Related provisions for GENPRU 2.2.206

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A firm'sfinancial resources requirement will be recalculated annually when its fourth quarterly financial return is prepared. The firm must maintain financial resources sufficient to meet its new financial resources requirement from the date on which the fourth quarterly financial return is prepared and no later than 80 business days after the firm’saccounting reference date. The expenditure based requirement applicable at the accounting reference date will be based on the four
A firm that meets the combined buffer must not make a distribution in connection with common equity tier 1 capital to an extent that would decrease its common equity tier 1 capital to a level where the combined buffer is no longer met.[Note: article 141(1) of CRD]

Glossary of defined terms for Chapter 9

Note: If a defined term does not appear in the glossary below, the definition appearing in the HandbookGlossary applies.

approved exchange

means an investment exchange listed as such in Appendix 33 to IPRU-INV 3.


means a recognised investment exchange or designated investment exchange.

initial capital

means the initial capital of a firm calculated in accordance with section 9.3.

intangible assets

the full balance sheet value of a firm's intangible assets including goodwill, capitalised development costs, licences, trademark and similar rights etc.

intermediate broker

in relation to a margined transaction, means any person through whom the firm undertakes that transaction.

material current year losses

means losses of an amount equal to 10% or more of initial capital minus B (with B calculated in accordance with Table 9.5.2R).

material holding

means a firm's holdings of shares and any other interest in the capital of a credit institution or financial institution:

(a) which exceeds 10% of the capital of the issuer, and, where this is the case, any holdings of subordinated debt of the same issuer, the full amount is a material holding; or

(b) holdings not deducted under (a) if the total amount of such holdings exceeds 10% of that firm'sown funds, in which case only the excess amount is a material holding.

material insurance holdings

(a) means the holdings of an exempt CAD firm of items of the type set out in (b) in any:

(i) insurance undertaking; or

(ii) insurance holding company that fulfils one of the following conditions:

(iii) it is a subsidiary undertaking of that firm; or

(iv) that firm holds a participation in it.

(b) An item falls into this provision for the purpose of (a) if it is:

(i) an ownership share; or

(ii) subordinated debt or another item of capital that forms part of the tier two capital resources that1 falls into GENPRU 2 or, as the case may be, INSPRU 7, or is an item of “basic own funds” defined in the PRA Rulebook: Glossary.

own funds

means the own funds of a firm calculated in accordance with 9.2.9R(2) and The Interim Prudential Sourcebook for Investment Businesses Chapter 9: Financial resources requirements for an exempt CAD firm Page 2 of 2 Version: November 2007 9.2.8R(b).

own funds requirement

means the requirement set out in 9.2.9R(1) and 9.2.8R(b).


means checked by an external auditor who has undertaken at least to:

(a) satisfy himself that the figures forming the basis of the interim profits have been properly extracted from the underlying accounting records;

(b) review the accounting policies used in calculating the interim profits so as to obtain comfort that they are consistent with those normally adopted by the firm in drawing up its annual financial statements and are in accordance with the relevant accounting principles;

(c) perform analytical procedures on the result to date, including comparisons of actual performance to date with budget and with the results of prior period(s);

(d) discuss with management the overall performance and financial position of the firm;

(e) obtain adequate comfort that the implications of current and prospective litigation, all known claims and commitments, changes in business activities and provisioning for bad and doubtful debts have been properly taken into account in arriving at the interim profits; and

(f) follow up problem areas of which he is already aware in the course of auditing the firm's financial statements.


1Liquid Capital Requirement = Initial Capital Requirement + Capital Surcharge

Calculation of Initial Capital Requirement

ICR = (√AUA) x K1



means Initial Capital Requirement


means Assets Under Administration calculated as the sum of the most recent annual valuations over the preceding 12 months of the personal pension schemes administered by the firm, and adjusted to include any revaluation of assets that may occur between the date of the most recent annual valuation and the date when the firm must calculate its AUA.

A firm must calculate its AUA quarterly in line with the dates when it has to submit its regulatory capital reporting form in accordance with SUP 16.12 (Integrated Regulatory Reporting).

Where it is not possible to value an asset (for example because there is no readily available market price), the most recent market valuation should be used.

Where it would be reasonable to assume that the value of the asset has changed by more than 15% since the most recent market valuation, a firm should instead use a reasonable estimate. This is without prejudice to any requirement on a firm to provide a personal pension scheme member with accurate and timely valuations of their portfolios.


is set subject to the firm’s AUA as specified in the below table:


K1 constant to be applied







When K1 changes due to an increase in AUA, in accordance with the thresholds in this table, the firm must apply the new K1 value within six months following the date on which its AUA exceeded the threshold of its previous K1 value.

Calculation of Capital Surcharge

CS =(√P) x K2 x ICR



means Capital Surcharge


means the fraction of personal pension schemes administered by the firm which contain one or more asset types which do not appear in the list of Standard Assets below, at the most recent quarter end. For example, if a quarter of personal pensions contained non-Standard Assets, this would be inputted in to the formula as 0.25.


is set at 2.5.


means the Initial Capital Requirement calculated as above.

Standard Assets

The List of Standard Assets is as follows (subject to Note 1):


Cash funds


Exchange traded commodities

Government & local authority bonds and other fixed interest stocks

Investment notes (structured products)

Shares in Investment trusts

Managed pension funds

National Savings and Investment products

Permanent interest bearing shares (PIBs)

Physical gold bullion

Real estate investment trusts (REITs)

Securities2 admitted to trading on a regulated venue

UK commercial property

Units in regulated collective investment schemes2


A Standard Asset must be capable of being accurately and fairly valued on an ongoing basis and readily realised within 30 days, whenever required.


In addition to complying with the provisions of IPRU-INV 5.8, in accordance with IPRU-INV 5.3.2R, a firm must hold its liquid capital in financial resources as follows:


realisable within 12 months; and


realisable within 30 days