IPRU-INV 12 Financial resources requirements for operators of electronic systems in relation to lending.

This chapter applies to an operator of an electronic system in relation to lending.

A firm must recognise an asset or liability, and measure its amount, in accordance with the relevant accounting principles applicable to it for the purpose of preparing its annual financial statements unless a rule requires otherwise.

A contravention of the rules in this chapter does not give rise to a right of action by a private person under section 138D of the Act (and each of those rules is specified under section 138D(3) of the Act as a provision giving rise to no such right of action).

The definitions in the glossary at IPRU-INV 12 Appendix 1 apply to terms shown in bold type this chapter. Where the term is italicised, the FCA Handbook Glossary definition applies.

A firm must at all times be able to meet its liabilities as they fall due.

A firm must ensure that at all times its financial resources are not less than its financial resources requirement.

The financial resources requirement for a firm carrying on one or more regulated activities in addition to operating an electronic system in relation to lending, is the higher of:

1. (1)

   the financial resources requirement which is applied by this chapter; and

2. (2)

   the financial resources or own funds requirement which is applied by another rule or by directly applicable legislation of the UK to the firm.

On its accounting reference date in each year, a firm must calculate:

1. (1)

   the total value of loaned funds outstanding on that date; and

2. (2)

   the sum of:

   1. (a)

      0.2% of the first £50 million of that total value;

   2. (b)

      0.15% of the next £200 million of that total value;

   3. (c)

      0.1% of the next £250 million of that total value; and

   4. (d)

      0.05% of any remaining total value.

The total value of loaned funds outstanding is the total amount of funds that are currently being provided to borrowers under P2P agreements through an operator of an electronic system in relation to lending.

The financial resources requirement for a firm to which this chapter applies is the higher of:

1. (1)

   £50,000; and

2. (2)

   the sum calculated in accordance with IPRU-INV 12.2.4R(2) for the period until (subject to IPRU-INV 12.2.9R) its next accounting reference date.

To determine a firm’s financial resources requirement for the period beginning on the date on which it obtains a Part 4A permission and ending on the day before its next accounting reference date, the firm must carry out the calculation in IPRU-INV 12.2.4R(2) on the basis of the total value of loaned funds the firm projects will be outstanding on the day before its next accounting reference date.

If the firm experiences a greater than 25% increase in the total value of loaned funds outstanding compared to the value used in its last financial resources requirement calculation, it must recalculate its financial resources requirement using the higher total value of loaned funds outstanding.

A firm must notify the FCA of any change, or any likely change, in its financial resources requirement within 14 days of that change, or it becoming aware that the change is likely, whichever is the earlier.

1. (1)

   A firm must at all times have available the amount and type of financial resources required by this chapter (see IPRU-INV 12.3.2R).

2. (2)

   In arriving at its calculation of its financial resources, a firm must deduct certain items (see IPRU-INV 12.3.3R).

A subordinated loan/debt must not form part of the financial resources of the firm unless it meets the following conditions:

1. (1)

   it has an original maturity of:

   1. (a)

      at least five years; or

   2. (b)

      it is subject to five years’ notice of repayment;

2. (2)

   the claims of the subordinated creditors must rank behind those of all unsubordinated creditors;

3. (3)

   the only events of default must be non-payment of any interest or principal under the debt agreement or the winding up of the firm and such event of default must not prejudice the subordination in (2);

4. (4)

   the remedies available to the subordinated creditor in the event of non-payment or other default in respect of the subordinated loan/debt must be limited to petitioning for the winding up of the firm or proving the debt and claiming in the liquidation of the firm;

5. (5)

   the subordinated loan/debt must not become due and payable before its stated final maturity date except on an event of default complying with (3);

6. (6)

   the agreement and the debt are governed by the law of England and Wales, or of Scotland or of Northern Ireland;

7. (7)

   to the fullest extent permitted under the rules of the relevant jurisdiction, creditors must waive their right to set off amounts they owe the firm against subordinated amounts owed to them by the firm;

8. (8)

   the terms of the subordinated loan/debt must be set out in a written agreement that contains terms that provide for the conditions set out in this rule; and

9. (9)

   the loan/debt must be unsecured and fully paid up.