Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.


Status: This chapter was amended on 31 December 2020 as a result of Brexit. However, it is subject to the FCA Prudential Transitional Direction, which means that firms should not comply with these provisions yet. Instead, firms must follow this link and continue to comply with pre-IP completion day requirements https://www.handbook.fca.org.uk/handbook?date=31-12-2020&timeline=True (unless specified otherwise in the Direction). To see a full list of Handbook modules affected, please see Section B of the Annex to the Direction.

IPRU-INV 5.16 Foreign exchange requirement

IPRU-INV 5.16.1RRP
  1. 1(1) A firm's foreign exchange requirement is determined by calculating the excess of its foreign exchange position (FEP) above 2 per cent of its own funds and multiplying this excess by 8 per cent.

  2. (2) The FEP is the greater of:

    1. (a) the total in the reporting currency of the net short positions in each currency other than the reporting currency; and

    2. (b) the total in the reporting currency of the net long positions in each currency other than the reporting currency;

    where the conversion to the reporting currency is performed using spot rates.

Note For this purpose, long and short positions in the same currency can be netted to produce the net position.

  1. (3) In calculating the FEP, a firm must include relevant foreign exchange items.

EXCHANGE POSITION FOR HEDGING PURPOSES

Any positions which the firm has taken in order to hedge against the adverse effect of exchange rates on an item already deducted in the calculation of liquid capital may not be excluded from the calculation of net open currency positions.