Related provisions for GENPRU 2.2.24

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GENPRU 2.2.2GRP
GENPRU 2.1 (Calculation of capital resources requirement) sets out minimum capital resources requirements for a firm. This section (GENPRU 2.2) sets out how, for the purpose of these requirements, capital resources are defined and measured.
GENPRU 2.2.4GRP
This section also implements minimum EC standards for the composition of capital resources required to be held by a BIPRU firm. In particular it implements Articles 56 – 61, Articles 63 – 64, Article 66 and Articles 120 – 122 of the Banking Consolidation Directive (2006/48/EC) and Articles 12 – 16, Article 17 (in part), Article 22(1)(c) (in part) and paragraphs 13 - 15 of Part B of Annex VII of the Capital Adequacy Directive (2006/49/EC).
GENPRU 2.2.6GRP

This table belongs to GENPRU 2.2.5 G

Topic

Location of text

Application and purpose of the rules in this section

GENPRU 2.2.1 R to GENPRU 2.2.4 G

BIPRU firms that only have simple types of capital resources (simple capital issuers)

GENPRU 2.2.7 G

Principles underlying the definition of capital resources

GENPRU 2.2.8 G

Which method of calculating capital resources applies to which type of firm

GENPRU 2.2.17 R to GENPRU 2.2.19 R

Purpose of the limits on the use of different forms of capital

GENPRU 2.2.24 G

Use of higher tier capital in lower tiers

GENPRU 2.2.25 R to GENPRU 2.2.28 R

Calculation of capital resources for insurers

GENPRU 2.2.22 G to GENPRU 2.2.23 G; GENPRU 2 Annex 1

Limits on the use of different forms of capital for insurer (capital resources gearing rules for insurer)

GENPRU 2.2.29 R to GENPRU 2.2.41 R

Calculation of capital resources for banks

GENPRU 2 Annex 2

Calculation of capital resources for building societies

GENPRU 2 Annex 3

Limits on the use of different forms of capital for banks and building societies (certain types of capital resources cannot be used for certain purposes)

GENPRU 2.2.42 R8 to GENPRU 2.2.45 R; GENPRU 2.2.47 R to GENPRU 2.2.48 R

8

Limits on the use of different forms of capital for banks and building societies (capital resources gearing rules)

GENPRU 2.2.29 R to GENPRU 2.2.31 G; GENPRU 2.2.46 R; GENPRU 2.2.49 R

Calculation of capital resources for BIPRU investment firms

GENPRU 2.2.20 G to GENPRU 2.2.21 G; GENPRU 2 Annex 4 to GENPRU 2 Annex 6

Limits on the use of different forms of capital for BIPRU investment firms (certain types of capital resources cannot be used for certain purposes)

GENPRU 2.2.42 R to GENPRU 2.2.45 R; GENPRU 2.2.47 R to GENPRU 2.2.48 R

Limits on the use of different forms of capital for BIPRU investment firms (capital resources gearing rules)

GENPRU 2.2.29 R to GENPRU 2.2.31 G; GENPRU 2.2.46 R; GENPRU 2.2.50 R

Example of how the capital resources calculation for BIPRU firms works

GENPRU 2.2.51 G to GENPRU 2.2.59 G

Capital used to meet the base capital resources requirement for BIPRU firms

GENPRU 2.2.60 R to GENPRU 2.2.61 G

Tier one capital instruments: general

GENPRU 2.2.9 G to GENPRU 2.2.10 G; GENPRU 2.2.62 R to GENPRU 2.2.69 G; GENPRU 2.2.80 R to GENPRU 2.2.82 G

Core tier one capital: permanent share capital

GENPRU 2.2.83 R to GENPRU 2.2.84 G

Core tier one capital: profit and loss account and other reserves: material applicable to all firms

GENPRU 2.2.85 R; GENPRU 2.2.87 R to GENPRU 2.2.89 G; GENPRU 2.2.91 G

Core tier one capital: profit and loss account and other reserves: material specific to BIPRU firms

GENPRU 2.2.86 R; GENPRU 2.2.90 R; GENPRU 2.2.92 G

Core tier one capital: provisions relating to partnerships and limited liability partnerships

GENPRU 2.2.93 R to GENPRU 2.2.100 R

Core tier one capital: share premium account

GENPRU 2.2.101 R

Core tier one capital: externally verified interim net profits

GENPRU 2.2.102 R to GENPRU 2.2.103 G

Core tier one capital: valuation differences and fund for future appropriations for insurer

GENPRU 2.2.104 R to GENPRU 2.2.108 R

Tier one capital: perpetual non-cumulative preference shares

GENPRU 2.2.109 R to GENPRU 2.2.110 G

Tier one capital: PIBS

GENPRU 2.2.76 R; GENPRU 2.2.111 R to GENPRU 2.2.112 G

Innovative tier one capital (excluding issues through SPVs)

GENPRU 2.2.76 R; GENPRU 2.2.113 R to GENPRU 2.2.122 G

Innovative tier one capital (issues through SPVs)

GENPRU 2.2.123 R to GENPRU 2.2.137 R

Tier one capital: conversion ratio

GENPRU 2.2.138 R to GENPRU 2.2.144 G

Tier one capital: requirement to have sufficient unissued stock

GENPRU 2.2.145 R

Deductions from tier one capital resources

GENPRU 2.2.155 R to GENPRU 2.2.156 G

Tier two capital

GENPRU 2.2.11 G; GENPRU 2.2.157 G to GENPRU 2.2.197 G

Deductions from tier one capital resources and tier two capital resources

GENPRU 2.2.202 R to GENPRU 2.2.240 G

Tier three capital

GENPRU 2.2.12 G; GENPRU 2.2.241 R to GENPRU 2.2.249 R

Deductions from total capital resources

GENPRU 2.2.14 G to GENPRU 2.2.16 G; GENPRU 2.2.250 R to GENPRU 2.2.265 R

The effect of swaps

GENPRU 2.2.198 R to GENPRU 2.2.201 R

Step-ups (Tier one capital and tier two capital)

GENPRU 2.2.76 R; GENPRU 2.2.146 R to GENPRU 2.2.154 G

Redemption of tier one instruments

GENPRU 2.2.64R (3); GENPRU 2.2.70 R to GENPRU 2.2.79 G

Redemption of tier two instruments

GENPRU 2.2.172 R to GENPRU 2.2.174 R; GENPRU 2.2.177 R to GENPRU 2.2.178 R (upper tier two instruments); GENPRU 2.2.194 R to GENPRU 2.2.197 G (lower tier two instruments)

Non-standard capital instruments

GENPRU 2.2.13 G

Standard form documentation for subordinated debt

GENPRU 2.2.164 G

Public sector guarantees

GENPRU 2.2.276 R

Other capital resources for insurers: unpaid share capital or unpaid initial funds and calls for supplementary contributions

