agreement covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital
BIPRU 5.6.18RRP
A firm may use the master netting agreement internal models approach independently of the choice it has made between the standardised approach and the IRB approach for the calculation of risk weighted exposure amounts. However, if a firm uses the master netting agreement internal models approach, it must do so for all counterparties and securities, excluding immaterial portfolios where it may use the supervisory volatility adjustments approach or the own estimates of volatility
BIPRU 5.6.24RRP
The fully adjusted exposure value (E*) for a firm using the master netting agreement internal models approach must be calculated according to the following formula:E* = max {0, [(∑E -∑C) + (VaR output of the internal models)]}where(1) (where risk weighted exposure amounts are calculated under the standardised approach) E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection;(2) C is the value of the securities
IPRU-INV 12.3.1RRP
(1) A firm must at all times have available the amount and type of financial resources1 required by this chapter (see IPRU-INV 12.3.2R). (2) In arriving at its calculation of its financial resources1, a firm must deduct certain items (see IPRU-INV 12.3.3R).
IPRU-INV 12.3.2RRP

Table: Items which are eligible to contribute to the financial resources of a firm

Item

Additional explanation

1.

Share capital

This must be fully paid and may include:

(1)

ordinary share capital; or

(2)

preference share capital (excluding preference shares redeemable by shareholders within two years).

2.

Capital other than share capital (for example, the capital of a sole trader, partnership or limited liability partnership)

The capital of a sole trader is the net balance on the firm's capital account and current account. The capital of a partnership is the capital made up of the partners':

(1)

capital account, that is the account:

(a)

into which capital contributed by the partners is paid; and

(b)

from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if:

( i) he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any person replacing him as their partner; or

(ii) the partnership is otherwise dissolved or wound up; and

(2)

current accounts according to the most recent financial statement.

For the purpose of the calculation of financial resources1, in respect of a defined benefit occupational pension scheme:

(1)

a firm must derecognise any defined benefit asset;

(2)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

3.

Reserves (Note 1)

These are, subject to Note 1, the audited accumulated profits retained by the firm (after deduction of tax, dividends and proprietors' or partners' drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent undertaking.

For the purposes of calculating financial resources1, a firm must make the following adjustments to its reserves, where appropriate:

(1)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on debt instruments held, or formerly held, in the available-for-sale financial assets category;

(2)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;

(3)

in respect of a defined benefit occupational pension scheme:

(a)

a firm must derecognise any defined benefit asset;

(b)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

4.

Interim net profits (Note 1)

If a firm seeks to include interim net profits in the calculation of its financial resources1, the profits have, subject to Note 1, to be verified by the firm's external auditor, net of tax, anticipated dividends or proprietors' drawings and other appropriations.

5.

Revaluation reserves

6.

Subordinated loans/debt

Subordinated loans/debt must be included in financial resources1 on the basis of the provisions in this chapter that apply to subordinated loans/debt.

Note:

1

Reserves must be audited and interim net profits, general and collective provisions must be verified by the firm's external auditor unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)) or, where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.

IPRU-INV 12.3.3RRP

Table: Items which must be deducted in arriving at financial 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.

IPRU-INV 12.3.6GRP

IPRU-INV 12.3.5R can be illustrated as follows:

1

    Share Capital

    £20,000

    Reserves

    £30,000

    Subordinated loans/debts

    £10,000

    Intangible Assets

    £10,000

    As subordinated loans/debts (£10,000) are less than the total of share capital + reserves – intangible assets (£40,000) the firm need not exclude any of its subordinated loans/debts pursuant to IPRU-INV 12.3.5R. Therefore, total financial resources1 will be £50,000.

    Share Capital

    £20,000

    Reserves

    £30,000

    Subordinated loans/debts

    £60,000

    Intangible Assets

    £10,000

    As subordinated loans/debts (£60,000) exceed the total of share capital + reserves – intangible assets (£40,000) by £20,000, the firm should exclude £20,000 of its subordinated loans/debts when calculating its financial resources1. Therefore, total financial resources1 will be £80,000.

