Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.


Status: This chapter was amended on 31 December 2020 as a result of Brexit. However, it is subject to the FCA Prudential Transitional Direction, which means that firms should not comply with these provisions yet. Instead, firms must follow this link and continue to comply with pre-IP completion day requirements https://www.handbook.fca.org.uk/handbook?date=31-12-2020&timeline=True (unless specified otherwise in the Direction). To see a full list of Handbook modules affected, please see Section B of the Annex to the Direction.

BIPRU 8.3 Scope and basic consolidation requirements for non-UK sub-groups

Main consolidation rule for non-UK sub-groups

BIPRU 8.3.1RRP

  1. (1)

    A BIPRU firm that is a subsidiary undertaking of a BIPRU firm or of a financial holding company or of a mixed financial holding company3 must apply the requirements laid down in GENPRU 1.2 (Adequacy of financial resources) and4 the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) on a sub-consolidated basis if the BIPRU firm, or the parent undertaking where it is a financial holding company or a mixed financial holding company3, have a third country investment services undertaking5 as a subsidiary undertaking or hold a participation in such an undertaking.

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  2. (2)

    [deleted]5

BIPRU 8.3.2RRP

Further to BIPRU 8.3.1 R, a firm that is a member of a non-UK sub-group5 must at all times ensure that the consolidated capital resources of that non-UK sub-group5 are equal to or exceed its consolidated capital resources requirement.

BIPRU 8.3.3GRP

The base capital resources requirement does not apply on a consolidated basis.

BIPRU 8.3.4GRP

The sub-group identified in BIPRU 8.3.1 R is called a non-UK sub-group5.

How to identify a non-UK sub-group

BIPRU 8.3.6GRP

The remainder of this section sets out a process for identifying a non-UK sub-group5 in straightforward cases.

BIPRU 8.3.7GRP

A firm will not be a member of a non-UK sub-group5 unless it is1 also a member of a UK consolidation group. So the first step is to identify each undertaking in the firm's UK consolidation group that satisfies the following conditions:

  1. (1)

    it isa CAD investment firm,4 financial institution or asset management company whose head office is outside the UK5 (a third country investment services undertaking4);

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  2. (2)

    one of the following applies:

    1. (a)

      it is a subsidiary undertaking of a BIPRU firm in that UK consolidation group; or

    2. (b)

      a BIPRU firm in that UK consolidation group holds a participation in it; and

  3. (3)

    that BIPRU firm is not a parent institution in the UK5.

BIPRU 8.3.8GRP
BIPRU 8.3.9GRP

If more than one BIPRU firm is a direct or indirect parent undertaking in accordance with BIPRU 8.3.7G (2)(a) then the sub-groups of each of 1them are all potential non-UK sub-groups5.

4
BIPRU 8.3.10GRP

Similarly if there is more than one BIPRU firm that holds a participation in the third country investment services undertaking4 in accordance with BIPRU 8.3.7G (2)(b) then the sub-group of each such BIPRU firm is a potential non-UK sub-group5.

4
BIPRU 8.3.11GRP

The effect of BIPRU 8.3.7G (3) is that a non-UK sub-group5 cannot be headed by a parent institution in the UK5.

4
BIPRU 8.3.12GRP

The firm should then identify each undertaking in the firm's UK consolidation group that satisfies the following conditions:

  1. (1)

    it is a CAD investment firm,4 financial institution or asset management company whose head office is outside the UK5 (a third country investment services undertaking);

    4
  2. (2)

    one of the following applies:

    1. (a)

      it is a subsidiary undertaking of a financial holding company in that UK consolidation group; or

    2. (b)

      a financial holding company in that UK consolidation group holds a participation in it;

  3. (3)

    the head office of that financial holding company is in the United Kingdom; and

  4. (4)

    that financial holding company has a subsidiary undertaking that is a BIPRU firm.

BIPRU 8.3.13GRP
BIPRU 8.3.15GRP

If more than one financial holding company is a direct or indirect parent undertaking in accordance with BIPRU 8.3.12G (2)(a) then the sub-groups of each of 1them are all potential non-UK sub-groups5.

BIPRU 8.3.16GRP

Similarly if there is more than one financial holding company that holds a participation in the third country investment services undertaking4 in accordance with BIPRU 8.3.12G (2)(b) then the sub-group of each such financial holding company is a potential non-UK sub-group5.

4
BIPRU 8.3.17GRP

The firm should apply the process in BIPRU 8.3.12 G to a third country investment services undertaking4 even though it may be also be part of a potential non-UK sub-group5 under BIPRU 8.3.7 G.

4
BIPRU 8.3.18GRP

Having identified potential non-UK sub-groups5 for each third country investment services undertaking4 in its UK consolidation group the firm should then eliminate overlapping potential non-UK sub-groups5 in the following way. If:

4
  1. (1)

    one potential non-UK sub-group5 is 1contained within a wider potential non-EEA sub-group5; and

  2. (2)

    the third country investment services undertaking4 in the two potential non-UK sub-groups5 are the same;

    4

then the smaller potential non-UK sub-group5 is eliminated.

BIPRU 8.3.19GRP

If there is a chain of three or more potential non-UK sub-groups5, each with the same third country investment services undertaking,4 the elimination process may remove all but the highest.

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BIPRU 8.3.20GRP

Each remaining potential non-UK sub-group is a non-UK sub-group5, even though it may be part of a wider non-UK sub-group5.

BIPRU 8.3.22GRP

If a UK consolidation group is headed by a parent financial holding company in the UK5 the result of the elimination process may be that a firm's UK consolidation group contains only one non-UK sub-group5 and that the non-UK sub-group5 is the same as the UK consolidation group. In theory that means that there are two sets of consolidation requirements, one in relation to the UK consolidation group and one in relation to the non-UK sub-group5. However as the UK consolidation group and the non-UK sub-group5 are the same, in practice this means that the additional non-UK sub-group5 consolidation disappears.

4
BIPRU 8.3.23GRP

Even where the requirements for a non-UK sub-group5 are absorbed into those for the UK consolidation group a firm should still make clear in its regulatory reporting that the consolidation figures relate to a UK consolidation group and a non-UK sub-group5 and that they both contain the same members.

BIPRU 8.3.24GRP

[deleted]5

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