GENPRU 2.2.266 G to GENPRU 2.2.269 G

Additional requirements for insurer carrying on with-profits insurance business

GENPRU 2.2.270 R to GENPRU 2.2.275 G

GENPRU 2.2.7GRP
Parts of this section are irrelevant to a BIPRU firm whose capital resources consist of straightforward capital instruments. Therefore the FSA's Personal handbooks facility available on its website allows a BIPRU firm to screen out those parts of this section that are not relevant to a simple capital issuer.A simple capital issuer is a BIPRU firm that meets the following conditions:(1) it does not raise capital through a special purpose vehicle;(2) it only includes capital instruments
GENPRU 2.2.8GRP
The FSA has divided its definition of capital into categories, or tiers, reflecting differences in the extent to which the capital instruments concerned meet the purpose and conform to the characteristics of capital listed in GENPRU 2.2.9 G. The FSA generally prefers a firm to hold higher quality capital that meets the characteristics of permanency and loss absorbency that are features of tier one capital. Capital instruments falling into core tier one capital can be included
GENPRU 2.2.9GRP
Tier one capital typically has the following characteristics:(1) it is able to absorb losses;(2) it is permanent;(3) it ranks for repayment upon winding up, administration or similar procedure after all other debts and liabilities; and(4) it has no fixed costs, that is, there is no inescapable obligation to pay dividends or interest.
GENPRU 2.2.11GRP
Tier two capital includes forms of capital that do not meet the requirements for permanency and absence of fixed servicing costs that apply to tier one capital. Tier two capital includes, for example:(1) capital which is perpetual (that is, has no fixed term) but cumulative (that is, servicing costs cannot be waived at the issuer's option, although they may be deferred – for example, cumulative preference shares); only perpetual capital instruments may be included in upper tier
GENPRU 2.2.12GRP
Tier three capital consists of forms of capital conforming least well to the characteristics of capital listed in GENPRU 2.2.9 G: either subordinated debt of short maturity (upper tier three capital) or net trading book profits that have not been externally verified (lower tier three capital).
GENPRU 2.2.14GRP
Deductions should be made at the relevant stage of the calculation of capital resources to reflect capital that may not be available to the firm or assets of uncertain value (for example, holdings of intangible assets and assets that are inadmissible for an insurer., or, in the case of a bank or building society, where that firm has made investments in a subsidiary undertaking or in another financial institution or in respect of participations that it holds).
GENPRU 2.2.16GRP
A full list of deductions from capital resources is shown in the capital resources table applicable to the firm.
GENPRU 2.2.17RRP
A firm must calculate its capital resources in accordance with the version of the capital resources table applicable to the firm, subject to the capital resources gearing rules. The version of the capital resources table that applies to a firm is specified in the table in GENPRU 2.2.19 R.
GENPRU 2.2.18RRP
In the case of a BIPRU firm the capital resources table also sets out how the capital resources requirement is deducted from capital resources in order to decide whether its capital resources equal or exceed its capital resources requirement.
GENPRU 2.2.20GRP
GENPRU 2.2.19 R sets out three different methods of calculating capital resources for BIPRU investment firms. The differences between the three methods relate to whether and how material holdings and illiquid assets are deducted when calculating capital resources. The method depends on whether a firm has an investment firm consolidation waiver. If a firm does have such a waiver, it should deduct illiquid assets, own groupmaterial holdings and certain contingent liabilities. If
GENPRU 2.2.25RRP
A firm may include in a lower stage of capital, capital resources which are eligible for inclusion in a higher stage of capital if the capital resources gearing rules would prevent the use of that capital in that higher stage of capital. However:(1) the capital resources gearing rules applicable to that lower stage of capital apply to higher stage of capital included in that lower stage of capital; and(2) (subject to GENPRU 2.2.26 R) the rules in GENPRU governing the eligibility
GENPRU 2.2.26RRP
An item of tier one capital which is included in a firm'stier two capital resources under GENPRU 2.2.25 R is not subject to the requirement to obtain a legal opinion in GENPRU 2.2.159R (12).
GENPRU 2.2.44RRP
Tier one capital and tier two capital are the only type of capital resources that a BIPRU firm may use for the purpose of meeting:(1) the credit risk capital component;(2) the operational risk capital requirement;(3) the counterparty risk capital component; and(4) the base capital resources requirement.
GENPRU 2.2.45RRP
GENPRU 2.2.44 R (and the capital resources gearing rules that relate to it) also applies for the purposes of any other requirement in the Handbook for which it is necessary to calculate the capital resources of a BIPRU firm, except for the purposes described in GENPRU 2.2.47 R and except as may otherwise be stated in the relevant part of the Handbook.
GENPRU 2.2.46RRP
For the purpose of GENPRU 2.2.44 R:(1) the amount of the items which may be included in a BIPRU firm'stier two capital resources must not exceed the amount calculated at stage F of the calculation in the capital resources table (Total tier one capital after deductions); and(2) the amount of the items which may be included in a BIPRU firm'slower tier two capital resources must not exceed 50% of the amount calculated at stage F of the calculation in the capital resources table.
GENPRU 2.2.47RRP
For the purposes of meeting:(1) the market risk capital requirement; (2) the concentration risk capital component; and(3) the fixed overheads requirement (where applicable);a BIPRU firm may only use the following parts of its capital resources:(4) tier one capital to the extent that it is not required to meet the requirements in GENPRU 2.2.44 R (GENPRU 2.2.48 R explains how to calculate how much tier one capital is required to meet the requirements in GENPRU 2.2.44 R);(5) tier
GENPRU 2.2.48RRP
The amount of tier one capital and tier two capital that is not used to meet the requirements in GENPRU 2.2.44 R as referred to in GENPRU 2.2.47R (4) and (5)(5) is equal to the amount calculated at stage N of the calculation in the capital resources table (Total tier one capital plus tier two capital after deductions) less the parts of the capital resources requirement deducted immediately after stage N of the capital resources table (the parts of the capital resources requirements
GENPRU 2.2.49RRP
For the purpose of meeting the requirements in GENPRU 2.2.47R (1) to GENPRU 2.2.47R (3) and subject to GENPRU 2.2.50 R, a BIPRU firm must not include any item in either:(1) its tier two capital resources falling within GENPRU 2.2.47R (6) (excess tier two capital); or(2) its upper tier three capital resources;to the extent that the sum of (1) and (2) would exceed 250% of the amount resulting from the following calculation:(3) calculate the amount at stage F of the calculation in
GENPRU 2.2.50RRP
In relation to a BIPRU investment firm which calculates its capital resources under GENPRU 2 Annex 4 (Capital resources table for a BIPRU investment firm deducting material holdings), the figure of 200% replaces that of 250% in GENPRU 2.2.49 R.
GENPRU 2.2.52GRP

This table belongs to GENPRU 2.2.51 G

Description of the stage of the capital resources calculation

Stage in the capital resources table

Amount (£)

Total tier one capital after deductions (excluding innovative tier one instruments – see GENPRU 2.2.53 G)

Stage F

80

Total tier two capital (including innovative tier one instruments– see GENPRU 2.2.53 G)

Stage K

80

Deductions

Stage M

(20)

Total tier one capital and tier two capital after deductions

Stage N

140

Upper tier three capital (this example assumes the firm has no lower tier three capital (trading book profits))

Stage Q

50

Total capital resources

Stage T

190

GENPRU 2.2.55GRP
The combined credit, operational and counterparty1 risk capital requirement is deducted after stage N of the capital resources table and the market risk requirement following stage T of the capital resources table. These calculations are shown in the table in GENPRU 2.2.56 G.
GENPRU 2.2.56GRP

This table belongs to GENPRU 2.2.55 G

Description of the stage of the capital resources calculation

Stage in the capital resources table

Amount (£)

Total tier one capital and tier two capital after deductions

Stage N

140

Credit, operational, and counterparty1 risk requirement

(100)

Tier one capital and tier two capital available to meet market risk requirement

40

Tier three capital

Stage Q

50

Total capital available to meet market risk requirement

90

Market risk requirement

(90)

Market risk requirement met subject to meeting gearing limit set out in GENPRU 2.2.49 R – see GENPRU 2.2.57 G