BIPRU 4.9.6RRP
The risk weighted exposure amounts must be calculated according to the formula:Risk-weighted exposure amount = 100% * exposure value except for when the exposure is a residual value of leased properties1 in which case it must1 be calculated as follows:1/t * 100% * exposure value;where t is the greater of 1 and the nearest number of whole years of the lease remaining.1[Note: BCD Annex VII Part 1 point 27]1
BIPRU 4.9.10RRP
For non credit-obligation assets the expected loss amount must be zero.[Note: BCD Article 88(4)]
BIPRU 4.9.11RRP
(1) Where exposures in the form of a CIU1 meet the criteria set out in BIPRU 3.4.121 R2(Conditions for look through treatment under the standardised approach) and the firm is aware of all of the underlying exposures of the CIU, the firm must look through to those underlying exposures in order to calculate risk weighted exposure amounts and expected loss amounts in accordance with the methods set out in BIPRU 4.BIPRU 4.9.12 R applies to the part of the underlying exposures of the
BIPRU 4.9.14GRP
For the purposes of BIPRU 4.9.12 R (2), a firm should ensure that any third party relied on for the calculations and report possesses the necessary competence and experience to ensure that the calculations and report are correct.
BIPRU 4.9.15RRP
The expected loss amounts for exposures referred to in BIPRU 4.9.11 R - BIPRU 4.9.12 R must be calculated in accordance with the methods set out in BIPRU 4.4.61 R (Calculation of expected loss for sovereigns, institutions and corporates), BIPRU 4.5.12 R - BIPRU 4.5.14 R (Calculation of expected loss for specialised lending), BIPRU 4.6.47 R - BIPRU 4.6.48 R (Calculation of expected loss for retail exposures), BIPRU 4.7.12 R, BIPRU 4.7.17 R and BIPRU 4.7.26 R (Calculation of expected
BIPRU 8.4.4GRP
The FCA will not grant an investment firm consolidation waiver unless:(1) the UK consolidation group or non-UK sub-group3 meets the conditions for being a CAD Article 22 group;(2) the FCA is satisfied that each BIPRU firm in the UK consolidation group or non-UK sub-group3 will be able to meet its capital requirements using the calculation of capital resources in GENPRU 2 Annex 6R (Capital resources table for a BIPRU 2firm with a waiver from consolidated supervision); and(3) the
BIPRU 8.4.10GRP
[deleted]311111
BIPRU 8.4.11RRP
If a firm has an investment firm consolidation waiver, it must ensure that any financial holding company in the UK consolidation group or the non-UK sub-group3 that is the parent financial holding company in the UK3 of a CAD investment firm in the UK consolidation group or non-UK sub-group3 has capital resources, calculated under BIPRU 8.4.12 R, in excess of the sum of the following (or any higher amount specified in the investment firm consolidation waiver):(1) the sum of the
BIPRU 8.4.12RRP
A firm must calculate the capital resources of the parent financial holding company in the UK3 for the purpose of BIPRU 8.4.11 R as follows:(1) the capital resources are the sum of capital resources calculated at stages D (Total tier one capital before deductions) and I (Total tier two capital) of the version of the capital resources table in GENPRU 2 Annex 4R(Capital resources table for a BIPRU 2firm deducting material holdings) as adjusted in accordance with this rule;(2) capital
BIPRU 8.4.13RRP
The solo notional capital resources requirement as referred to in BIPRU 8.4.11R (1) is calculated in the same way as the capital resources requirement for a BIPRU firm.1
BIPRU 8.4.15GRP
The notional capital resources requirement calculated under BIPRU 8.4.13 R need not include a credit charge for material holdings. However it should include one for illiquid assets.
CONC 10.2.5RRP
On its accounting reference date in each year, a firm must calculate:(1) the total value of its relevant debts under management outstanding on that date; and(2) the sum of:(a) 0.25% of the first £5 million of that total value;(b) 0.15% of the next £95 million of that total value; and(c) 0.05% of any remaining total value.
CONC 10.2.6RRP
The total value of a firm'srelevant debts under management outstanding referred to in CONC 10.2.5 R (1) is the sum of all the firm'scustomers'relevant debts under management.
CONC 10.2.8RRP
The prudential resources requirement for a firm to which this chapter applies is the higher of:(1) £5,000; or(2) the sum calculated in accordance with CONC 10.2.5 R (2); for the period until (subject to CONC 10.2.13 R) its next accounting reference date.
CONC 10.2.9RRP
To determine a firm's prudential resources requirement for the period beginning on the date on which it obtains Part 4A permission and ending on the day before its next accounting reference date, the firm must carry out the calculation in CONC 10.2.5 R (2) on the basis of the total value of relevant debts under management the firm projects will be outstanding on the day before its next accounting reference date.
CONC 10.2.10GRP
Activities carried on by a person acting as an insolvency practitioner (within section 388 of the Insolvency Act 1986 or, as the case may be, article 3 of the Insolvency (Northern Ireland) Order 1989) or by a person acting in reasonable contemplation of that person's appointment as an insolvency practitioner are excluded from the regulated activity of debt adjusting. A debt in relation to which a person is acting in such a capacity is, therefore, excluded from the calculation
IPRU-INV 14.4.1RRP
A firm must calculate its groupfinancial resources on the basis of the consolidated accounts of the relevant group, subject to the adjustments in rule 14.4.2 and on the basis specified in rule 14.4.3.
IPRU-INV 14.4.2RRP
(1) If more than one firm in the group is subject to the rules of this chapter, groupfinancial resources are defined according to the relevant rules applicable to the main firm in the group to which this chapter applies, with Tier 1 minority interests being allowed as Group Tier 1 capital and Tier 2 minority interests being allowed as Group Tier 2 capital. (2) In calculating the groupfinancial resources, deductions should be made for intangible assets, material unaudited losses
IPRU-INV 14.4.4GRP
(1) The FCA interprets 'main' by reference to the share of the firm's business in the group, its contribution to the group's balance sheet (measured on the basis of total assets) or profit and loss statement (measured on the basis of gross income). (2) The form in SUP 16 Ann 19 R, together with the guidance in SUP 16 Ann 20 G, shows the mechanics of the calculation.
CONC 10.3.1RRP
(1) A firm must calculate its prudential resources only from the items which are eligible to contribute to a firm's prudential resources (see CONC 10.3.2 R).(2) In arriving at its calculation of its prudential resources a firm must deduct certain items (see CONC 10.3.3 R).
CONC 10.3.2RRP

