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BIPRU 1.3 Applications for advanced approaches and waivers2

Application

BIPRU 1.3.1R

This section of the Handbook applies to every BIPRU firm that wishes to apply for a permission to use any of the approaches set out in BIPRU 1.3.2 G.

Purpose

BIPRU 1.3.2G
  1. (1)

    A firm may apply for an Article 129 permission or a waiver in respect of:

    1. (a)

      the IRB approach;

    2. (b)

      [deleted]5

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    3. (c)

      the CCR internal model method; and

    4. (d)

      the VaR model approach.

  2. (2)

    A firm should apply for a waiver if it wants to:

    1. (a)

      apply the CAD 1 model approach; or2

    2. (b)

      apply the master netting agreement internal models approach; or2

    3. (c)

      disapply consolidated supervision under BIPRU 8 for its UK consolidation group or non-EEA sub-group; or2

    4. (d)

      apply the treatment in BIPRU 2.1 (Solo-consolidation waiver); or

    5. (da)

      2apply the treatment for a core UK group in BIPRU 3.2.25 R (Zero risk-weighting for intra-group exposures).5

      5
    6. (e)

      [deleted]512

      25
    7. (f)

      [deleted]5

      25

Article 129

BIPRU 1.3.3G

An EEA parent institution and its subsidiary undertakings or the subsidiary undertakings of its EEA parent financial holding company or the subsidiary undertakings of its EEA parent mixed financial holding company4 that wish to use any of the approaches listed in BIPRU 1.3.2 G (1) in respect of its group, including members of its group that are BIPRU firms, may apply for an Article 129 permission.

BIPRU 1.3.4G

The Article 129 procedure allows an EEA parent institution and its subsidiary undertakings or the subsidiary undertakings of its EEA parent financial holding company or the subsidiary undertakings of its EEA parent mixed financial holding company4 to apply for permission to use the approaches in BIPRU 1.3.2 G (1) without making separate applications to the competent authority of each EEA State where members of a firm's group are authorised.

BIPRU 1.3.5G
BIPRU 1.3.6G

Where a firm or its group has been granted an Article 129 permission, each competent authority, including the lead competent authority, will need to take action to apply that Article 129 permission to the institutions that they authorise. Part 3 of the Capital Requirements Regulations 2006 governs how the appropriate regulator will take that action, whether or not the appropriate regulator is the lead competent authority.

Article 129 permissions and waivers - specific conditions

BIPRU 1.3.7D

When an advanced measurement approach is intended to be used by an EEA parent institution and its subsidiary undertakings or the subsidiary undertakings of an EEA parent financial holding company, the application of a firm in accordance with BIPRU 1.3.14 D must include the elements listed in BIPRU 6.5.5 R (Minimum standards for the advanced measurement approach).

[Note:BCD Article 105(2)]

BIPRU 1.3.8D

When an advanced measurement approach is intended to be used by an EEA parent institution and its subsidiary undertakings or the subsidiary undertakings of an EEA parent financial holding company or an EEA parent mixed financial holding company4, the application of a firm must include a description of the methodology used for allocating operational risk capital between the different entities of the group.

[Note: BCD Annex4X Part 3 point 30]

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BIPRU 1.3.9D

For the purposes of BIPRU 1.3.8 D, the application of a firm must indicate whether and how diversification effects are intended to be factored in the risk measurement system.

[Note: BCD annex X Part 3 point 31]

Waiver - general

BIPRU 1.3.10G

As explained in SUP 8, under section 138A3 of the Act, the appropriate regulator may not grant a waiver to a firm unless it is satisfied that:

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  1. (1)

    compliance by the firm with the rules, or with the rules as modified, would be unduly burdensome or would not achieve the purpose for which the rules were made; and

  2. (2)

    the waiver would not adversely affect the advancement of any of the appropriate regulator's objectives.3

    3
BIPRU 1.3.11G

The conditions relating to the use of an approach listed in BIPRU 1.3.2 G referred to in the relevant chapter of BIPRU are minimum standards. Satisfaction of those conditions does not automatically mean the appropriate regulator will grant a waiver referred to in those paragraphs. The appropriate regulator will in addition also apply the tests in section 138A of the Act.

BIPRU 1.3.12G

In the appropriate regulator's view, if the minimum standards referred to in BIPRU 1.3.11 G are satisfied, the conditions referred to in BIPRU 1.3.10 G (1) will generally be met.

Forms and method of application

BIPRU 1.3.13D

Subject to BIPRU 1.3.14 D to BIPRU 1.3.20 D1, if a firm wishes to apply for a waiver to apply an approach set out in BIPRU 1.3.2 G, it must comply with SUP 8.3.3 D.

BIPRU 1.3.14D

[deleted]5

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BIPRU 1.3.15D

If a firm wishes to apply for a waiver or an Article 129 permission to use the IRB approach, it must complete and submit the form in BIPRU 1 Annex 2D D.

BIPRU 1.3.16D

If a firm wishes to apply for a waiver or an Article 129 permission to use the CCR internal model method, it must complete and submit the form in BIPRU 1 Annex 3D D.

BIPRU 1.3.17D

Where a firm makes an application in accordance with BIPRU 1.3.14 D, BIPRU 1.3.15 D or BIPRU 1.3.16 D, the firm must state on the application whether it is making an application for a waiver or an Article 129 permission.

BIPRU 1.3.18D

Where a firm applies for a VaR model permission, the firm must state whether it is making an application for a waiver or an Article 129 permission.

BIPRU 1.3.19G

In respect of the application for waivers to apply the approaches set out in BIPRU 1.3.2 G (1), the appropriate regulator will aim to give decisions on applications as soon as practicable. However, the appropriate regulator expects that it will take a significant period to determine and give a decision due to the complexity of the issues raised by the applications. Details of timelines for applications for waivers to use advanced approaches and under the Article 129 procedure are set out on the appropriate regulator website.

BIPRU 1.3.20D

Where a firm applies for a solo consolidation waiver, it must demonstrate how each of the conditions set out in BIPRU 2.1.20 R to BIPRU 2.1.24 R are met and address the criteria set out in the guidance in BIPRU 2.1.25 G as part of its application in accordance with BIPRU 1.3.13 D.

BIPRU 1.3.21G

Before sending in an application for a waiver or Article 129 permission, a firm may find it helpful to discuss the application with its usual supervisory contact at the appropriate regulator. However, the firm should still ensure that all relevant information is included in the application.