GENPRU 2.2.57GRP
The gearing limit in GENPRU 2.2.49 R (Combined tier two and tier three limits) requires that the upper tier three capital used to meet the market risk requirement does not exceed 250% of the relevant1tier one capital1.
GENPRU 2.2.58GRP
In this example it is assumed that the maximum possible amount of tier one capital is carried forward to meet the market risk requirement. There are other options as to the allocation of tier one capital and tier two capital to the credit, operational, and counterparty1 risk requirement.1In order to calculate the relevant tier one capital for the upper tier three gearing limit in accordance with GENPRU 2.2.49 R it is first necessary to allocate tier one capital and tier two capital
GENPRU 2.2.59GRP
The 250% gearing limit is met as the limit of £1251 is greater than the upper tier three capital of £50 used in this example.
GENPRU 2.2.60RRP
A BIPRU firm may use the capital resources used to meet the base capital resources requirement to meet any other part of the capital resources requirement.
GENPRU 2.2.61GRP
The explanation for GENPRU 2.2.60 R can be found in GENPRU 2.2.43 G (Base capital resources requirement). In brief the reason is that the base capital resources requirement is not in practice meant to act as an additional capital resources requirement. It is meant to act as a floor to the capital resources requirement.
GENPRU 2.2.62RRP
A firm may not include a capital instrument in its tier one capital resources unless it complies with the following conditions:(1) it is included in one of the categories in GENPRU 2.2.63 R;(2) it complies with the conditions set out in GENPRU 2.2.64 R;(3) i t is not excluded under GENPRU 2.2.65 R (Connected transactions); and(4) it is not excluded by any of the rules in GENPRU 2.2.
GENPRU 2.2.63RRP
The categories referred to in GENPRU 2.2.62R (1) are:(1) permanent share capital;(2) eligible partnership capital;(3) eligible LLP members' capital;(4) sole trader capital;(5) a perpetual non-cumulative preference share;(6) (in the case of a building society) PIBS; and(7) an innovative tier one instrument.
GENPRU 2.2.65RRP
An item of capital does not qualify for inclusion as tier one capital if the issue of that item of capital by the firm is connected with one or more other transactions which, when taken together with the issue of that item, could result in that item of capital no longer displaying all of the characteristics set out in GENPRU 2.2.64R (1) to GENPRU 2.2.64R (9).
GENPRU 2.2.71RRP
A firm may include a term in a tier one instrument allowing the firm to redeem it before the date in GENPRU 2.2.70R (2)(a) if the following conditions are satisfied:(1) the other conditions in GENPRU 2.2.70 R are met;(2) the circumstance that entitles the firm to exercise that right is a change in law or regulation in any relevant jurisdiction or in the interpretation of such law or regulation by any court or authority entitled to do so;(3) it would be reasonable for the firm
GENPRU 2.2.72RRP
A firm must not redeem a tier one instrument in accordance with a term included under GENPRU 2.2.71 R.
GENPRU 2.2.74RRP
A firm must not redeem any tier one instrument that it has included in its tier one capital resources unless it has notified the FSA of its intention at least one month before it does so.
GENPRU 2.2.75RRP
If a firm gives notice of the redemption or repayment of any tier one instrument, the firm must no longer include that instrument in its tier one capital resources.
GENPRU 2.2.77RRP
(1) This rule applies to a tier one instrument, tier two instrument or tier three instrument (instrument A) that under its terms is exchanged for or converted into another instrument or is subject to a similar process.(2) This rule also applies to instrument A if under its terms it is redeemed out of the proceeds of the issue of new securities.(3) If the instrument with which instrument A is replaced is included in the same stage of capital or a higher stage of capital as instrument
GENPRU 2.2.80RRP
A firm may not include a share in its tier one capital resources unless (in addition to complying with the other relevant rules in GENPRU 2.2):(1) (in the case of a firm that is a company as defined in the Companies Act 1985 or the Companies (Northern Ireland) Order 1986)it is "called-up share capital" within the meaning given to that term in that Act or, as the case may be, that Order; or(2) (in the case of a building society) it is a "deferred share" as defined in the Building
GENPRU 2.2.81RRP
A firm may not include a capital instrument other than a share in its tier one capital resources unless it complies with GENPRU 2.2.80R (3).
GENPRU 2.2.83RRP
Permanent share capital means an item of capital which (in addition to satisfying GENPRU 2.2.64 R) meets the following conditions:(1) it is:(a) an ordinary share; or(b) a members' contribution; or(c) part of the initial fund of a mutual; (2) any coupon on it is not cumulative, the firm is under no obligation to pay a coupon in any circumstances and the firm has the right to choose the amount of any coupon that it pays; and(3) the terms upon which it is issued do not permit redemption
GENPRU 2.2.85RRP
(1) Negative amounts, including any interim net losses (but in the case of a BIPRU investment firm, only material interim net losses), must be deducted from profit and loss account and other reserves.(2) For these purposes material interim net losses mean unaudited interim losses arising from a firm'strading book and non-trading book business which exceed 10% of the sum of its capital resources calculated at stages A (Core tier one capital) and B (Perpetual non-cumulative preference
GENPRU 2.2.86RRP
(1) This rule applies to trading book valuation adjustments or reserves referred to in GENPRU 1.3.29 R to GENPRU 1.3.35 G (Valuation adjustments and reserves). It applies to a BIPRU firm.(2) When valuation adjustments or reserves give rise to losses of the current financial year, a firm must treat them in accordance with GENPRU 2.2.85 R.(3) Valuation adjustments or reserves which exceed those made under the accounting framework to which a firm is subject must be treated in accordance
GENPRU 2.2.87RRP
Dividends must be deducted from reserves as soon as they are declared.
GENPRU 2.2.88RRP
A firm must account for a capital contribution as an increase in reserves and may, notwithstanding GENPRU 2.2.63 R, count that increase in reserves as core tier one capital.
GENPRU 2.2.89GRP
An item of capital qualifies as a capital contribution if it is a gift of capital (and, as such, is not repayable) and a coupon is not payable on it.
GENPRU 2.2.90RRP
In the case of a BIPRU firm which is the originator of a securitisation, net gains arising from the capitalisation of future income from the securitised assets and providing credit enhancement to positions in the securitisation must be excluded from profit and loss account and other reserves.
GENPRU 2.2.91GRP
Profit and loss account and other reserves should be valued in accordance with the rules in GENPRU 1.3 (Valuation).
GENPRU 2.2.93RRP
Eligible partnership capital means a partners' account:(1) into which capital contributed by the partners is paid; and(2) from which under the terms of the partnership agreement an amount representing capital may be withdrawn by a partner only if:(a) he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any person replacing him as their partner; or(b) the partnership is otherwise dissolved or wound up and either the BIPRU
GENPRU 2.2.94RRP
Eligible LLP members' capital means a members' account:(1) into which capital contributed by the members is paid; and(2) from which under the terms of the limited liability partnership agreement an amount representing capital may be withdrawn by a member only if:(a) he ceases to be a member and an equal amount is transferred to another such account by his former fellow members or any person replacing him as a member; or(b) the limited liability partnership is otherwise dissolved
GENPRU 2.2.95RRP
A BIPRU firm that is a partnership or a limited liability partnership may not include eligible partnership capital or eligible LLP members' capital in its tier one capital resources unless (in addition to GENPRU 2.2.62 R (General conditions relating to tier one capital)) it complies with GENPRU 2.2.83R (2) (Coupons should not be cumulative or mandatory). However GENPRU 2.2.64R (3) (Redemption) is replaced by GENPRU 2.2.93 R or GENPRU 2.2.94 R.
GENPRU 2.2.97RRP
The items permanent share capital and share premium account (which form part of core tier one capital) and perpetual non-cumulative preference shares (which forms stage B of the capital resources table) do not apply to a BIPRU firm that is a partnership or a limited liability partnership.
GENPRU 2.2.99GRP
A BIPRU firm that is a partnership or a limited liability partnership should include profit and loss (taking into account interim losses or material interim net losses) in its core tier one capital.
GENPRU 2.2.100RRP
A BIPRU firm which is a partnership or limited liability partnership must deduct at stage E of the calculation in the capital resources table (Deductions from tier one capital) the amount by which the aggregate of the amounts withdrawn by its partners or members exceeds the profits of that firm. Amounts of eligible partnership capital or eligible LLP members' capital repaid in accordance with GENPRU 2.2.93 R or GENPRU 2.2.94 R are not included in this calculation.
GENPRU 2.2.101RRP
(1) A firm must include share premium account relating to the issue of a share forming part of its core tier one capital in its core tier one capital.(2) A firm must include share premium account relating to the issue of a share forming part of another tier of capital in that other tier.(3) A firm that is incorporated under the Companies Act 1985 or the Companies (Northern Ireland) Order 1986may include its share premium account as core tier one capital notwithstanding (2) to
GENPRU 2.2.102RRP
Externally verified interim net profits are interim profits which have been verified by a firm's external auditors after deduction of tax, declareddividends and other appropriations.
GENPRU 2.2.103GRP
A firm may include interim profits before a formal decision has been taken only if these profits have been verified, in accordance with the relevant Auditing Practices Board's Practice Note, by persons responsible for the auditing of the accounts.
GENPRU 2.2.124RRP
(1) GENPRU 2.2.123 R - GENPRU 2.2.137 R apply to capital of a firm if:(a) either or both of the conditions in (2) are satisfied; and(b) any of the SPVs referred to in (2) is a subsidiary undertaking of the firm.(2) The conditions referred to in (1) are:(a) that capital is issued to an SPV; or(b) the subscription for the capital issued by the firm is funded directly or indirectly by an SPV.(3) A BIPRU firm may not include capital coming within this rule in its capital resources
GENPRU 2.2.132RRP
The capital which the firm seeks to include in its capital resources under GENPRU 2.2.124R (3)(a) must satisfy the following conditions:(1) it meets the conditions for inclusion in tier one capital (subject to GENPRU 2.2.130 R);(2) its first call date (if any) must not arise before that on the instrument issued by the SPV; and(3) its terms relating to repayment must be the same as those of the instrument issued by the SPV.
GENPRU 2.2.133RRP
(1) This rule deals with any transaction:(a) under which an SPV directly or indirectly funds the subscription for capital issued by the firm as described in GENPRU 2.2.124 R; or(b) that is directly or indirectly funded by a transaction in (1)(a).(2) Each undertaking that is a party to a transaction to which this rule applies (other than the firm) must be a subsidiary undertaking of the firm.(3) Each SPV that is a party to a transaction to which this rule applies must comply with
GENPRU 2.2.134GRP
The purpose of GENPRU 2.2.133 R is to deal with a capital-raising under which the capital raised by a special purpose vehicle is passed through a number of undertakings before it is invested in the firm. If the capital resources of the firm fall below, or are likely to fall below, its capital resources requirement the firm should replace the capital issued by that first special purpose vehicle with a tier one instrument directly issued by the firm itself that is not an innovative
GENPRU 2.2.135RRP
A firm which satisfies the conditions for the inclusion of capital set out in GENPRU 2.2.124 R, must, in addition, if that transaction is in any respect unusual, notify the FSA at least one Month in advance of the date on which the firm intends to include that capital in its capital resources.
GENPRU 2.2.136GRP
The FSA is likely to consider as unusual a transaction which involves the raising by the firm of tier one capital through a subsidiary undertaking of that firm that is not an SPV. The FSA would expect a firm to request individual guidance in such circumstances.
GENPRU 2.2.138RRP
(1) This rule applies to a potential tier one instrument if:(a) it is redeemable by the firm (ignoring GENPRU 2.2.77 R (Meaning of redemption));(b) it provides that if the issuer does not exercise that right or does not do so in specified circumstances the issuer must or may have to redeem it in whole or in part through the issue of shares eligible for inclusion in the firm'stier one capital resources or the instrument converts or may convert into such shares; and(c) GENPRU 2.2.77
GENPRU 2.2.139RRP
In GENPRU 2.2.138 R to GENPRU 2.2.142 R:(1) the original capital item means the capital item that is being redeemed; and(2) the conversion instrument means the tier one capital to be issued on its redemption.
GENPRU 2.2.140RRP
In GENPRU 2.2.138 R to GENPRU 2.2.142 R, the conversion ratio means the ratio of:(1) the number of units of the conversion instrument that the firm must issue to satisfy its redemption obligation (so far as it is to be satisfied by the issue of conversion instruments) in respect of one unit of the original capital item; to(2) one unit of the original capital item.
GENPRU 2.2.147RRP