Table: Items which are eligible to contribute to the prudential resources of a firm

Item

Additional explanation

1

Share capital

This must be fully paid and may include:

(1)

ordinary share capital; or

(2)

preference share capital (excluding preference shares redeemable by shareholders within two years).

2

Capital other than share capital (for example, the capital of a sole trader, partnership or limited liability partnership)

The capital of a sole trader is the net balance on the firm's capital account and current account. The capital of a partnership is the capital made up of the partners':

(1)

capital account, that is the account:

(a)

into which capital contributed by the partners is paid; and

(b)

from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if:

(i) he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any person replacing him as their partner; or

(ii) he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any person replacing him as their partner; or

(iii) the partnership is otherwise dissolved or wound up; and

(2)

current accounts according to the most recent financial statement.

For the purpose of the calculation of capital resources in respect of a defined benefit occupational pension scheme:

(1)

a firm must derecognise any defined benefit asset;

(2)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

3

Reserves (Note 1)

These are, subject to Note 1, the audited accumulated profits retained by the firm (after deduction of tax, dividends and proprietors' or partners' drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent undertaking.

For the purposes of calculating capital resources, a firm must make the following adjustments to its reserves, where appropriate:

(1)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on debt instruments held, or formerly held, in the available-for-sale financial assets category;

(2)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;

(3)

in respect of a defined benefit occupational pension scheme:

(a)

a firm must derecognise any defined benefit asset;

(b)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

4

Interim net profits (Note 1)

If a firm seeks to include interim net profits in the calculation of its capital resources, the profits have, subject to Note 1, to be verified by the firm's external auditor, net of tax, anticipated dividends or proprietors' drawings and other appropriations.

5

Revaluation reserves

6

Subordinated loans/debt

Subordinated loans/debts must be included in capital on the basis of the provisions in this chapter that apply to subordinated loans/debts.

Note:

1

Reserves must be audited and interim net profits, general and collective provisions must be verified by the firm's external auditor unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)) or, where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.
CONC 10.3.5RRP

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

where:

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]

CONC 10.3.6GRP

CONC 10.3.5 R can be illustrated by the examples set out below:

  1. (1)

    Share Capital

    £20,000

    Reserves

    £30,000

    Subordinated loans/debts

    £10,000

    Intangible assets

    £10,000

    As subordinated loans/debts (£10,000) are less than the total of share capital + reserves - intangible assets (£40,000) the firm need not exclude any of its subordinated loans/debts pursuant to CONC 10.3.5 R. Therefore total prudential resources will be £50,000.
  2. (2)

    Share Capital

    £20,000

    Reserves

    £30,000

    Subordinated loans/debts

    £60,000

    Intangible assets

    £10,000

    As subordinated loans/debts (£60,000) exceed the total of share capital + reserves - intangible assets (£40,000) by £20,000, the firm should exclude £20,000 of its subordinated loans/debts when calculating its prudential resources. Therefore total prudential resources will be £80,000.

