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BIPRU 10.7 Treasury concession and intra-group securities financing transactions

Treasury concession

BIPRU 10.7.1R

Subject to BIPRU 10.11.1 R (Notification procedures for BIPRU 10.7 to BIPRU 10.10), a firm may treat as exempt from the limits in BIPRU 10.5 (Limits on exposures and large exposures) an exposure to a concentration risk group counterparty provided that one or more of the following conditions is satisfied:

  1. (1)

    the exposure has an original maturity of one year or less and it is incurred in the course of the firm carrying on a treasury role for other members of its group;

  2. (2)

    the following conditions are satisfied:

    1. (a)

      the exposure is a cash loan to a parent undertaking of the firm or to another member of the firm's immediate group;

    2. (b)

      (if the loan is to a member of the firm's immediate group other than a parent undertaking of the firm) that member carries on a treasury role for the firm's group;

    3. (c)

      the cash lent is surplus to the needs of the firm; and

    4. (d)

      the amount of the surplus fluctuates regularly; or

  3. (3)

    the exposure arises from the firm or the counterparty operating a central risk management function for members of the firm's group for exposures arising from derivatives.

BIPRU 10.7.2R

The total amount of the exposures that a firm may treat as exempt under BIPRU 10.7.1 R must not exceed 50% of the firm's capital resources as set out in stage (N) of the capital resources table (Total tier one capital plus tier two capital after deductions).

BIPRU 10.7.3G

Any exposures that would, but for BIPRU 10.7.2 R, fall to be treated in accordance with BIPRU 10.7.1 R remain subject to the limits in BIPRU 10.5 (Limits on exposures and large exposures).

Intra-group securities financing transactions

BIPRU 10.7.4R

Subject to BIPRU 10.11.1 R (Notification procedures for BIPRU 10.7 to BIPRU 10.10), a firm may treat as exempt from the limits in BIPRU 10.5 (Limits on exposures and large exposures) an exposure in the form of a securities financing transaction provided that:

  1. (1)

    the counterparty is a concentration risk group counterparty;

  2. (2)

    the firm does not apply the CCR internal model method with respect to any securities financing transaction under this chapter;

  3. (3)

    the exposure in question is collateralised by collateral whose value equals or exceeds 90% of the amount of the exposure; and

  4. (4)

    (whether or not the firm uses the financial collateral comprehensive method1) the collateral is eligible under the financial collateral comprehensive method1 and the firm meets the other minimum requirements under BIPRU 5 (Credit risk mitigation) in relation to that collateral.

BIPRU 10.7.5R

The level of collateralisation referred to in BIPRU 10.7.4 R (3) must be measured by reference to the gross amount of the exposure without taking into account the effects of netting and without applying volatility adjustments or adjustments for maturity mismatches under the financial collateral comprehensive method1.

BIPRU 10.7.6R

A firm using the exemption in BIPRU 10.7.4 R must be able to demonstrate to the FSA:

  1. (1)

    (if the firm has an CCR internal model method permission) any roll-out programme as referred to in BIPRU 13.6.13 R (Sequential implementation of the CCR internal model method) or any combination of the CCR internal model method with either or both of the CCR mark to market method or the CCR standardised method;

  2. (2)

    the selection of counterparties for securities financing transactions; and

  3. (3)

    the booking of its securities financing transactions and the way that it carries on its business with respect to them;

are not designed or chosen wholly or mainly with a view to coming within the limits in BIPRU 10.5 (Limits on exposures and large exposures) or reducing capital requirements applicable to the firm under the regulatory system through the use of that exemption.