Related provisions for BIPRU 13.8.1

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

BIPRU 13.8.2RRP
Subject to BIPRU 13.8.3 R, in respect of a securities financing transaction, if a firm:(1) has a CCR internal model method permission which covers the transaction; or(2) has a master netting agreement internal models approach permission which covers the transaction;then the firm must use the CCR internal model method approach or the master netting agreement internal models approach, as applicable, to calculate the exposure value for that transaction unless an exception in BIPRU
BIPRU 13.8.3RRP
If a firm has a CCR internal model method permission and a master netting agreement internal models approach permission, and both cover a securities financing transaction, then the firm may choose which of those approaches it wishes to use to calculate the exposure value for that transaction.
BIPRU 13.8.4RRP
Where BIPRU 13.8.2 R does not apply, a firm must use one of the following approaches to determine the exposure value of a securities financing transaction, as appropriate:(1) if the transaction is covered by a master netting agreement which satisfies the requirements for recognition set out in BIPRU 5.6.1 R to BIPRU 5.6.3 R, a firm may calculate the exposure value under the master netting agreement method set out in BIPRU 5.6.5 R to BIPRU 5.6.11 R (Calculation of the fully adjusted
BIPRU 13.8.6GRP
If a firm calculates the exposure value of a securities financing transaction as its on-balance sheet value, in accordance with BIPRU 13.8.4 R (2), it may recognise the effects of financial collateral in the same way as for its other exposures, for example by using either the financial collateral simple method or the financial collateral comprehensive method. However firms should note that the financial collateral simple method is not available:(1) to a firm using the IRB approach
BIPRU 13.8.7RRP
Notwithstanding BIPRU 13.8.2 R, a firm must determine the exposure value of a credit risk exposure outstanding with a central counterparty in accordance with BIPRU 13.8.8 R1, provided that the central counterparty'scounterparty credit riskexposures with all participants in its arrangements are fully collateralised on a daily basis.[Note: BCD Article 78(4) in respect of SFTs]
BIPRU 13.8.8RRP
A firm may attribute an exposure value of zero for CCR to a securities financing transaction or to any other exposures in respect of that transaction (but excluding an exposure arising from collateral held to mitigate losses in the event of the default of other participants in the central counterparty's arrangements) which is outstanding with a central counterparty and has not been rejected by the central counterparty.[Note: BCD Annex III Part 2 point 6 in respect of SFTs]
CASS 6.4.1RRP
(1) 1A firm must not enter into arrangements for securities financing transactions in respect of safe custody assets2 held by it on behalf of a client or otherwise use such safe custody assets2 for its own account or the account of any other person or6client of the firm, unless:22(a) the client has given express prior consent to the use of the safe custody assets2 on specified terms; and2(b) the use of that client'ssafe custody assets2 is restricted to the specified terms
CASS 6.4.1AGRP
5The FCA expects firms which enter into arrangements under CASS 6.4.1 R with retail clients to only enter into securities financing transactions and not otherwise use retail clients' 6safe custody assets.
CASS 6.4.2BGRP
6The requirement to monitor collateral under CASS 6.4.2AR applies to a firm where it is party to a securities financing transaction, including when acting as an agent for the conclusion of a securities financing transaction or in the case of a tripartite transaction between a borrower, a client and the firm.[Note: recital 9 to the MiFID Delegated Directive]
COLL 4.5.8AAGRP
(1) 16The Securities Financing Transactions Regulation sets out the additional information which:(a) an authorised fund manager of a UCITS scheme must include in the scheme’s annual and half-yearly reports; and(b) an authorised fund manager who is a full-scope UK AIFM of a non-UCITS retail scheme must include in the scheme’s annual report.(2) COLL 4.5.8ABEU and COLL 4.5.8ACEU copy out the relevant provisions of that regulation.(3) An authorised fund manager of a UCITS scheme or
COLL 4.5.8ABEURP

16

Transparency of collective investment undertakings in periodical reports

1.