(1) A firm may not include in its tier one capital resources a tier one instrument that is or may be subject to a step-up that does not meet the definition of moderate in the press release of the Basle Committee on Banking Supervision of 27th October 1998 called "Instruments eligible for inclusion in Tier 1 capital".(2) For the purpose of (1) the words in that press release "than, at national supervisory discretion, either" are replaced by "than the higher of the following two
GENPRU 2.2.148GRP
The effect of GENPRU 2.2.147 R is that for inclusion in tier one capital resources, step-ups in instruments should be moderate. A moderate step-up for these purposes is one which results in an increase over the initial rate that is no greater than the higher of the following two amounts:(1) 100 basis points, less the swap spread between the initial index basis and the stepped-up index basis; or(2) 50% of the initial credit spread, less the swap spread between the initial index
GENPRU 2.2.159RRP
A capital instrument must not form part of the tier two capital resources of a firm unless it meets the following conditions:(1) the claims of the creditors must rank behind those of all unsubordinated creditors;(2) the only events of default must be non-payment of any amount falling due under the terms of the capital instrument or the winding-up of the firm and any such event of default must not prejudice the subordination in (1);(3) to the fullest extent permitted under the
GENPRU 2.2.161RRP
A capital instrument may be included in a firm'stier two capital resources even though the remedies available to the subordinated creditor go beyond those referred to in GENPRU 2.2.159R (3), if the following conditions are satisfied:(1) those remedies are not available for failure to pay any amount of principal, interest or expenses or in respect of any other payment obligation; and(2) those remedies do not in substance amount to remedies to recover payment of the amounts in
GENPRU 2.2.162GRP
If damages are a remedy that cannot be excluded as referred to in GENPRU 2.2.159R (3) those damages should be subordinated in accordance with GENPRU 2.2.159R (1). Damages permitted by GENPRU 2.2.161 R should also be subordinated in accordance with GENPRU 2.2.159R (1).
GENPRU 2.2.164GRP
The FSA is more concerned that the subordination provisions listed in GENPRU 2.2.159 R should be effective than that they should follow a particular form. The FSA does not, therefore, prescribe that the loan agreement or capital instrument should be drawn up in a standard form.
GENPRU 2.2.166GRP
GENPRU 2.2.159R (3) allows a capital instrument to form part of the tier two capital resources even though the laws of the relevant jurisdiction do not allow remedies to be limited in the way described there. For example it is not possible to limit certain remedies in the case of an issue in the United States that is SEC-registered and subject to the provisions of the Trust Indenture Act.
GENPRU 2.2.172RRP
A tier two instrument may be redeemable at the option of the firm, but any term of the instrument providing for the firm to have the right to exercise such an option must not provide for that right to be exercisable earlier than the fifth anniversary of the date of issue of the instrument.
GENPRU 2.2.175GRP
The rules and guidance in GENPRU 2.2.146 R to GENPRU 2.2.154 G on step-ups cover tier two capital as well as tier one capital.
GENPRU 2.2.176GRP
Examples of capital instruments which may be eligible to count in upper tier two capital resources include the following:(1) perpetual cumulative preference shares;(2) perpetual subordinated debt; and(3) other instruments that have the same economic characteristics as (1) or (2).
GENPRU 2.2.177RRP
A capital instrument must (in addition to meeting the requirements of the rules about eligibility for inclusion in tier two capital) meet the following conditions before it can be included in a firm'supper tier two capital resources:(1) it must have no fixed maturity date;(2) the terms of the instrument must provide for the firm to have the option to defer any coupon on the debt, except that the firm need not have that right in the case of a coupon payable in the form of an item
GENPRU 2.2.178RRP
If a firm gives notice of the redemption or repayment of an upper tier two instrument, the firm must no longer include it in its upper tier two capital resources.
GENPRU 2.2.179GRP
For the purpose of GENPRU 2.2.177R (2), GENPRU 2.2.68 G (Dividend pushers) applies equally in relation to the inclusion of an instrument in upper tier two capital resources.
GENPRU 2.2.180RRP
A capital instrument may only be included in upper tier two capital resources if a firm's obligations under the instrument either:(1) do not constitute a liability (actual, contingent or prospective) under section 123(2) of the Insolvency Act 1986; or(2) do constitute such a liability but the terms of the instrument are such that:(a) any such liability is not relevant for the purposes of deciding whether:(i) the firm is, or is likely to become, unable to pay its debts; or(ii)
GENPRU 2.2.181RRP
A firm may not include an upper tier two instrument in its upper tier two capital resources unless it has obtained a properly reasoned independent legal opinion from an appropriately qualified individual confirming that the criteria in GENPRU 2.2.177R (3) and GENPRU 2.2.180 R (Loss absorption) are met. This rule does not apply to a perpetual cumulative preference share.
GENPRU 2.2.187RRP
A BIPRU firm which adopts the standardised approach to credit risk may include general/collective provisions in its tier two capital resources only if:(1) they are freely available to the firm;(2) their existence is disclosed in internal accounting records; and(3) their amount is determined by the management of the firm, verified by independent auditors and notified to the FSA.
GENPRU 2.2.188RRP
The value of general/collective provisions which a firm may include in its tier two capital resources as referred to in GENPRU 2.2.187 R may not exceed 1.25% of the sum of the following:(1) the sum of the market risk capital requirement and the operational risk capital requirement (if applicable), multiplied by a factor of 12.5; and(2) the sum of risk weighted assets under the standardised approach for credit risk.
GENPRU 2.2.194RRP
A firm may include a capital instrument in its lower tier two capital resources if (in addition to meeting the requirements of the rules about eligibility for inclusion in tier two capital) either the holder has no right to repayment or it satisfies either of the following conditions:(1) it has an original maturity of at least five years; or(2) it is redeemable on notice from the holder, but the period of notice of repayment required to be given by the holder is five years or
GENPRU 2.2.195GRP
A firm may include perpetual capital instruments that do not meet the conditions in GENPRU 2.2.177 R (Eligibility conditions for upper tier two capital) in lower tier two capital resources if they meet the general conditions described in GENPRU 2.2.159 R (General conditions for eligibility as tier two capital instruments).
GENPRU 2.2.196RRP
(1) For the purposes of calculating the amount of a lower tier two instrument which may be included in a firm'scapital resources:(a) in the case of an instrument with a fixed maturity date, in the final five years to maturity; and(b) in the case of an instrument with or without a fixed maturity date but where five years' or more notice of redemption or repayment has been given, in the final five years to the date of redemption or repayment;the principal amount must be amortised
GENPRU 2.2.197GRP
If a firm wishes to include in lower tier two capital resources an instrument with or without a fixed maturity date but where less than five years' notice of redemption or repayment has been given, it should seek individual guidance from the FSA.
GENPRU 2.2.198RRP
GENPRU 2.2.198 R to GENPRU 2.2.201 R apply to a tier one instrument, tier two instrument or tier three instrument of a firm that is treated as a liability under the accounting framework to which it is subject as referred to in GENPRU 1.3.4 R (General requirements: accounting principles to be applied) (a "debt instrument").
GENPRU 2.2.199RRP
A firm must recognise for the purpose of this section any effect that changes in exchange rates or interest rates have on a debt instrument (as defined in GENPRU 2.2.198 R) under the accounting framework to which the firm is subject as referred to in GENPRU 1.3.4 R (General requirements: accounting principles to be applied).
GENPRU 2.2.200RRP
A firm must recognise, in accordance with GENPRU 2.2.201 R, the effect of a foreign currency hedge on a debt instrument (as defined in GENPRU 2.2.198 R) denominated in a foreign currency or of an interest rate hedge on a fixed rate coupon debt instrument if:(1) the accounting framework to which the firm is subject as referred to in GENPRU 1.3.4 R (General requirements: accounting principles to be applied) provides for a fair value hedge accounting relationship between a liability
GENPRU 2.2.206RRP
The relevant capital resources of a firm mean for the purposes of this rule the sum of the amount of capital resources calculated at stages L (Total tier one capital plus tier two capital) and Q (Total tier three capital) of the calculation in the capital resources table as adjusted in accordance with the following:(1) the firm must not take into account the items referred to in any of the following:(a) GENPRU 2.2.190 R to GENPRU 2.2.193 R (surplus provisions); or(b) GENPRU 2.2.236
GENPRU 2.2.210GRP
For the purpose of the definition of a material holding, share capital includes preference shares. Share premium should be taken into account when determining the amount of share capital.
GENPRU 2.2.216GRP
(1) This paragraph gives guidance on how the calculation under GENPRU 2.2.214R (1) should be carried out where an insurance undertaking is accounted for using the embedded value method.(2) On acquisition, any "goodwill" element (that is, the difference between the acquisition value according to the embedded value method and the actual investment) should be deducted from tier one capital resources.(3) The embedded value should be deducted from the total of tier one capital resources
GENPRU 2.2.224RRP
For the purpose of the rules in this section about connected lending of a capital nature and in relation to a bank, a connected party means another person ("P") who fulfils at least one of the following conditions and is not solo-consolidated with the bank under BIPRU 2.1 (Solo consolidation):(1) P is closely related to the bank; or(2) P is an associate of the bank; or(3) the same persons significantly influence the governing body of P and the bank.
GENPRU 2.2.225RRP
For the purpose of GENPRU 2.2.224 R, in relation to a person ("P") to which a bank has an exposure when P is acting on his own behalf and also an exposure to P when P acts in his capacity as a trustee, custodian or general partner of an investment trust, unit trust, venture capital or other investment fund, pension fund or similar fund (a "fund") the bank may choose to treat this latter exposure as an exposure to the fund, unless such treatment would be misleading.
GENPRU 2.2.229RRP
A loan is also connected lending of a capital nature if:(1) it funds directly or indirectly a loan to a connected party of the bank falling into GENPRU 2.2.228 R1 or an investment in the capital of a connected party of the bank; and(2) it falls into GENPRU 2.2.228 R.
GENPRU 2.2.234GRP
A loan may initially fall outside the definition of connected lending of a capital nature but later fall into it. For example, if the initial lending to a connected party is subsequently downstreamed to another connected party the relationship between the bank and the ultimate borrower may be such that, looking at the arrangements as a whole, the undertaking to which the bank lends is able to regard the loan to it as being capable of absorbing losses.
GENPRU 2.2.235GRP
Lending to a connected party will not normally be connected lending of a capital nature where that party:(1) is acting as a vehicle to pass funding to an unconnected party; and(2) has no other creditors whose claims could be senior to those of the lender.
GENPRU 2.2.237RRP
A BIPRU firm calculating risk weighted exposure amounts under the IRB approach or the standardised approach to credit risk must deduct from its capital resources the exposure amount of securitisation positions which receive a risk weight of 1250% under BIPRU 9 (Securitisation), unless the firm includes the securitisation positions in its calculation of risk weighted exposure amounts (see BIPRU 9.10 (Reduction in risk-weighted exposure amounts)).
GENPRU 2.2.239RRP
(1) The treatment in the capital resources table of the deductions in GENPRU 2.2.238 R only has effect for the purpose of the capital resources gearing rules.(2) In other cases (3) and (4) apply.(3) A BIPRU firm making the deductions described in GENPRU 2.2.238 R must deduct 50% of the total amount of those deductions at stage E (Deductions from tier one capital) and 50% at stage J (Deductions from tier two capital) of the calculation in the capital resources table after the application
GENPRU 2.2.241RRP
GENPRU 2.2.241 R to GENPRU 2.2.245 R only apply to a BIPRU firm.
GENPRU 2.2.242RRP
A BIPRU firm may include subordinated debt in its upper tier three capital resources only if:(1) it has an original maturity of at least two years or is subject to at least two years' notice of repayment; and(2) payment of interest or principal is permitted only if, after that payment, the firm'scapital resources would be not less than its capital resources requirement.
GENPRU 2.2.243RRP
A BIPRU firm which includes subordinated debt in its tier three capital resources must notify the FSA one month in advance of all payments of either interest or principal made when the firm'scapital resources are less than 120% of its capital resources requirement.
GENPRU 2.2.244RRP
The rules in the table in GENPRU 2.2.245 R apply to short term subordinated debt that a BIPRU firm includes in its tier three capital resources in the same way that they apply to a firm'stier two capital resources with the adjustments in that table.
GENPRU 2.2.245RRP

