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BIPRU TP 10 Pre CRD capital requirements applying on a consolidated basis during 2007

1Application

10.1

R

This section applies to a firm to which BIPRU 8 (Consolidation) applies.

Purpose

10.2

G

This section sets out how BIPRU TP 3 - BIPRU TP 9 (Use of IPRU during 2007) are applied on a consolidated basis.

Duration of transitional

10.3

R

BIPRU TP 10 applies until 1 January 2008.

Main rule

10.4

R

A firm may apply BIPRU TP 3 to BIPRU TP 9 (Use of IPRU during 2007 on a solo basis) on a consolidated basis. Applying them on a consolidated basis means that BIPRU 8 (Group risk - Consolidation) is modified by applying the relevant parts of BIPRU TP 3 to BIPRU TP 9 (as defined in BIPRU TP 10.5R) in place of the corresponding BIPRU credit risk and other rules.

10.5

R

(1)

This rule sets out what the relevant parts of BIPRU TP 3 to BIPRU TP 9 (Use of IPRU during 2007 on a solo basis) are for the purposes of BIPRU TP 10.4R. The answer depends on the kind of UK consolidation group or non-EEA sub-group ("group") to which consolidated requirements are being applied.

(2)

If the group is a building society group as defined in BIPRU TP 1.7R, the relevant parts of BIPRU TP 3 to BIPRU TP 9 are those applicable to a building society.

(3)

If the group is a banking group as defined in BIPRU TP 1.7R, the relevant parts of BIPRU TP 3 to BIPRU TP 9 are those applicable to a bank.

(4)

If the group is an investment services group as defined in BIPRU TP 1.7R, the relevant parts of BIPRU TP 3 to BIPRU TP 9 are those applicable to the main BIPRU investment firm in that group. For these purposes the main BIPRU investment firm is identified in the same way as the "main firm" is identified under rule 14.4.2R(1) of chapter 14 IPRU(INV).

10.6

G

The application of BIPRU TP 3 (Pre CRD capital requirements applying on a solo basis during 2007) on a consolidated basis is not done by applying the relevant consolidation provisions in IPRU. BIPRU 8 (Group risk - Consolidation) still applies, as modified by this section. BIPRU TP 10.7G to BIPRU TP 10.12G summarise how BIPRU TP 3 works on a consolidated basis under this section assuming that the firm does not use the IRB approach.

10.7

G

The consolidated credit risk charge (called the consolidated credit risk requirement) is normally calculated under BIPRU 8 by applying the solo BIPRU credit risk charges on a consolidated basis. Under this section the IPRU credit risk charges are applied instead, as modified by BIPRU TP 3 to BIPRU TP 9 (Use of IPRU during 2007 on a solo basis).

10.8

G

Under this section the applicable IPRU large exposure requirements, as modified by BIPRU TP 3 to BIPRU TP 9, apply instead of the ones in BIPRU 10 (Concentration risk requirements). BIPRU TP 10.15R disapplies most of BIPRU 8.9 (Consolidated concentration risk requirements).

10.9

G

A firm should calculate the consolidated credit risk requirement so far as it relates to the concentration risk capital component using the relevant IPRU rules. In particular a firm should not use the capital requirements of a regulator other than the FSA for this purpose.

10.10

G

A firm should still base its capital resources calculation for consolidation purposes on BIPRU 8.6 (Consolidated capital resources) rather than using the IPRU capital resources calculations. In turn, BIPRU 8.6 is based on GENPRU 2.2 (Capital resources). This applies for consolidated concentration risk purposes as well.

10.11

G

BIPRU 8.4 (CAD Article 22 groups and investment firm consolidation waiver) still applies.

10.12

G

The calculation of consolidated capital requirements under BIPRU 8.7 (Consolidated capital resources requirements) depends in part on whether the group contains banks, BIPRU limited activity firms or BIPRU limited licence firms. This continues to apply for the purpose of this section in addition to BIPRU TP 10.5R. So for instance, if a group contains only BIPRU limited licence firms the consolidated capital requirements for the group are based on the capital requirements for BIPRU limited licence firms. However in addition if, for example, the main firm (as defined in BIPRU TP 10.5R) is a personal investment firm the requirements for BIPRU limited licence firm are modified in accordance with BIPRU TP 9 (Pre CRD capital requirements applying on a solo basis during 2007 and capital floors: Personal investment firms). The calculation of notional capital resources requirements under BIPRU 8.4.13 R (Capital adequacy obligations relating to a CAD Article 22 group: Capital resources requirement) works in a similar way.

Consolidated capital resources requirement: Use of home state requirements for EEA firms

10.13

R

A firm may, for the purposes of BIPRU TP 10.4R, use the solo financial resources requirement to which an EEA firm is subject in accordance with BIPRU 8.7.34 R (Use of the solo requirements of another EEA competent authority) or the consolidated financial resources requirements of an EEA competent authority under BIPRU 8.7.37 R (Use of the consolidated requirements of another EEA competent authority). However those requirements must be ones that apply under the CRD implementation measures for Articles 152(8) - (14) of the Banking Consolidation Directive and Article 50(1) of the Capital Adequacy Directive for the relevant EEA State (Pre CRD capital requirements applying during 2007).

Consolidated capital resources requirement: Use of home state requirements for third country undertakings

10.14

R

(1)

A firm may, for the purposes of BIPRU TP 10.4R, use the solo financial resources requirement of a third country competent authority in accordance with BIPRU 8.7.35 R (Use of the solo requirements of a regulator outside the EEA) or the consolidated financial resources requirements of a third country competent authority under BIPRU 8.7.38 R (Use of the consolidated requirements of a regulator outside the EEA) in accordance with the adjustments in this rule.

(2)

The list in BIPRU 8 Annex 6 R (List of equivalent third country regulators) does not apply and instead:

(a)

if the UK consolidation group or non-EEA sub-group is a banking group or building society group as defined in BIPRU TP 1.7R (Classification of groups for certain consolidation rules), the lists in Appendices C and D2 of chapter CS of IPRU(BANK) apply2; and

(b)

if the UK consolidation group or non-EEA sub-group is an investment firm group as defined in BIPRU TP 1.7R, the list in Appendix 592 of chapter 10 of IPRU(INV) applies.

(3)

The firm must apply the version of those requirements in force on 31 December 2006 or any later version that remains consistent with EEA prudential sectoral legislation for the banking sector or investment services sector in the form it was in on 31 December 2006.

(4)

The requirement in BIPRU 8.7.35 R (2) and the last sentence of BIPRU 8.7.38 R (2) (Requirement for calculation not to produce a lower figure than the FSA's rules) still applies.

Consolidated large exposures

10.15

R

A firm must apply the concentration risk requirements underBIPRU TP 3 to BIPRU TP 9 (Use of IPRU during 2007 on a solo basis) applicable to its UK consolidation group or non-EEA sub-group under BIPRU TP 10.4R as if it were a single undertaking. BIPRU 8.9.2 R (Definition of consolidated capital resources for concentration risk purposes) applies for the purpose of this rule. BIPRU 8.9 (Consolidated concentration risk requirements) does not otherwise apply.