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BIPRU 8.9 Consolidated concentration risk requirements

Main rule

BIPRU 8.9.1R

BIPRU 10 (Concentration risk requirements) applies to a firm's UK consolidation group or non-EEA sub-group as if it were a single undertaking, subject to the rest of this section.

Definition of consolidated capital resources for concentration risk purposes

BIPRU 8.9.2R

BIPRU 8.6 (Consolidated capital resources) applies for the purpose of this section subject to the adjustments required by BIPRU 8.9.1 R. In particular BIPRU 10.5.2 R to BIPRU 10.5.5 R (Definition of capital resources for concentration risk purposes) apply on a consolidated basis.

Calculation of the concentration risk capital component

BIPRU 8.9.3R

A firm must calculate the consolidated credit risk requirement so far as it relates to the concentration risk capital component under BIPRU 8.9.1 R. In particular a firm must not use the capital requirements of a regulator other than the FSA so far as they correspond to the concentration risk capital component.

Treasury Concession

BIPRU 8.9.4R

A firm may only treat an exposure as exempt under BIPRU 10.7.1 R (Treasury Concession) as applied on a consolidated basis if the exposure is of a member of the UK consolidation group or non-EEA sub-group that is a BIPRU firm or that has its head office in the UK and that exposure is or (if that rule applied to the undertaking 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 consolidation 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.

Intra-group securities financing transactions

BIPRU 8.9.5R

A firm may only treat an exposure as exempt under BIPRU 10.7.4 R (Intra-group securities financing transactions) as applied on a consolidated basis 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.

UK integrated groups and wider integrated groups

BIPRU 8.9.6G

In many cases there is no need for the UK integrated groups and wider integrated groups regime in BIPRU 10.8 and BIPRU 10.9 to apply on a consolidated basis under this chapter as intra-group exposures within a UK consolidation group will be eliminated on consolidation. However it may be applicable to some group structures. For example a UK consolidation group may be part of a wider EEA or third country group. If the group has two or more UK consolidation groups in the United Kingdom because there is no common parent undertaking in the United Kingdom the regime may enable exposures between the two UK consolidation groups to be exempted. Likewise the regime may allow a firm to exempt exposures between its UK group and the wider worldwide group of which it forms part.

BIPRU 8.9.7R

BIPRU 10.8 (Concentration risk requirements: UK integrated groups) and BIPRU 10.9 (Concentration risk requirements: Wider integrated groups) do not apply on a consolidated basis under this chapter. BIPRU 8.9.8 R to BIPRU 8.9.27 R apply instead.

UK integrated groups: Introduction

BIPRU 8.9.8R

  1. (1)

    BIPRU 8.9.9 R to BIPRU 8.9.15 R apply with respect to a firm's UK consolidation group or non-EEA sub-group (a "group") if:

    1. (a)

      the group is part of a consolidation UK integrated group; and

    2. (b)

      the firm gives notice in accordance with BIPRU 8.9.27 R that it will apply those rules with respect to that group.

  2. (2)

    If (1) applies with respect to a firm's UK consolidation group or non-EEA sub-group, the firm must apply BIPRU 8.9.9 R to BIPRU 8.9.15 R to all exposures to all consolidation concentration risk group counterparties and not just some of them.

UK integrated groups: Definition of consolidation UK integrated group

BIPRU 8.9.9R

An undertaking which is not itself a member of a firm's UK consolidation group or non-EEA sub-group (a "group") is a member of that group's consolidation UK integrated group if it satisfies the following conditions:

  1. (1)

    it is a consolidation 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 established in the United Kingdom and either it is incorporated in the United Kingdom or (if that undertaking 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);

  4. (4)

    the group and that undertaking are subject to the same risk evaluation, measurement and control procedures; 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 undertaking to any member of the group that has an exposure to that undertaking.

BIPRU 8.9.10G

Firms are referred to the guidance in BIPRU 3.2.30 G and BIPRU 3.2.31 G (guidance relating to 0% risk weights for intra-group exposures under the standardised approach) on the prompt transfer of capital resources and repayment of liabilities.

UK integrated groups: Definition of consolidation concentration risk group counterparty

BIPRU 8.9.11R

A consolidation concentration risk group counterparty means, in relation to a firm's UK consolidation group or non-EEA sub-group (a "relevant group"), an undertaking that satisfies the following conditions:

  1. (1)

    it is not a member of the relevant group;

  2. (2)

    it is:

    1. (a)

      a parent undertaking of a member of the relevant group;

    2. (b)

      a subsidiary undertaking of a member of the relevant group; or

    3. (c)

      a subsidiary undertaking of a parent undertaking falling into (a); and

  3. (3)

    the undertaking and each member of the relevant group are:

    1. (a)

      (if the relevant group is a non-EEA sub-group) included within the scope of consolidation on a full basis with respect to the same UK consolidation group ;

    2. (b)

      included within the scope of consolidation on a full basis with respect to the same group by a competent authority of an EEA State other than the UK under the CRD implementation measures about consolidated supervision in that EEA State; or

    3. (c)

      (provided that this consolidation is carried out to standards equivalent to those in (a) and (b)) included within the scope of consolidation on a full basis with respect to the same group by a third country competent authority under prudential rules for the banking sector or investment services sector of or administered by that third country competent authority.

BIPRU 8.9.12R

For the purposes of BIPRU 8.9.11R (3)(c), a group is subject to consolidation to equivalent standards only if a member of that group has been notified in writing by the FSA or a competent authority of another EEA State pursuant to Article 143 of the Banking Consolidation Directive that that group is subject to equivalent supervision.

BIPRU 8.9.13G

An undertaking is included within the scope of consolidation of a group on a full basis if it is at the head of the group or if its assets and liabilities are taken into account in full as referred to in BIPRU 8.5.4 R (Basis of inclusion of undertakings in consolidation).