Table: Application of tier two capital rules to tier three debt

This table belongs to GENPRU 2.2.244 R

Tier two capital rule

Adjustment

GENPRU 2.2.159 R (General conditions for eligibility as tier two capital)

The references in GENPRU 2.2.159R (5) (Capital must not become repayable prior to stated maturity date except in specified circumstances) to repayment at the option of the holder are replaced by a reference to GENPRU 2.2.242R (1) (Upper tier three capital should have maturity or notice period of at least two years)

The reference in GENPRU 2.2.159R (10) (Description of tier two capital in marketing documents) to

GENPRU 2.2.271 R (Other requirements: insurers carrying on with-profits business (Insurer only)) does not apply

GENPRU 2.2.160 R (Holder of a non-deferred share of a building society to be treated as a senior creditor)

GENPRU 2.2.161 R (Additional remedies)

GENPRU 2.2.163 R (Legal opinion where debt subject to a law of a country outside the United Kingdom)

GENPRU 2.2.169 R (Ineligibility as tier two capital owing to connected transactions)

The reference to GENPRU 2.2.177 R (General eligibility conditions for upper tier two capital) does not apply

GENPRU 2.2.171 R (Amendments to terms of the capital instrument)

GENPRU 2.2.172 R to GENPRU 2.2.173 R (Redeemability at the option of the issuer)

GENPRU 2.2.174 R (Notification of redemption)

References in the rules in the first column to the fifth anniversary are amended so as to refer to the second anniversary.

