GENPRU 3.1 Application

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1. (1)

   Unless otherwise stated,8 GENPRU 3.1 applies to every firm that is a member of a financial conglomerate other than:

   1. (a)

      an incoming EEA firm;

   2. (b)

      an incoming Treaty firm;

   3. (c)

      a UCITS qualifier;

   4. (d)

      an ICVC;8

   5. (e)

      a bank;8

   6. (f)

      a designated investment firm; and8

   7. (g)

      an insurer.8

2. (1A)

   GENPRU 3.1 (except GENPRU 3.1.5R to GENPRU 3.1.13G) applies to each of the following firms that is a member of a financial conglomerate:8

   1. (a)

      a bank;8

   2. (b)

      a designated investment firm; and8

   3. (c)

      an insurer that is a “UK Solvency II firm” as defined in the PRA Rulebook: Glossary.8

3. (2)

   GENPRU 3.1 does not apply to a firm with respect to a financial conglomerate of which it is a member if the interest of the financial conglomerate in that firm is no more than a participation.

4. (3)

   GENPRU 3.1.25 R (Capital adequacy requirements: high level requirement), and GENPRU 3.1.35 R (Risk concentration and intra group transactions: the main rule) do not apply with respect to a third-country financial conglomerate.

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A financial conglomerate means a consolidation group that is identified as a financial conglomerate in accordance with the decision tree in GENPRU 3 Annex 4.

A consolidation group is not prevented from being a financial conglomerate because it is part of a wider:

1. (1)

   consolidation group; or

2. (2)

   financial conglomerate; or

3. (3)

   group of persons linked in some other way.

For the purpose of the definition of financial conglomerate, there are two financial sectors as follows:

1. (1)

   the banking sector and the investment services sector, taken together; and

2. (2)

   the insurance sector.

1. (1)

   This rule applies for the purpose of the definition of financial conglomerate and the financial conglomerate definition decision tree.

2. (1A)

   In determining the investment services sector for the purpose of identifying a financial conglomerate in the boxes entitled Threshold Test 1, Threshold Test 2 and Threshold Test 3 in the financial conglomerate definition decision tree, any investment firm that does not fall within the definition of article 4(1)(2) of the EU CRR is excluded. 8

3. (2)

   Any mixed financial holding company is considered to be outside the overall financial sector for the purpose of the tests set out in the boxes titled Threshold Test 1, Threshold Test 2 and Threshold Test 3 in the financial conglomerate definition decision tree.

4. (3)

   Determining whether the tests set out in the boxes titled Threshold Test 2 and Threshold Test 3 in the financial conglomerate definition decision tree are passed is based on considering the consolidated and/or aggregated activities of the members of the consolidation group within the insurance sector and the consolidated and/or aggregated activities of the members of the consolidation group within the banking sector and the investment services sector.

Once a financial conglomerate has become a financial conglomerate and subject to supervision in accordance with the Financial Groups Directive, the figures in the financial conglomerate definition decision tree are altered as follows:

1. (1)

   the figure of 40% in the box titled Threshold Test 1 is replaced by 35%;

2. (2)

   the figure of 10% in the box titled Threshold Test 2 is replaced by 8%; and

3. (3)

   the figure of six billion Euro in the box titled Threshold Test 3 is replaced by five billion Euro.

The alteration in GENPRU 3.1.9 R only applies to a financial conglomerate during the period that:

1. (1)

   begins when the financial conglomerate would otherwise have stopped being a financial conglomerate because it does not meet one of the unaltered thresholds referred to in GENPRU 3.1.9 R; and

2. (2)

   covers the three years following that date.

The calculations referred to in the financial conglomerate definition decision tree regarding the balance sheet must be made on the basis of the aggregated balance sheet total of the members of the consolidation group, according to their annual accounts. For the purposes of this calculation, undertakings in which a participation is held must be taken into account as regards the amount of their balance sheet total corresponding to the aggregated proportional share held by the consolidation group. However, where consolidated accounts are available, they must be used instead of aggregated accounts.

The solvency and capital adequacy requirements referred to in the financial conglomerate definition decision tree must be calculated in accordance with the provisions of the relevant sectoral rules.

1. (1)

   A firm that is a member of a financial conglomerate must at all times have capital resources of such an amount and type that results in the capital resources of the financial conglomerate taken as a whole being adequate.

2. (2)

   This rule does not apply with respect to any financial conglomerate until notification has been made that it has been identified as a financial conglomerate as contemplated by Article 4(2) of the Financial Groups Directive.