UK integrated groups: Revised concentration risk limits

BIPRU 8.9.14R

A firm must treat exposures of members of the firm's UK consolidation group or non-EEA sub-group (the "relevant group") to consolidation concentration risk group counterpartsies as follows:

  1. (1)

    exposures of a member of the relevant group that has its head office in the UK to a member of the relevant group's consolidation UK integrated group are exempt; and

  2. (2)

    all exposures falling into this rule not in (1) must be treated in accordance with BIPRU 8.9.15 R.

BIPRU 8.9.15R

A firm must treat exposures falling into BIPRU 8.9.14R (2) as follows:

  1. (1)

    the firm must apply the rules set out in BIPRU 10.8.7 R (List of concentration risk rules that apply to UK integrated groups) on a consolidated basis under BIPRU 8.9.1 R with respect to its UK consolidation group or non-EEA sub-group;

  2. (2)

    the other limits in BIPRU 10.5 (Concentration risk requirements: Limits on exposures and large exposures) do not apply, subject to BIPRU 8.9.26 R; and

  3. (3)

    all those exposures must be treated as being to a single undertaking.

Wider integrated groups: Introduction

BIPRU 8.9.16R

BIPRU 8.9.17 R to BIPRU 8.9.24 R apply with respect to a firm's UK consolidation group or non-EEA sub-group (a "group") if:

  1. (1)

    the firm has a wider integrated group permission that applies on a consolidated basis with respect to that group; and

  2. (2)

    the group is part of a consolidation UK integrated group and of a consolidation wider integrated group.

BIPRU 8.9.17R

If BIPRU 8.9.16 R applies with respect to a firm's UK consolidation group or non-EEA sub-group, the firm must apply BIPRU 8.9.18 R to BIPRU 8.9.24 R to all to exposures to all consolidation concentration risk group counterparties and not just some of them.

BIPRU 8.9.18R

If BIPRU 8.9.16 R applies, BIPRU 8.9.8 R to BIPRU 8.9.12 R do not apply.

Wider integrated groups: Definition of wider integrated group

BIPRU 8.9.19R

An undertaking that is not itself a member of a firm's UK consolidation group or non-EEA sub-group (a "relevant group") is a member of the relevant group's consolidation wider integrated group if it satisfies all the conditions for membership of the consolidation UK integrated group except BIPRU 8.9.9R (3).

Wider integrated groups: Revised concentration risk limits

BIPRU 8.9.20R

A firm must treat exposures of members of the firm's UK consolidation group or non-EEA sub-group (the "relevant group") to consolidation concentration risk group counterparties as follows:

  1. (1)

    exposures of a member of the relevant group with its head office in the UK to a member of the relevant group's consolidation UK integrated group are exempt; and

  2. (2)

    all exposures falling into this rule not in (1) must be treated in accordance with BIPRU 8.9.21 R.

BIPRU 8.9.21R

A firm must treat exposures falling into BIPRU 8.9.20R (2) as follows:

  1. (1)

    the firm must apply the rules set out in BIPRU 10.9.9 R (List of concentration risk rules that apply to wider integrated group) on a consolidated basis under BIPRU 8.9.1 R with respect to its UK consolidation group or non-EEA sub-group;

  2. (2)

    the other limits in BIPRU 10.5 (Concentration risk requirements: Limits on exposures and large exposures) do not apply, subject to BIPRU 8.9.26 R;

  3. (3)

    the firm must treat all exposures in a single diverse block as exposures to a single undertaking; and

  4. (4)

    the firm must treat all exposures in the residual block as exposures to a single undertaking.

Wider integrated groups: Definition of diverse block

BIPRU 8.9.22R

Exposures are treated as being in a single diverse block if:

  1. (1)

    they are eligible to be included in a diverse block; and

  2. (2)

    they are to undertakings that are designated by the wider integrated group permission as being associated with the same diverse block.

BIPRU 8.9.23R

An exposure is only eligible for inclusion in a diverse block if one of the following conditions is satisfied:

  1. (1)

    it is an exposure of a member of the firm's UK consolidation group or non-EEA sub-group (the "group") with its head office in the UK to a member of the group's consolidation wider integrated group; or

  2. (2)

    it is an exposure of a member of the group with its head office outside the UK to:

    1. (a)

      a member of the consolidation UK integrated group; or

    2. (b)

      a member of the consolidation wider integrated group.

Wider integrated groups: Definition of residual block

BIPRU 8.9.24R

The residual block consists of all exposures to group concentration risk group counterparties falling into BIPRU 8.9.20R (2) not included in a diverse block.

Capital base for a UK integrated groups or wider integrated group

BIPRU 8.9.25G

The capital base against which exposure limits are tested under the consolidation UK integrated group or consolidation wider integrated group regimes under this section remains that of the firm's UK consolidation group or non-EEA sub-group. It is not extended to cover the consolidation UK integrated group. This is in contrast with the integrated groups regime on a solo basis, where the capital base is extended from the firm to cover the firm's UK integrated group.

Trading book excesses for UK integrated groups and wider integrated groups

BIPRU 8.9.26R

BIPRU 10.10 (Concentration risk requirements: Trading book excess) (as applied by BIPRU 8.9.1 R) applies to a firm applying the treatments set out BIPRU 8.9.8 R to BIPRU 8.9.24 R.

Notification procedures for UK integrated groups and wider integrated groups

BIPRU 8.9.27R

BIPRU 10.11 (Concentration risk requirements: Notification procedures) (as applied by BIPRU 8.9.1 R) applies to a firm applying the treatments set out in BIPRU 8.9.8 R to BIPRU 8.9.24 R.