GENPRU 2.2.246RRP
GENPRU 2.2.246 R to GENPRU 2.2.249 R only apply to a BIPRU firm.
GENPRU 2.2.248RRP
Trading book profits and losses, other than those losses to which GENPRU 2.2.86R (2) (Valuation adjustment and reserves) refers, originating from valuation adjustments or reserves as referred to in GENPRU 1.3.29 R to GENPRU 1.3.35 G (Valuation adjustments or reserves) must be included in the calculation of net interim trading book profits and be added to or deducted from tier three capital resources.
GENPRU 2.2.249RRP
Trading book valuation adjustments or reserves as referred to in GENPRU 1.3.29 R to GENPRU 1.3.35 G which exceed those made under the accounting framework to which a firm is subject must be treated in accordance with GENPRU 2.2.248 R if not required to be treated under GENPRU 2.2.86R (2).
GENPRU 2.2.260RRP
Illiquid assets means illiquid assets including(1) tangible fixed assets (except land and buildings if they are used by a firm as security for loans, but this exclusion is only up to the value of the principal outstanding on the loans); or(2) any holdings in the capital resources of credit institutions or financial institutions, except to the extent that:(a) they have already been deducted as a material holding; or(b) they are shares which are included in a firm'strading book
GENPRU 2.2.264RRP
(1) The excess trading book position is the excess of:(a) a bank or building society's aggregate net long (including notional) trading bookpositions in shares, subordinated debt or any other interest in the capital of credit institutions or financial institutions;over;(b) 25% of that firm'scapital resources calculated at stage T (Total capital after deductions) of the capital resources table (calculated before deduction of the excess trading book position).(2) Only the excess
GENPRU 2.2.265RRP
The standard market risk PRR rules apply for establishing what is a net position and the amount and value of that position for the purposes of GENPRU 2.2.264 R, ignoring rules which would otherwise exclude such positions from BIPRU 7.2 (Interest rate PRR) or BIPRU 7.3 (Equity PRR and basic interest rate PRR for equity derivatives) on the basis that they are to be deducted from a bank or building society'scapital resources, or for any other reason.
GENPRU 2.2.276RRP
A BIPRU firm may not include a guarantee from a state or public authority in its capital resources.
GENPRU 1.2.26RRP
A firm must at all times maintain overall financial resources, including capital resources and liquidity resources, which are adequate, both as to amount and quality, to ensure that there is no significant risk that its liabilities cannot be met as they fall due.
GENPRU 1.2.29GRP
Risks may be addressed through holding capital to absorb losses that unexpectedly materialise. The ability to pay liabilities as they fall due also requires liquidity. Therefore, in assessing the adequacy of a firm's financial resources, both capital and liquidity needs should be considered. A firm should also consider the quality of its financial resources such as the loss-absorbency of different types of capital and the time required to liquidate different types of asset. SYSC
GENPRU 1.2.30RRP
A firm must have in place sound, effective and complete processes, strategies and systems:(1) to assess and maintain on an ongoing basis the amounts, types and distribution of financial resources, capital resources and internal capital that it considers adequate to cover:(a) the nature and level of the risks to which it is or might be exposed;(b) the risk in the overall financial adequacy rule; and(c) the risk that the firm might not be able to meet its CRR in the future; and(2)
GENPRU 1.2.34GRP
In the overall Pillar 2 rule , internal capital refers to the financial resources of a firm which it treats as being held against the risks listed in the overall Pillar 2 rule. The obligation in that rule to assess the distribution of such capital refers, in relation to a firm making an assessment on a solo basis, for example, to the need to take account of circumstances where part of a firm's financial resources are held by a branch of that firm which are subject to restrictions
GENPRU 1.2.35RRP
The processes, strategies and systems required by the overall Pillar 2 rule must be comprehensive and proportionate to the nature, scale and complexity of the firm's activities.
GENPRU 1.2.36RRP
As part of its obligations under GENPRU 1.2.30R (1) (Main requirement relating to risk processes, strategies and systems), a firm must identify separately the amount of tier one capital, tier two capital, tier three capital, other capital eligible to form part of its capital resources and each category of capital (if any) that is not eligible to form part of its capital resources which it considers adequate for the purposes described in GENPRU 1.2.30R (1).
GENPRU 1.2.37RRP
The processes and systems required by the overall Pillar 2 rule must:(1) include an assessment of how itintends to deal with each of the major sources of risk identified in accordance with GENPRU 1.2.30R (2); and(2) take into account the impact of diversification effects and how such effects are factored into the firm's systems for measuring risks.
GENPRU 1.2.49RRP
(1) In accordance with the general principles in GENPRU 1.2.48 R and BIPRU 8 (Group risk – consolidation), for the purpose of the ICAAP rules as they apply on a consolidated basis:(a) the firm must ensure that the relevant group as defined in (2) have the processes, strategies and systems required by the overall Pillar 2 rule;(b) the risks to which the overall Pillar 2 rule and the general stress and scenario testing rule refer are those risks as they apply to each member of the
GENPRU 1.2.51RRP
(1) This rule relates to the assessment of the amounts, types and distribution of financial resources, capital resources and internal capital (referred to in this rule as "resources") under the overall Pillar 2 rule as applied on a consolidated basis and to the assessment of diversification effects as referred to in GENPRU 1.2.37R (2) as applied on a consolidated basis.(2) A firm must be able to explain how it has aggregated the risks referred to in the overall Pillar 2 rule and
GENPRU 1.2.52RRP
(1) A firm must allocate the total amount of financial resources, capital resources and internal capital identified as necessary under the overall Pillar 2 rule (as applied on a consolidated basis) between different parts of the relevant group (as defined in GENPRU 1.2.49 R). GENPRU 1.2.36 R (Identifying different tiers of capital) does not apply to this allocation.(2) The firm must carry out the allocation in (1) in a way that adequately reflects the nature, level and distribution
GENPRU 1.2.53RRP
A firm must also allocate the total amount of financial resources, capital resources and internal capital (referred to in this rule as "resources") identified as necessary under the overall Pillar 2 rule as applied on a consolidated basis between each firm which is a member of the relevant group (as defined in GENPRU 1.2.49 R) on the following basis:(1) the amount allocated to each firm must be decided on the basis of the principles in GENPRU 1.2.52R (2); and(2) if the process
GENPRU 1.2.57RRP
The overall financial adequacy rule applies to a firm on a solo basis whether or not it also applies to the firm on a consolidated basis.
GENPRU 1.2.58RRP
The overall financial adequacy rule applies to a firm on a consolidated basis if the ICAAP rules apply to it on a consolidated basis.
GENPRU 1.2.62GRP
Where a firm assesses the adequacy of its CRR in its particular circumstances in accordance with BIPRU 2.2 (Internal capital adequacy standards) and INSPRU 7.1 (Individual capital assessment) as a basis for deciding what financial resources are adequate, it should include this in the documentation produced in accordance with GENPRU 1.2.60 R.
GENPRU 1.2.68GRP
Subject to GENPRU 1.2.76 G, the purpose of stress tests and scenario analyses under the general stress and scenario testing rule is to test the adequacy of overall financial resources. Scenarios need only be identified, and their impact assessed, in so far as this facilitates that purpose. In particular, the nature, depth and detail of the analysis depend, in part, upon the firm's capital strength and the robustness of its risk prevention and risk mitigation measures.
GENPRU 1.2.72GRP
In determining whether it would have adequate financial resources in the event of each identified realistic adverse scenario, a firm should:(1) only include financial resources that could reasonably be relied upon as being available in the circumstances of the identified scenario; and(2) take account of any legal or other restriction on the use of financial resources.
GENPRU 1.2.80GRP
The pension scheme itself (i.e. the scheme's assets and liabilities) is not the focus of the risk assessment; it is the firm's obligations towards the pension scheme which is.
GENPRU 1.2.81GRP
If a firm has a current funding obligation in excess of normal contributions or there is a risk that such a funding obligation will arise then, when calculating available capital resources, it should reverse out any accounting deficit and replace this in its capital adequacy assessment with its best estimate, calculated in discussion with the scheme's actuaries or trustees, of the cash that will need to be paid into the scheme in addition to normal contributions over the foreseeable
REC 2.3.1UKRP

Schedule to the Recognition Requirements Regulations, Paragraph 1

(1) The [UK RIE] must have financial resources sufficient for the proper performance of its [ relevant functions] as a [UK RIE].

(2) In considering whether this requirement is satisfied, the [FSA] may (without prejudice to the generality of regulation 6(1)) take into account all the circumstances, including the [UK RIE's] connection with anyperson , and any activity carried on by the [UK RIE], whether or not it is anexempt activity.1

