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BIPRU 10.8 UK integrated groups

Application

BIPRU 10.8.1R

This section applies to a firm if:

  1. (1)

    it is a member of a UK integrated group; and

  2. (2)

    it gives notice in accordance with BIPRU 10.11.1 R (Notification procedures for BIPRU 10.7 to BIPRU 10.10) that it will apply BIPRU 10.8.

BIPRU 10.8.2R

If this section applies to a firm, it must apply this section to all exposures to all its concentration risk group counterparties and not just some of them.

Guidance about UK integrated groups

BIPRU 10.8.3G

Guidance on the treatment of intra-group exposures under this chapter if this section applies can be found in BIPRU 10 Annex 1 G (Treatment of exposures under the integrated groups regime for concentration risk).

Definition of UK integrated group

BIPRU 10.8.4R

An undertaking is a member of a firm's UK integrated group if, in relation to the firm, that undertaking satisfies the following conditions:

  1. (1)

    it is a concentration risk group counterparty;

  2. (2)

    it is an institution, financial holding company, financial institution, asset management company or ancillary services undertaking;

  3. (3)

    it is subject to the same risk evaluation, measurement and control procedures as the firm;

  4. (4)

    it is established in the United Kingdom and either it is incorporated in the United Kingdom or (if that counterparty is of a type that falls within the scope of that Regulation) the centre of its main interests is situated within the United Kingdom within the meaning of the Council Regulation of 29 May 2000 on insolvency proceedings (Regulation 1346/2000/EC); and

  5. (5)

    there is no current or foreseen material practical or legal impediment to the prompt transfer of capital resources or repayment of liabilities from the counterparty to the firm.

BIPRU 10.8.5G

Firms are referred to the guidance relating to 0% risk weights for intra-group exposures under the standardised approach as follows:2

22
  1. (1)

    BIPRU 3.2.28 G in respect of BIPRU 10.8.4 R (3) on same risk evaluation, measurement and control procedures; and2

  2. (2)

    BIPRU 3.2.30 G and BIPRU 3.2.31 G in respect of BIPRU 10.8.4 R (5) on prompt transfer of capital resources and repayment of liabilities.2

BIPRU 10.8.5AG

2The FSA may discuss with a firm that makes the notification required in BIPRU 10.8.1 R (2) the reasons why the firm believes it meets the conditions in BIPRU 10.8.4 R (Definition of UK integrated group).

Revised concentration risk limits for a UK integrated group

BIPRU 10.8.6R

A firm must ensure that the rules listed in BIPRU 10.8.7 R are complied with on a consolidated basis in accordance with the following:

  1. (1)

    the rules apply in relation to the firm's UK integrated group rather than in relation to the firm;

  2. (2)

    the rules apply in relation to exposures of members of the UK integrated group to members of the residual block; and

  3. (3)

    the UK integrated group and the residual block must each be treated as a single undertaking.

BIPRU 10.8.7R

The rules referred to in BIPRU 10.8.6 R are:

  1. (1)

    BIPRU 10.5.6 R (25% non-trading book limit);

  2. (2)

    BIPRU 10.5.11 R (trading book limits) other than BIPRU 10.5.11 R (2) (CNCOM);

  3. (3)

    BIPRU 10.5.12 R (500% limit for trading book excess exposures) with the deletion of the time limit set out in BIPRU 10.5.12 R; and

  4. (4)

    BIPRU 10.7 (Treasury concession and intra-group securities financing transactions).

BIPRU 10.8.8G

Exposures between members of the UK integrated group are exempt if this section applies.

BIPRU 10.8.9G

The 800% limit in BIPRU 10.5.8 RR and the 600% limit in BIPRU 10.5.13 R do not apply to exposures to concentration risk group counterparties if this section applies.

Adjustments to the Treasury concession exemption

BIPRU 10.8.10R

A firm may only treat an exposure as exempt under BIPRU 10.7.1 R (Treasury Concession) as applied under this section if the exposure is or (if that rule applied to the member of the UK integrated group in question) would be exempt under BIPRU 10.7.1 R on a solo basis. The following adjustments apply:

  1. (1)

    the exposure must be to a concentration risk group counterparty; and

  2. (2)

    the limit in BIPRU 10.7.2 R (Exemption limited to 50% of a firm's capital resources) is calculated on a consolidated basis with respect to the UK integrated group.

Adjustments to the exemption for securities financing transactions

BIPRU 10.8.11R

A firm may only treat an exposure as exempt under BIPRU 10.7.4 R (Intra-group securities financing transactions) as applied under this section if the exposure is or (if that rule applied to the undertaking in question) would be exempt under BIPRU 10.7.4 R on a solo basis. BIPRU 10.7.6 R (Abuse of the exemption) continues to apply. The exemption is not available if the firm uses the CCR internal model method1 for securities financing transactions for the purpose of this chapter.

Definition of residual block

BIPRU 10.8.12R

For the purposes of this section, a member of the residual block means, in relation to a firm and its UK integrated group, a concentration risk group counterparty of the firm which is not a member of the firm's UK integrated group.

Calculation of capital resources for a UK integrated group

BIPRU 10.8.13R

For the purposes of this section, a firm must calculate the capital resources of the UK integrated group in accordance with GENPRU 3 Annex 1 R Part 2 (Method 2 of Annex I of the Financial Groups Directive (Deduction and aggregation Method)) and apply the limits set out in this section to those capital resources rather than the capital resources of the firm. For these purposes the definition of solo capital resources is adjusted so that the rules on which the calculation for each member of the UK integrated group is based are the ones that would apply under the procedure in BIPRU 8.6.6 R to BIPRU 8.6.9 R (Consolidated capital resources).

BIPRU 10.8.14G

The calculation of capital resources under GENPRU 3 Annex 1 R Part 2 (Method 2 of Annex I of the Financial Groups Directive (Deduction and aggregation Method)) is based on the solo capital resources of members of a financial conglomerate. The definition of solo capital resources depends on what type of undertakings the financial conglomerate contains. For instance, if a financial conglomerate contains a bank the solo capital resources calculation for every group member in the banking sector and the investment services sector is based on the capital resources calculation for banks. The purpose of BIPRU 10.8.13 R is to apply the corresponding procedure that applies under BIPRU 8.6 (Calculation of capital resources on a consolidated basis for BIPRU firms).

Exemption for intra-group exposures on a solo basis

BIPRU 10.8.15R

If this section applies to a firm, then subject to BIPRU 10.10 (Treatment of the trading book concentration risk excess under the integrated groups regime), it may, on a solo basis, treat an exposure to a concentration risk group counterparty as exempt from the limits in BIPRU 10.5 (Limits on exposures and large exposures).

BIPRU 10.8.16G

The purpose of BIPRU 10.8.15 R is to reflect the fact that the limits in BIPRU 10.5 (Limits on exposures and large exposures) so far as they apply to concentration risk group counterparties are calculated on a consolidated basis with respect to a firm's UK integrated group. It is therefore necessary to switch them off on a purely solo basis.