If,5 with respect to a firm and a financial conglomerate of which it is a member, this rule applies under GENPRU 3.1.29A R5 to the firm with respect to that financial conglomerate as described in GENPRU 3.1.30 R, the firm must at all times have capital resources of an amount and type that ensures that the conglomerate capital resources of that financial conglomerate at all times equal or exceed its conglomerate capital resources requirement.

5GENPRU 3.1.29 R applies to a firm with respect to the financial conglomerate of which it is a member if notification has been made in accordance with regulation 2 of the Financial Groups Directive Regulations that the financial conglomerate is a financial conglomerate and that the FCA8 is coordinator of that financial conglomerate.

If GENPRU 3.1.29 R (application of Method 1 or 2 from Annex I of the Financial Groups Directive) applies to a firm with respect to the financial conglomerate of which it is a member, then with respect to the firm and the financial conglomerate:

1. (1)

   the definitions of conglomerate capital resources and conglomerate capital resources requirement that apply for the purposes of that rule are the ones from whichever of Part 1 or Part 2 of GENPRU 3 Annex 1 the firm has indicated to the FCA8 it will apply, unless the firm is subject to a requirement obliging the firm to apply a specific part of GENPRU 3 Annex 1, in which case GENPRU 3.1.31 R will apply; and5

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2. (2)

   the firm must indicate to the FCA8 in advance which Part of GENPRU 3 Annex 1 the firm intends to apply.5

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If GENPRU 3.1.29 R (application of Method 1 or 25 from Annex I of the Financial Groups Directive) applies to a firm with respect to a financial conglomerate of which it is a member, and the firm is subject to a requirement obliging the firm to apply a specific part of GENPRU 3 Annex 1,5 the definitions of conglomerate capital resources and conglomerate capital resources requirement that apply for the purposes of that rule are the ones from whichever of Part 1 or5 Part 2 of GENPRU 3 Annex 1 is specified in the requirement.

GENPRU 3.1.35 R applies to a firm with respect to a financial conglomerate of which it is a member if:

1. (1)

   the condition in Articles 7(4) and 8(4) of the Financial Groups Directive is satisfied (the financial conglomerate is headed by a mixed financial holding company); and

2. (2)

   that financial conglomerate is a UK regulated EEA financial conglomerate.12

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Afirm must ensure that the sectoral rules regarding risk concentration and intra-group transactions of the most important financial sector in the financial conglomerate referred to in GENPRU 3.1.34 R are complied with with respect to that financial sector as a whole, including the mixed financial holding company. The sectoral rules for these purposes are those identified in the table in GENPRU 3.1.36 R.

1. (1)

   In accordance with Articles5 30 and 30a5 of the Financial Groups Directive (Asset management companies and Alternative investment fund managers5), this rule deals with the inclusion of an asset management company or an alternative investment fund manager5 that is a member of a financial conglomerate in the scope of regulation of financial conglomerates.

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2. (2)

   An asset management company or an alternative investment fund manager5 is in the overall financial sector and is a regulated entity for the purpose of:

   1. (a)

      5GENPRU 3.1.29 R5 to GENPRU 3.1.36 R;

   2. (b)

      GENPRU 3 Annex 1 (Capital adequacy calculations for financial conglomerates) and GENPRU 3 Annex 2 (Prudential rules for third country groups); and

   3. (c)

      any other provision of the Handbook8 relating to the supervision of financial conglomerates.

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3. (3)

   In the case of a financial conglomerate for which the FCA8 is the coordinator, all asset management companies and all alternative investment fund managers5 must be allocated to one financial sector to which they belong5 for the purposes in (2), being either the investment services sector or the insurance sector. But if that choice has not been made in accordance with (4) and notified to the FCA8 in accordance with (4)(d), an asset management company or an alternative investment fund manager5 must be allocated to the smallest financial sector.5

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4. (4)

   The choice in (3):

   1. (a)

      must be made by the undertaking in the financial conglomerate holding the position referred to in Article 4(2) of the Financial Groups Directive (group member to whom notice must be given that the group has been found to be a financial conglomerate);

   2. (b)

      applies to all asset management companies and all alternative investment fund managers5 that are members of the financial conglomerate from time to time;

   3. (c)

      cannot be changed; and

   4. (d)

      must be notified to the FCA8 as soon as reasonably practicable after the notification in (4)(a).

5. (5)

   This rule applies even if:

   1. (a)

      a UCITS management company is an IFPRU investment firm4; or

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   2. (b)

      an asset management company 4 or alternative investment fund manager is an investment firm.