REC 2.3.3GRP
In determining whether a UK recognised body has financial resources sufficient for the proper performance of its relevant functions, the FSA may have regard to:(1) the operational and other risks to which the UK recognised body is exposed;(2) if the UK recognised body acts as a central counterparty or otherwise guarantees the performance of transactions in specified investments, the counterparty and market risks to which it is exposed in that capacity; (3) the amount and composition
REC 2.3.5GRP
In assessing whether a UK recognised body has sufficient financial resources in relation to counterparty and market risks, the FSA may have regard to:(1) the amount and liquidity of its financial assets and the likely availability of liquid financial resources to the UK recognised body during periods of major market turbulence or other periods of major stress for the financial system; and(2) the nature and scale of the UK recognised body's exposures to counterparty and market
REC 2.3.6GRP
In assessing whether a UK recognised body has sufficient financial resources in relation to operational and other risks, the FSA may have regard to the extent to which, after allowing for the financial resources necessary to cover counterparty and market risks, the UK recognised body's financial resources are sufficient and sufficiently liquid:(1) to enable the UK recognised body to continue carrying on properly the regulated activities that it expects to carry on; and(2) to ensure
REC 2.3.7GRP
The FSA considers that a UK recognised body which (after allowing for the financial resources necessary to cover counterparty and market risks) has at any time:(1) liquid financial assets amounting to at least six months' operating costs; and (2) net capital of at least this amount; will, at that time, have sufficient financial resources to meet the recognition requirement unless there are special circumstances indicating otherwise.
REC 2.3.9GRP
The FSA recognises that UK recognised bodies may wish to satisfy the recognition requirements in different ways. The FSA does not prescribe any particular approach to calculating financial resources or to assessing their adequacy. It is willing to discuss with each UK recognised body the most appropriate way for it to meet the recognition requirement and each UK recognised body will need to be able to show the FSA that its financial resources are at all times sufficient to meet
GENPRU 2.1.4GRP
The adequacy of a firm'scapital resources needs to be assessed in relation to all the activities of the firm and the risks to which they give rise.
GENPRU 2.1.6GRP
Principle 4 requires a firm to maintain adequate financial resources. GENPRU 2 sets out provisions that deal specifically with the adequacy of that part of a firm's financial resources that consists of capital resources. The adequacy of a firm'scapital resources needs to be assessed both by that firm and the FSA. Through its rules, the FSA sets minimum capital resources requirements for firms. It also reviews a firm's own assessment of its capital needs, and the processes and
GENPRU 2.1.7GRP
This section sets capital resources requirements for a firm. GENPRU 2.2 (Capital resources) sets out how, for the purpose of meeting capital resources requirements, the amounts or values of capital, assets and liabilities are to be determined. More detailed rules relating to capital, assets and liabilities are set out in GENPRU 1.3 (Valuation) and, for an insurer, INSPRU and, for a BIPRU firm, BIPRU.
GENPRU 2.1.8GRP
(1) This section implements minimum EC standards for the capital resources required to be held by an insurer undertaking business that falls within the scope of the Consolidated Life Directive (2002/83/EC), the Reinsurance Directive (2005/68/EC) or the First Non-Life Directive (1973/239/EEC) as amended.(2) This section also implements provisions of the Capital Adequacy Directive and Banking Consolidation Directive concerning the level of capital resources which a BIPRU firm is
GENPRU 2.1.10GRP
For the purposes of GENPRU 2.1.9 R, a firm should have systems in place to enable it to be certain whether it has adequate capital resources to comply with GENPRU 2.1.13 R and the main BIPRU firm Pillar 1 rules (as applicable) at all times. This does not necessarily mean that a firm needs to measure the precise amount of its capital resources and its CRR on a daily basis. A firm should, however, be able to demonstrate the adequacy of its capital resources at any particular time
GENPRU 2.1.40RRP
A BIPRU firm must maintain at all times capital resources equal to or in excess of the amount specified in the table in GENPRU 2.1.45 R (Calculation of the variable capital requirement for a BIPRU firm).
GENPRU 2.1.41RRP
A BIPRU firm must maintain at all times capital resources equal to or in excess of the base capital resources requirement (see the table in GENPRU 2.1.48 R).
GENPRU 2.1.42RRP
At the time that it first becomes a bank, building society or BIPRU investment firm, a firm must hold initial capital of not less than the base capital resources requirement applicable to that firm.
GENPRU 2.1.43GRP
The purpose of the base capital resources requirement for a BIPRU firm is to act as a minimum capital requirement or floor. It has been written as a separate requirement as there are restrictions in GENPRU 2.2 (Capital resources) on the types of capital that a BIPRU firm may use to meet the base capital resources requirement which do not apply to some other parts of the capital requirement calculation. In order to preserve the base capital resources requirement's role as a floor
GENPRU 2.1.44GRP
The base capital resources requirement and the variable capital requirement in GENPRU 2.1.40 R are together called the capital resources requirement (CRR) in the case of a BIPRU firm.
GENPRU 2.1.47RRP
The amount of a BIPRU firm'sbase capital resources requirement is set out in the table in GENPRU 2.1.48 R.
GENPRU 2.1.48RRP

This table belongs to GENPRU 2.1.47 R

Firm category

Amount: Currency equivalent of

Bank

€5 million

Building society

The higher of €1 million and £1 million

BIPRU 730K firm

€730,000

BIPRU 125K firm

€125,000

BIPRU 50K firm

€50,000

UCITS investment firm

The amount specified in UPRU 2.1.2 R (1) (Financial resources requirement). However the capital that a firm must hold in respect of that requirement is as defined by GENPRU and not as specified in that rule. The reference in that rule to initial capital does not therefore apply.

