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Status: You are viewing the version of the handbook as on 2009-03-31.

BIPRU 8.5 Basis of consolidation

Undertakings to be included in consolidation

BIPRU 8.5.1RRP

A firm must include only the following types of undertaking in a UK consolidation group or non-EEA sub-group for the purposes of this chapter:

  1. (1)

    a BIPRU firm;

  2. (2)

    an institution;

  3. (3)

    a financial institution;

  4. (4)

    an asset management company;

  5. (5)

    a financial holding company; and

  6. (6)

    an ancillary services undertaking.

BIPRU 8.5.2GRP

Although an undertaking falling outside BIPRU 8.5.1 R will not be included in a UK consolidation group or non-EEA sub-group it may be relevant in deciding whether one undertaking in the banking sector or the investment services sector is a subsidiary undertaking of another with the result that they should be included in the same UK consolidation group or non-EEA sub-group.

BIPRU 8.5.3GRP

Basis of inclusion of undertakings in consolidation

BIPRU 8.5.4RRP

A firm must include any subsidiary undertaking in the UK consolidation group or non-EEA sub-group in full in the calculations in this chapter.

BIPRU 8.5.5RRP

In carrying out the calculations for the purposes of this chapter a firm must only include the relevant proportion of an undertaking that is a member of the UK consolidation group or non-EEA sub-group:

  1. (1)

    by virtue of a consolidation Article 12(1) relationship;

  2. (2)

    by virtue of an Article 134 relationship; or

  3. (3)

    because the group holds a participation in it.

BIPRU 8.5.6RRP

In BIPRU 8.5.5 R, the relevant proportion is either:

  1. (1)

    (in the case of a participation) the proportion of shares issued by the undertaking held by the UK consolidation group or the non-EEA sub-group; or

  2. (2)

    (in the case of a consolidation Article 12(1) relationship or an Article 134 relationship), such proportion (if any) as stated in the Part IV permission of the firm.

Basis of inclusion of UCITS investment firms in consolidation

BIPRU 8.5.7R

GENPRU 2.1.46 R (Adjustment of the variable capital requirement calculation for UCITS investment firms) and BIPRU 10.1.5 R (Restricted application for UCITS investment firms) do not apply for the purpose of this chapter.

BIPRU 8.5.8GRP

In general a UCITS investment firm only calculates its capital and concentration risk requirements in relation to its designated investment business and does not calculate them with respect toscheme management activity. The effect of BIPRU 8.5.7 R is that this does not apply on a consolidated basis. For the purpose of this chapter the calculations are carried with respect to the whole of the activities of a UCITS investment firm.

Exclusion of undertakings from consolidation: Balance sheet size

BIPRU 8.5.9RRP

A firm may, having first notified the FSA in writing in accordance with SUP 15.7 (Form and method of notification), exclude an institution, asset management company, financial institution or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group if the balance sheet total of that undertaking is less than the smaller of the following two amounts:

  1. (1)

    10 million Euros;

  2. (2)

    1% of the balance sheet total of the parent undertaking or the undertaking that holds the participation.

BIPRU 8.5.10RRP

A firm must include undertakings, to which BIPRU 8.5.9 R would otherwise apply, if the balance sheet total of those undertakings taken together breaches the limit in BIPRU 8.5.9 R.

Exclusion of undertakings from consolidation: Other reasons

BIPRU 8.5.11GRP

Article 73(1) of the Banking Consolidation Directive allows the FSA to decide to exclude an institution, financial institution, asset management company or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group for the purposes of this chapter in the following circumstances:

  1. (1)

    where the head office of the undertaking concerned is situated in a country outside the EEA where there are legal impediments to the transfer of the necessary information; or

  2. (2)

    where, in the opinion of the FSA, the undertaking concerned is of negligible interest only with respect to the objectives of monitoringinstitutions; or

  3. (3)

    where, in the opinion of the FSA, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of institutions are concerned.

BIPRU 8.5.12GRP

If a firm wishes to exclude an undertaking on the basis of any of the grounds set out in BIPRU 8.5.11 G it should apply to the FSA for a waiver. The FSA will consider such applications in the light of the criteria in section 148 of the Act.

BIPRU 8.5.13GRP

If several undertakings meet the criteria in BIPRU 8.5.11G (2), the FSA will not agree to a waiver to exclude them all from consolidation where collectively they are of non-negligible interest with respect to the objectives of the supervision of institutions.

Information about excluded undertakings

BIPRU 8.5.14GRP

The FSA may require a firm to provide information about the undertakings excluded from consolidation of the UK consolidation group or non-EEA sub-group pursuant to this section.