[Note: Until 31 March 2017, transitional provisions apply to CONC 10.3.6 G: see CONC TP 5.3]

MIPRU 4.4.1RRP
(1) A firm must calculate its capital resources only from the items which are eligible to contribute to a firm's capital resources from which it must deduct certain items (see MIPRU 4.4.4 R).(2) If the firm is subject to the Prudential sourcebook for MiFID Investment Firms (MIFIDPRU) or the Interim Prudential sourcebook for investment businesses (IPRU(INV)), the capital resources are the higher of:96(a) the amount calculated under (1); and(b) the financial resources calculated
MIPRU 4.4.2RRP

Table: Items which are eligible to contribute to the capital resources of a firm

Item

Additional explanation

1.

Share capital

This must be fully paid and may include:

(1)

ordinary share capital; or

(2)

preference share capital (excluding preference shares redeemable by shareholders within two years).

2.

Capital other than share capital (for example, the capital of a sole trader, partnership or limited liability partnership)

The capital of a sole trader is the net balance on the firm's capital account and current account. The capital of a partnership is the capital made up of the partners':

(1)

capital account, that is the account:

(a)

into which capital contributed by the partners is paid; and

(b)

from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if:

(i) he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any person replacing him as their partner; or

(ii) the partnership is otherwise dissolved or wound up; and

(2)

current accounts according to the most recent financial statement.

For the purpose of the calculation of capital resources, in respect of a defined benefit occupational pension scheme:

(1)

a firm must derecognise any defined benefit asset;

(2)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

3.

Reserves (Note 1)

These are, subject to Note 1, the audited accumulated profits retained by the firm (after deduction of tax, dividends and proprietors' or partners' drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent undertaking.

For the purposes of calculating capital resources, a firm must make the following adjustments to its reserves, where appropriate:

(1)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on debt instruments held, or formerly held,3 in the available-for-sale financial assets category;

(2)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;

(3)

in respect of a defined benefit occupational pension scheme:

(a)

a firm must derecognise any defined benefit asset;

(b)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount, provided that the election is applied consistently in respect of any one financial year.

4.

Interim net profits (Note 1)

If a firm seeks to include interim net profits in the calculation of its capital resources, the profits have, subject to Note 1, to be verified by the firm's external auditor, net of tax, anticipated dividends or proprietors' drawings and other appropriations.

5.

Revaluation reserves

6.

General/ collective provisions (Note 1)

These are provisions that a firm carrying on home financing1or home finance administration1holds against potential losses that have not yet been identified but which experience indicates are present in the firm's portfolio of assets. Such provisions must be freely available to meet these unidentified losses wherever they arise. Subject to Note 1, general/collective provisions must be verified by external auditors and disclosed in the firm's annual report and accounts.

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7.

Subordinated loans

Subordinated loans must be included in capital on the basis of the provisions in this chapter that apply to subordinated loans.

Note:

1

Reserves must be audited and interim net profits, general and collective provisions must be verified by the firm's external auditor unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)) or, where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit))2 relating to the audit of accounts. 2
MIPRU 4.4.3GRP
A firm should keep a record of and be ready to explain to its supervisory contacts in the appropriate regulator the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme.
MIPRU 4.4.4RRP

Table: Items which must be deducted from capital resources

1

Investments in own shares

2

Intangible assets (Note 1)

3

Interim net losses (Note 2)

4

Excess of drawings over profits for a sole trader or a partnership (Note 2)

Notes

Notes 1. Intangible assets are the full balance sheet value of goodwill (but not until 14 January 2008 - see transitional provision 1), capitalised development costs, brand names, trademarks and similar rights and licences.

2. The interim net losses in row 3, and the excess of drawings in row 4, are in relation to the period following the date as at which the capital resources are being computed.
MIPRU 4.4.8RRP
  1. (1)

    This rule applies to a firm which:

    1. (a)

      carries on:

      1. (i)

        insurance distribution activity7 ; or

      2. (ii)

        home finance mediation activity1(or both); and

        1

    in relation to those activities, holds client money or other client assets; or5

    1. (b)

      carries on home financing or home finance administration connected to regulated mortgage contracts (or both) unless as at 26 April 2014 its Part IV permission was and continues to remain subject to a restriction preventing it from undertaking new home financing or home finance administration connected to regulated mortgage contracts.5

      5
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  1. (2)

    In calculating its capital resources, the firm must exclude any amount by which the aggregate amount of its subordinated loans and its redeemable preference shares exceeds the amount calculated as follows:

    2. four times (a - b - c);

    where:

    a

    =

    items 1 to 5 in the Table of items which are eligible to contribute to a firm's capital resources (see MIPRU 4.4.2 R)

    b

    =

    the firm's redeemable preference shares; and

    c

    =

    the amount of its intangible assets (but not goodwill until 14 January 2008 - see transitional provision 1).