Content Options

IFPRU 11.5 Intra-group financial support

Application

IFPRU 11.5.1 R

This section applies to:

  1. (1)

    a firm that is an RRD group member;

  2. (2)

    a qualifying parent undertaking that is an RRD group member; and

  3. (3)

    a qualifying parent undertaking that is a mixed activity holding company of an IFPRU 730k firm in an RRD group.

Scope of financial support covered by IFPRU 11.5

IFPRU 11.5.2 G
  1. (1)

    This section applies where an RRD group member gives, or proposes to give, intra-group financial support using an RRD group financial support agreement.

  2. (2)

    It does not apply to other sorts of intra-group financial arrangements, including funding arrangements and the operation of centralised funding arrangements.

  3. (3)

    It does not apply to financial support arrangements where none of the parties to the arrangement has infringed, or is likely to infringe, an RRD early intervention condition.

  4. (4)

    A firm or qualifying parent undertaking does not have to use an RRD group financial support agreement to give financial support to another group member that has infringed, or is likely to infringe, an RRD early intervention condition.

  5. (5)

    A firm or qualifying parent undertaking may give financial support on a case-by-case basis according to the group policies, if the support does not represent a risk for the whole group.

[Note: article 19(2) and (3) of RRD]

Summary of RRD intra-group financial support conditions

IFPRU 11.5.3 G
  1. (1)

    RRD recognises a specific form of intra-group financial support. This allows an RRD group member in one EEA State to give financial support to an RRD institution in its group in another EEA State, when that institution has infringed or is likely to infringe an RRD early intervention condition.

  2. (2)

    To give this specific form of financial support an RRD group member must use an RRD group financial support agreement and satisfy the applicable conditions.

  3. (3)

    If the RRD group member meets the applicable conditions, other EEA States will recognise this financial support.

  4. (4)

    This section sets out the conditions which, in summary, are:

    1. (a)

      the consolidating supervisor of the group approves the proposed RRD group financial support agreement (see IFPRU 11.5.7 R to IFPRU 11.5.8 G);

    2. (b)

      the agreement complies with the conditions for entering into an RRD group financial support agreement (see IFPRU 11.5.9 R to IFPRU 11.5.13 G);

    3. (c)

      the financial support complies with the conditions for giving financial support using an RRD group financial support agreement (see IFPRU 11.5.14 R to IFPRU 11.5.15 G);

    4. (d)

      the management bodies of the relevant group members take the decision to give and receive financial support (see IFPRU 11.5.16 R to IFPRU 11.5.17 R);

    5. (e)

      the relevant group members notify the relevant authorities of the intention to give financial support (see IFPRU 11.5.18 R to IFPRU 11.5.21 R); and

    6. (f)

      the relevant group members make the relevant disclosures (see IFPRU 11.5.22 R to IFPRU 11.5.23 G).

RRD group financial support agreement

IFPRU 11.5.4 G

An RRD group financial support agreement may:

  1. (1)

    cover one or more subsidiaries of the group; and

  2. (2)

    allow for financial support:

    1. (a)

      from the parent undertaking to subsidiaries;

    2. (b)

      from subsidiaries to the parent undertaking;

    3. (c)

      between subsidiaries of the group that are party to the agreement; or

    4. (d)

      between any combination of those group members.

[Note: article 19(5)(a) of RRD]

IFPRU 11.5.5 G

An RRD group financial support agreement may allow for financial support:

  1. (1)

    in the form of:

    1. (a)

      a loan;

    2. (b)

      a guarantee;

    3. (c)

      the use of assets as collateral; or

    4. (d)

      any combination of those forms; and

  2. (2)

    in one or more transactions, including between the beneficiary of the support and a third party.

[Note: article 19(5)(b) of RRD]

IFPRU 11.5.6 G

An RRD group financial support agreement may include a reciprocal agreement so the group member receiving financial support can give financial support to the group member agreeing to give financial support.

[Note: article 19(6) of RRD]

Approval of RRD group financial support agreements

IFPRU 11.5.7 R
  1. (1)

    The following must apply to their consolidating supervisor for approval of any proposed RRD group financial support agreement or of any amendment to that agreement:

    1. (a)

      a firm that is the EEA parent undertaking of an RRD group;

    2. (b)

      a qualifying parent undertaking that is the EEA parent undertaking of an RRD group; and

    3. (c)

      an IFPRU 730k firm that is a subsidiary of an EEA parent undertaking of an RRD group:

      1. (i)

        where the EEA parent undertaking is an EEA parent financial holding company or an EEA parent mixed financial holding company that is incorporated in, or formed under, the law of an EEA State other than the United Kingdom; and

      2. (ii)

        has the FCA as its consolidating supervisor.

