GENPRU 3.2 Third-country groups

Application

GENPRU 3.2.1RRP

GENPRU 3.2 applies to every firm that is a member of a third-country group. But it does not apply to:

  1. (1)

    an incoming EEA firm; or

  2. (2)

    an incoming Treaty firm; or

  3. (3)

    a UCITS qualifier; or

  4. (4)

    an ICVC; or3

  5. (5)

    a bank; or3

  6. (6)

    a designated investment firm; or3

  7. (7)

    an insurer.3

GENPRU 3.2.1ARRP

3GENPRU 3.2.9R (Supervision by analogy: rules for third-country banking and investment groups) applies in relation to the following:

  1. (1)

    a CAD investment firm; and

  2. (2)

    an investment firm that falls within the definition of “investment firm” in article 4(1)(2) of the EU CRR.

Purpose

GENPRU 3.2.2GRP

GENPRU 3.2 implements in part article 183 of the Financial Groups Directive, article 1273 of the CRD and (in relation to BIPRU firms) article 143 of the BCD3.

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Equivalence

GENPRU 3.2.3GRP

The first question that must be asked about a third-country financial group is whether the EEA regulated entities in that third-country group are subject to supervision by a third-country competent authority, which is equivalent to that provided for by the Financial Groups Directive (in the case of a financial conglomerate) or the EEA prudential sectoral legislation for the banking sector or the investment services sector (in the case of a banking and investment group). Article 18(1) of the Financial Groups Directive sets out the process for establishing equivalence with respect to third-country financial conglomerates and article 2127(1) and (2)3 of the CRD does so with respect to third-country banking and investment groups, except where the investment firms in the group are CAD investment firms only, in which case article 143 of the BCD applies3.

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Other methods: General

GENPRU 3.2.4GRP

If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in GENPRU 3.2.3 G,1 the methods set out in the CRD and EU CRR will apply or competent authorities may apply other methods that ensure appropriate supervision of the EEA regulated entities in that third-country group in accordance with the aims of supplementary supervision under the Financial Groups Directive or consolidated supervision under the applicable EEA prudential sectoral legislation.

Supervision by analogy: introduction

GENPRU 3.2.5GRP

If the supervision of a third-country group by a third-country competent authority does not meet the equivalence test referred to in GENPRU 3.2.3 G, a competent authority may, rather than take the measures described in GENPRU 3.2.4 G, apply, by analogy, the provisions concerning supplementary supervision under the Financial Groups Directive or, as applicable, consolidated supervision under the applicable EEA prudential sectoral legislation, to the EEA regulated entities in the banking sector, investment services sector and (in the case of a financial conglomerate ) insurance sector.

GENPRU 3.2.6GRP

The FCA3 believes that it will only be right to adopt the option in GENPRU 3.2.5 G in response to very unusual group structures.

GENPRU 3.2.7G

GENPRU 3.2.8 R and GENPRU 3.2.9 R and GENPRU 3 Annex 2 set out rules to deal with the situation covered in GENPRU 3.2.5 G. Those rules do not apply automatically. Instead, they can only be applied with respect to a particular third-country group through the Part 4A permission of a in that third-country group.

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Supervision by analogy: rules for third-country conglomerates

GENPRU 3.2.8RRP

If the Part 4A permission of a firm contains a requirement obliging it to comply with this rule with respect to a third-country financial conglomerate of which it is a member, it must comply, with respect to that third-country financial conglomerate, with the rules in Part 1 of GENPRU 3 Annex 2, as adjusted by Part 3 of that annex.

Supervision by analogy: rules for third-country banking and investment groups

GENPRU 3.2.9RRP

If the Part 4A permission of a firm contains a requirement obliging it to comply with this rule with respect to a third-country banking and investment group of which it is a member, it must comply, with respect to that third-country banking and investment group, with the rules in Part 2 of GENPRU 3 Annex 2, as adjusted by Part 3 of that annex.