A firm must deduct its direct, indirect and synthetic holdings in the tier 2 instruments of financial sector entities under article 66(c) of the UK CRR without applying article 70 of the UK CRR (deduction of tier 2 instruments where an institution does not have a significant investment in the relevant entity).
1A firm is not required to deduct holdings of tier 2 instruments issued by a financial sector entity from the firm’s tier 2 items in accordance with article 66 of the UK CRR if all of the following conditions are met:
there is no current or foreseen material, practical or legal impediment to the prompt transfer of capital or repayment of liabilities by the financial sector entity;
the risk evaluation, measurement and control procedures of the parent undertaking include the financial sector entity; and
the group capital test under MIFIDPRU 2.6 does not apply to the investment firm group.