  2. (2)

    An application for the approval or amendment of an RRD group financial support agreement must:

    1. (a)

      include the proposed RRD group financial support agreement; and

    2. (b)

      identify the members in the RRD group that are intended to be a party to the agreement.

[Note: article 20(1) of RRD]

IFPRU 11.5.8 G

The FCA will not approve an RRD group financial support agreement unless:

  1. (1)

    in its opinion, none of the parties has infringed an RRD early intervention condition or is likely to infringe one of those conditions in the near future;

  2. (2)

    the agreement complies with the conditions for entering into an RRD group financial support agreement in IFPRU 11.5.9 R to IFPRU 11.5.12 R; and

  3. (3)

    the terms of the proposed agreement are consistent with the conditions for giving financial support in IFPRU 11.5.14 R.

[Note: articles 19(8), 20(1) and 20(3) of RRD]

Conditions for entering into an RRD group financial support agreement

IFPRU 11.5.9 R

The parties to an RRD group financial support agreement must include:

  1. (1)

    one or more of the following:

    1. (a)

      a parent institution in a Member State;

    2. (b)

      an EEA parent institution;

    3. (c)

      a financial holding company;

    4. (d)

      a mixed financial holding company;

    5. (e)

      a mixed activity holding company; and

  2. (2)

    one or more subsidiaries of the group member in (1) which is an RRD institution or a financial institution.

IFPRU 11.5.10 R

Before entering into an RRD group financial support agreement, a firm or qualifying parent undertaking must ensure that:

  1. (1)

    the RRD group financial support agreement includes principles for the calculation of the consideration for any support made under it;

  2. (2)

    these principles include a requirement that the consideration is set when the financial support is given;

  3. (3)

    each party acts freely and in its own best interests in entering into the RRD group financial support agreement;

  4. (4)

    each party acts in its own best interests in deciding the consideration for the financial support;

  5. (5)

    each party giving financial support has full disclosure of relevant information from any party receiving financial support before deciding:

    1. (a)

      the consideration for the support; and

    2. (b)

      to give the support; and

  6. (6)

    only the parties to the agreement can exercise any right, claim or action arising from the RRD group financial support agreement.

[Note: articles 19(7)(a) to (c) and 19(9) of RRD]

IFPRU 11.5.11 R

When entering into the proposed RRD group financial support agreement, a firm or qualifying parent undertaking must ensure that none of the parties:

  1. (1)

    has infringed an RRD early intervention condition; or

  2. (2)

    is likely to infringe one of those conditions in the near future.

[Note: article 19(8) of RRD]

IFPRU 11.5.12 R
  1. (1)

    The principles for calculating the consideration for financial support do not need to take account of any anticipated temporary impact on market prices arising from events external to the group.

  2. (2)

    The consideration for financial support may take account of information that the party giving the support has, based on:

    1. (a)

      the party giving support being in the same group as the party receiving the support; and

    2. (b)

      the information not being available to the market.

[Note: article 19(7)(d) and (e) of RRD]

IFPRU 11.5.13 G

In deciding whether a party is acting in its own best interests, the party may take account of any direct or indirect benefit that may accrue to a party as a result of giving financial support.

[Note: article 19(7)(b) of RRD]

Conditions for giving group financial support using an RRD group financial support agreement

IFPRU 11.5.14 R

A firm or qualifying parent undertaking must not give financial support using an RRD group financial support agreement unless it is satisfied that:

  1. (1)

    there is a reasonable prospect that giving the support will significantly redress the financial difficulties of the group member receiving the support;

  2. (2)

    the support has the objective of preserving or restoring the financial stability of:

    1. (a)

      the group as a whole; or

    2. (b)

      any members of the group;

  3. (3)

    the support is in the interests of the group member giving the support;

  4. (4)

    the support is given on terms which meet the conditions in IFPRU 11.5.9 R to IFPRU 11.5.12 R;

  5. (5)

    there is a reasonable prospect, based on information available to the management body of the group member giving the support when it takes the decision to grant support, that:

    1. (a)

      the consideration for the support will be paid;

    2. (b)

      if the support is in the form of a loan, the group member receiving the support will reimburse the loan; and