GENPRU 2.1.49GRP
The terms BIPRU 730K firm, BIPRU 125K firm and BIPRU 50K firm are defined in BIPRU 1.1 (Application and purpose). However for convenience the table in GENPRU 2.1.50 G briefly summarises them.
GENPRU 2.1.52RRP
(1) A BIPRU firm must calculate its market risk capital requirement as the sum of:(a) the interest rate PRR (including the basic interest rate PRR for equity derivatives set out in BIPRU 7.3 (Equity PRR and basic interest rate PRR for equity derivatives));(b) the equity PRR;(c) the commodity PRR;(d) the foreign currency PRR;(e) the option PRR; and(f) the collective investment undertaking PRR.(2) Any amount calculated under BIPRU 7.1.9 R - BIPRU 7.1.13 R (Instruments for which
GENPRU 2.1.60RRP
(1) This rule applies to a bank that meets the following conditions:(a) on 31 December 2006 it had the benefit of IPRU(BANK) rule 3.3.12 (Reduced minimum capital requirement for a bank that is a credit institution which immediately before 1 January 1993 was authorised under the Banking Act 1987);(b) the relevant amount (as referred to in IPRU(BANK) rule 3.3.12) applicable to it was below €5 million as at 31 December 2006; and(c) on 1 January 2007 it did not comply with the base
GENPRU 2.1.61GRP
Where two or more banks merge, all of which individually have the benefit of GENPRU 2.1.60 R, the FSA may agree in certain circumstances that the base capital resources requirement for the bank resulting from the merger may be the sum of the aggregate capital resources of the merged banks, calculated at the time of the merger, provided this figure is less than €5 million.
INSPRU 7.1.5GRP
The adequacy of a firm'scapital resources needs to be assessed both by the firm and the FSA. In GENPRU 2.1, the FSA sets minimum capital resources requirements for firms.
INSPRU 7.1.6GRP
The FSA also assesses whether the minimum capital resources requirements are appropriate by reviewing:(1) a firm's own assessment of its capital needs; and(2) the processes and systems by which that assessment is made.
INSPRU 7.1.8GRP
There are two main aims in this section:(1) to enable firms to understand the issues which the FSA would expect to see assessed and the systems and processes which the FSA would expect to see in operation for ICAs by firms to be regarded as thorough, objective and prudent; and(2) to enable firms to understand the FSA's approach to assessing whether the minimum capital resources requirements of GENPRU 2.1 are appropriate and what action may be taken if the FSA concludes that those
INSPRU 7.1.11GRP
In accordance with GENPRU 1.2.60 R, these assessments must be documented so that they can be easily reviewed by the FSA as part of the FSA's assessment of the adequacy of the firm'scapital resources.
INSPRU 7.1.13GRP
Based upon this information and other information available to it, the FSA will consider whether the capital resources requirement applicable to the firm is appropriate. Where relevant, the firm'sECR will be a key input to the FSA's assessment of the adequacy of the firm'scapital resources. For firms carrying on general insurance business, the ECR is calculated in accordance with INSPRU 1.1.72C R. For realistic basis life firms, the ECR forms part of the CRR and is calculated
INSPRU 7.1.14GRP
Firms that are required to calculate an ECR may wish to note that the ECR as calculated is based upon the assumptions that a firm's business is well diversified, well managed with assets matching its liabilities and good controls, and stable with no large, unusual, or high risk transactions. Firms may find it helpful to assess the extent to which their actual business differs from these assumptions and therefore what adjustments it might be reasonable to make to the CRR or ECR
INSPRU 7.1.15RRP
Where a firm is carrying out an assessment of the adequacy of its overall financial resources in accordance with GENPRU 1.2, the assessment of the adequacy of the firm's capital resources must:(1) reflect the firm's assets, liabilities, intra-group arrangements and future plans; (2) be consistent with the firm's management practice, systems and controls;(3) consider all material risks that may have an impact on the firm's ability to meet its liabilities to policyholders; and(4)
INSPRU 7.1.18GRP
Where including new business would increase the capital resources by more than any increase in the capital required, or reduce the capital required by more than any reduction in available capital, new business should be excluded. To the extent that including new business increases the required capital, a firm should consider whether it is appropriate to include the additional amount within the ICA.
INSPRU 7.1.91GRP
In assessing the adequacy of a firm'scapital resources, the FSA draws on more than just a review of the submitted ICA. Use is made of wider supervisory knowledge of a firm and of wider market developments and practices. When forming a view of any individual capital guidance to be given to a firm, the review of the firm'sICA along with the ARROW risk assessment and any other issues arising from day-to-day supervision will be considered.
INSPRU 7.1.93GRP
A firm should not expect the FSA to accept as adequate any particular model that the firm develops or that the results from the model are automatically reflected in any individual capital guidance given to the firm for the purpose of determining adequate capital resources. However, the FSA will take into account the results of any sound and prudent model when giving individual capital guidance or considering applications for a waiver under section 148 of the Act of the capital
INSPRU 7.1.94GRP
Where the FSA considers that a firm will not comply with GENPRU 1.2.26 R (adequate financial resources, including capital resources) by holding the capital resources required by GENPRU 2.1, the FSA may give the firmindividual capital guidance advising it of the amount and quality of capital resources which the FSA considers it needs to hold in order to meet that rule.
LR 13.8.4RRP
A circular relating to a resolution proposing to reduce the company's capital must include a statement of the reasons for, and the effects of, the proposal.
LR 13.8.11RRP
A circular to shareholders about the approval of an employee's share scheme or long-term incentive scheme must:(1) include either the full text of the scheme or a description of its principal terms;(2) include, if directors of the listed company are trustees of the scheme, or have a direct or indirect interest in the trustees, details of the trusteeship or interest;(3) state that the provisions (if any) relating to:(a) the persons to whom, or for whom, securities, cash or other
LR 13.8.16RRP
(1) A circular to holders of listed securities convertible into shares reminding them of the times when conversion rights are exercisable must include:(a) the date of the last day for lodging conversion forms and the date of the expected sending of the certificates;(b) a statement of the market values for the securities on the first dealing day in each of the six months before the date of the circular and on the latest practicable date before sending the circular;(c) the basis
CASS 5.4.1GRP
(1) CASS 5.4 permits a firm, which has adequate resources, systems and controls, to declare a trust on terms which expressly authorise it, in its capacity as trustee, to make advances of credit to the firm'sclients. The client money trust required by CASS 5.4 extends to such debt obligations which will arise if the firm, as trustee, makes credit advances, to enable a client's premium obligations to be met before the premium is remitted to the firm and similarly if it allows claims
CASS 5.4.4RRP
A firm may not handle client money in accordance with the rules in this section unless each of the following conditions is satisfied:(1) the firm must have and maintain systems and controls which are adequate to ensure that the firm is able to monitor and manage its client money transactions and any credit risk arising from the operation of the trust arrangement and, if in accordance with CASS 5.4.2 R a firm complies with both the rules in CASS 5.3 and CASS 5.4, such systems and
CASS 5.4.5GRP
The amount of a firm's capital resources maintained for the purposes of PRU 9.3.30 R will also satisfy (in whole or in part) the requirement in CASS 5.4.4 R (4).
CASS 5.4.8RRP
The deed (or equivalent formal document) referred to in CASS 5.4.6 R may provide that:(1) the firm, acting as trustee (or, in Scotland, as agent), has power to make advances or give credit to clients or insurance undertakings from client money, provided that it also provides that any debt or other obligation of a client or resulting obligation of an insurance undertaking, in relation to an advance or credit, is held on the same terms as CASS 5.4.7 R;(2) the benefit of a letter
INSPRU 3.2.6RRP
A derivative or quasi-derivative is held for the purpose of efficient portfolio management if the firm reasonably believes the derivative or quasi-derivative (either alone or together with any other covered transactions) enables the firm to achieve its investment objectives by one of the following:(1) generating additional capital or income in one of the ways described in INSPRU 3.2.7 R; or(2) reducing tax or investment cost in relation to admissible assets; or(3) acquiring or
INSPRU 3.2.7RRP
The generation of additional capital or income falls within INSPRU 3.2.6R (1) where it arises from:(1) taking advantage of pricing imperfections in relation to the acquisition and disposal (or disposal and acquisition) of rights in relation to assets the same as, or equivalent to, admissible assets; or(2) receiving a premium for selling a covered call option or its equivalent, the underlying of which is an admissible asset, even if that additional capital or income is obtained
INSPRU 3.2.39GRP
For the purposes of assessing adequate quality in INSPRU 3.2.38R (3), reference should be made to the criteria for credit risk loss mitigation set out in INSPRU 2.1.16 R. The valuation rules in GENPRU 1.3 apply for the purpose of determining the value of both collateral received, and the securities transferred, by the firm. In addition, where collateral takes the form of assets transferred, under the rules in GENPRU any such asset that is not an admissible asset (see GENPRU 2
GENPRU 1.3.5GRP
Except where a rule in GENPRU, BIPRU or INSPRU makes different provision, GENPRU 1.3.4 R applies whenever a rule in GENPRU, BIPRU or INSPRU refers to the value or amount of an asset, liability, exposure, equity or income statement item, including:(1) whether, and when, to recognise or de-recognise an asset or liability;(2) the amount at which to value an asset, liability, exposure, equity or income statement item; and(3) which description to place on an asset, liability, exposure,
GENPRU 1.3.14RRP
Wherever possible, a firm must use mark to market in order to measure the value of the investments and positions to which this rule applies under GENPRU 1.3.13 R and GENPRU 1.3.38 R to GENPRU 1.3.41 R. Marking to market is valuation (on at least a daily basis in the case of the trading book positions of a BIPRU firm) at readily available close out prices from independent sources.
GENPRU 1.3.28RRP
In the case of the trading book positions of a BIPRU firm, while daily marking to market may be performed by dealers, verification of market prices and model inputs must be performed by a unit independent of the dealing room, at least monthly (or, depending on the nature of the market/trading activity, more frequently).
GENPRU 1.3.36RRP
Adjustments to accounting values(1) For the purposes of GENPRU and BIPRU, the adjustments in (2) and (3) apply to values calculated pursuant to GENPRU 1.3.4 R in addition to those required by GENPRU 1.3.9 R to GENPRU 1.3.10 R.(2) A BIPRU firm must not recognise either:(a) the fair value reserves related to gains or losses on cash flow hedges of financial instruments measured at amortised cost; or(b) any unrealised gains or losses on debt instruments held in the available-for-sale
MAR 5.3.1RRP
A person who applies for a Part IV permission and proposes to operate an ATS will be required to complete appropriate parts of the application pack relating to the operation of an ATS(see AUTH 3.9 (Procedures in relation to applications for Part IV permission)).
GENPRU 2.3.35GRP
The effect of GENPRU 2.3.34 R is that Lloyd's members' contributions, including letters of credit, guarantees and life assurance policies, are admissible assets.
REC 3.12.2RRP
A UK recognised body is not required to give notice of civil legal proceedings or information about them to the FSA under REC 3.12.1 R, where:(1) the amount of damages claimed would not significantly affect that UK recognised body's financial resources, if the claim were successful;(2) the claim would not have a significant adverse effect on the reputation and standing of that body, if that claim were successful; and (3) the claim does not relate to that body's regulatory fun
LR 13.7.1RRP
(1) A circular relating to a resolution proposing to give the company authority to purchase its own equity securities must also include:(a) if the authority sought is a general one, a statement of the directors' intentions about using the authority;(b) if known, the method by which the company intends to acquire its equity shares and the number to be acquired in that way;(c) a statement of whether the company intends to cancel the equity shares or hold them in treasury;(d) if
SUP 18.4.16GRP
The information should state whether any of the participants has any significant future capital commitments. The FSA will require it to state that the transfer of engagements or amalgamation will not conflict with any contractual commitment by a society, any subsidiary or any body jointly controlled by it and others.
SUP 18.4.37GRP
The FSA will not decide whether to confirm the transfer or amalgamation at the hearing. A copy of its written decision, including its findings on the points made in representations, will be sent to the society(ies) and to those making representations. It will also be available to any other person on request and may be published.
LR 14.3.10RRP
An overseas company must ensure that any definitive document of title for an equity security (other than a bearer security) includes the following matters on its face (or on the reverse in the case of (5) and (7)):(1) the authority under which the overseas company is constituted and the country of incorporation and registered number (if any);(2) the number or amount of equity securities the certificate represents and, if applicable, the number and denomination of units (in the
LR 14.3.17RRP
An overseas company must notify a RIS as soon as possible (unless otherwise indicated in this rule) of the following information relating to its capital:(1) any proposed change in its capital structure including the structure of its listeddebt securities, save that an announcement of a new issue may be delayed while marketing or underwriting is in progress;(2) any change in the rights attaching to any class of its listedequity securities or to any of its securities which are convertible
PERG 2.7.2GRP
Whether or not accepting deposits is a regulated activity depends on the use to which the money is put. The activity is caught if money received by way of deposit is lent to others or if any other activity of the person accepting the deposit is financed wholly (or to a material extent) out of the capital of, or interest on, money received by way of deposit.
SUP 6.3.25GRP

Information which may be required. See SUP 6.3.24 G

Type of business

Information which may be required

All

1. Details of how the firm plans to comply with the FSA's regulatory requirements relating to any additional regulated activities it is seeking to carry on.

2. Descriptions of the firm's key controls, senior management arrangements and audit and proposed compliance arrangements in respect of any new regulated activity (see SYSC).

3. Organisation charts and details of individuals transferring or being recruited to perform new controlled functions (see SUP 10 for details of the application or transfer procedures under the approved persons regime).

Insurance business

1. A scheme of operations in accordance with SUP App 2.

2. (If the application seeks to vary a permission to include motor vehicle liability insurance business) details of the claims representatives required by threshold condition 2A (Appointment of claims representatives), if applicable.

Accepting deposits and designated investment business

1. A business plan which includes the impact of the variation on the firm's existing or continuing business financial projections for the firm, including the impact of the requested variation of Part IV permission on the firm's financial resources and capital adequacy requirements.2