3Pursuant to the third paragraph of article 95(2) of the UK CRR, this section applies requirements that correspond to4 Articles 70 and 118 of the Banking Consolidation Directive3so far as they apply under Articles 2 and 28 of the Capital Adequacy Directive to CAD investment firms3 that are subject to the requirements imposed by the UK legislation that implemented4 MiFID (or which would have been subject to those requirements4 if its head office were in the UK4), but excluding a bank, building society, a credit institution, a local and an exempt CAD firm..3333
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's capital 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 that has a solo consolidation waiver must meet the obligations in SYSC 12.1.13 R (Application of certain systems and controls rules on a consolidated basis) on a consolidated basis with respect to the firm and each subsidiary undertaking to which the firm's solo consolidation waiver applies.
If (1) applies, SYSC 12.1.13 R applies to the group made up of the firm and its subsidiary undertakings referred to in (1) in the same way as it applies to a UK consolidation group or non-UK sub-group4.
A firm must treat itself and each subsidiary undertaking referred to in BIPRU 2.1.7 R as a single undertaking and must apply, on that basis, BIPRU 8 (Group risk - consolidation) to the group made up of the firm and such subsidiary undertakings in the same way as BIPRU 8 applies to a UK consolidation group or non-UK sub-group4.
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.
the speed with which funds can be transferred or liabilities repaid to the firm and the simplicity of the method for the transfer or repayment;
whether there are any interests other than those of the firm in the subsidiary undertaking and what impact those other interests may have on the firm's control over the subsidiary undertaking and on the ability of the firm to require a transfer of funds or repayment of liabilities;
whether there are any exchange controls that may have an impact on the transfer of funds or repayment of liabilities;
whether there are assets in the subsidiary undertaking available either to be transferred or liquidated for the purposes of the transfer of funds or repayment of liabilities;
whether any regulatory requirements impact on the ability of the subsidiary undertaking to transfer funds or repay liabilities promptly;
whether the purpose of the subsidiary undertaking prejudices the prompt transfer of funds or repayment of liabilities;
whether the legal structure of the subsidiary undertaking prejudices the prompt transfer of funds or repayment of liabilities;
whether the degree of solo consolidation by the firm undermines the appropriate regulator's ability to assess the soundness of the firm as a legal entity (taking into account any other subsidiary undertakings to which BIPRU 2.1 is being applied).
The effect of BIPRU 2.1.19 R is that even though a firm's solo consolidation waiver applies BIPRU 2.1 with respect to a subsidiary undertaking, the firm should not apply BIPRU 2.1 with respect to that subsidiary undertaking unless in addition it meets the conditions in BIPRU 2.1.20 R to BIPRU 2.1.24 R.