    3. (c)

      if the support is in the form of a guarantee or any form of security, the group member receiving the support will reimburse the amount of the guarantee or security if the guarantee or security is enforced;

  6. (6)

    the support will not jeopardise the liquidity or solvency of the group member giving the financial support;

  7. (7)

    the support will not create a threat to financial stability, in particular in the United Kingdom;

  8. (8)

    the group member giving the support complies with the following when giving the support:

    1. (a)

      the requirements of the CRD relating to capital and liquidity;

    2. (b)

      any requirements imposed under article 104(2) (additional own funds requirements) of the CRD; and

    3. (c)

      the requirements relating to large exposures in the CRR and in the CRD;

  9. (9)

    the support will not cause the group member giving the support to infringe any of the requirements in (8) as a result of giving the financial support; and

  10. (10)

    the support will not undermine the resolvability of the group member giving the support.

[Note: article 23(1) of RRD]

IFPRU 11.5.15 G

The FCA may modify or waive the requirements of IFPRU 11.5.14R (8) if the conditions in section 138A (modification or waiver of rules) of the Act are met.

[Note: article 23(1)(g) of RRD]

Decision to give and receive group financial support using an RRD group financial support agreement

IFPRU 11.5.16 R

A firm or qualifying parent undertaking intending to give financial support must ensure that:

  1. (1)

    its management body takes the decision to give group financial support using an RRD group financial support agreement; and

  2. (2)

    it is a reasoned decision that sets out:

    1. (a)

      the objective of the proposed support; and

    2. (b)

      how the support complies with the conditions for giving group financial support using an RRD group financial support agreement in IFPRU 11.5.14 R.

IFPRU 11.5.16A G

1A firm or qualifying parent undertaking proposing to give financial support using an RRD group financial support agreement should also refer to articles 33 to 36 of Commission Delegated Regulation (EU) 2016/1075 of 23 March 2016 supplementing RRD:

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32016R1075&from=EN.

IFPRU 11.5.17 R

A firm or qualifying parent undertaking intending to receive financial support must ensure that its management body takes the decision to accept the support using an RRD group financial support agreement.

[Note: article 24 of RRD]

Notice of intention to give financial support using an RRD group financial support agreement

IFPRU 11.5.18 R

A firm or a qualifying parent undertaking intending to give financial support using an RRD group financial support agreement must ensure that its management body notifies:

  1. (1)

    its competent authority;

  2. (2)

    where different, its consolidating supervisor;

  3. (3)

    where different, the competent authority of the group member receiving the financial support; and

  4. (4)

    the EBA.

IFPRU 11.5.19 R

A firm or a qualifying parent undertaking must:

  1. (1)

    send a notice of an intention to give financial support before the financial support is given; and

  2. (2)

    include in the notice:

    1. (a)

      the reasoned decision referred to in IFPRU 11.5.16 R of the management body of the group member intending to give the support; and

    2. (b)

      details of the proposed financial support including a copy of the RRD group financial support agreement.

[Note: article 25(1) of RRD]

IFPRU 11.5.20 R

An RRD group member may only give financial support using an RRD group financial support agreement if the FCA has:

  1. (1)

    agreed to the giving of the support with restrictions; or

  2. (2)

    agreed to the giving of the support without restrictions; or

  3. (3)

    not prohibited the support within five business days of receiving a notice of intention to give financial support.

[Note: article 25(2) and (5) of RRD]

IFPRU 11.5.21 R

1A firm or qualifying parent undertaking1must ensure it sends the decision of its management body to give financial support to:

  1. (1)

    its competent authority;

  2. (2)

    where different, its consolidating supervisor;

  3. (3)

    where different, the competent authority of the group member receiving the support; and

  4. (4)

    the EBA.

[Note: article 25(6) of RRD]

Disclosure of group financial support using an RRD group financial support agreement

IFPRU 11.5.22 R

A firm or qualifying parent undertaking must:

  1. (1)

    make public:

    1. (a)

      whether or not they have entered into an RRD group financial support agreement;

    2. (b)

      a description of the general terms of any RRD group financial support agreement; and

    3. (c)

      the names of the group members that are a party to the RRD group financial support agreement; and

  2. (2)

    update the information in (1) at least annually.

[Note: article 26 of RRD]

IFPRU 11.5.23 G

Regulations 431 to 434 of the EU CRR apply to the disclosures in IFPRU 11.5.22 R.

[Note: article 26(1) of RRD]