UCITS management companies, UCITS investment companies, and AIFMs shall inform investors on the use they make of SFTs and total return swaps in the following manner:

(a)

for UCITS management companies or UCITS investment companies in the half-yearly and annual reports referred to in Article 68 of Directive 2009/65/EC;

(b)

for AIFMs in the annual report referred to in Article 22 of Directive 2011/61/EU.

2.

The information on SFTs and total return swaps shall include the data provided for in Section A of the Annex.

[Note: article 13(1) and 13(2) of the Securities Financing Transactions Regulation and article 3 for relevant definitions]

COLL 4.5.8ACEURP

16

Information to be provided in the UCITS half-yearly and annual reports and the AIF’s annual report

Global data:

-

The amount of securities and commodities on loan as a proportion of total lendable assets defined as excluding cash and cash equivalents;

-

The amount of assets engaged in each type of SFTs and total return swaps expressed as an absolute amount (in the collective investment undertaking’s currency) and as a proportion of the collective investment undertaking’s assets under management (AUM).

Concentration data:

-

Ten largest collateral issuers across all SFTs and total return swaps (break down of volumes of the collateral securities and commodities received per issuer’s name);

-

Top 10 counterparties of each type of SFTs and total return swaps separately (Name of counterparty and gross volume of outstanding transactions).

Aggregate transaction data for each type of SFTs and total return swaps separately to be broken down according to the below categories:

-

Type and quality of collateral;

-

Maturity tenor of the collateral broken down in the following maturity buckets: less than one day, one day to one week, one week to one month, one to three months, three months to one year, above one year, open maturity;

-

Currency of the collateral;

-

Maturity tenor of the SFTs and total return swaps broken down in the following maturity buckets: less than one day, one day to one week, one week to one month, one to three months, three months to one year, above one year, open transactions;

-

Country in which the counterparties are established;

-

Settlement and clearing (e.g., tri-party, Central Counterparty, bilateral).

Data on reuse of collateral:

-

Share of collateral received that is reused, compared to the maximum amount specified in the prospectus or in the disclosure to investors;

-

Cash collateral reinvestment returns to the collective investment undertaking.

Safekeeping of collateral received by the collective investment undertaking as part of SFTs and total return swaps:

Number and names of custodians and the amount of collateral assets safe-kept by each of the custodians

Safekeeping of collateral granted by the collective investment undertaking as part of SFTs and total return swaps:

The proportion of collateral held in segregated accounts or in pooled accounts, or in any other accounts

Data on return and cost for each type of SFTs and total return swaps

broken down between the collective investment undertaking, the manager of the collective investment undertaking and third parties (e.g. agent lender) in absolute terms and as a percentage of overall returns generated by that type of SFTs and total return swaps

[Note: section A of the annex to the Securities Financing Transactions Regulation and article 3 for relevant definitions]

COLL 4.2.5AGRP
(1) 28The Securities Financing Transactions Regulation sets out the additional information which:(a) an authorised fund manager of a UCITS scheme must include in the UCITS scheme prospectus; and(b) an authorised fund manager who is a full-scope UK AIFM of a non-UCITS retail scheme must make available to investors before they invest.(2) COLL 4.2.5BEU and COLL 4.2.5CEU copy out the relevant provisions of that regulation.(3) An authorised fund manager who is a full-scope UK AIFM
COLL 4.2.5BEURP

28

Transparency of collective investment undertakings in pre-contractual documents

1.

The UCITS prospectus referred to in Article 69 of Directive 2009/65/EC, and the disclosure by AIFMs to investors referred to in Article 23(1) and (3) of Directive 2011/61/EU shall specify the SFT and total return swaps which UCITS management companies or UCITS investment companies, and AIFMs respectively, are authorised to use and include a clear statement that those transactions and instruments are used.

2.

The prospectus and the disclosure to investors referred to in paragraph 1 shall include the data provided for in Section B of the Annex.

[Note: article 14(1) and (2) of the Securities Financing Transactions Regulation and article 3 for relevant definitions]

COLL 4.2.5CEURP

28

Information to be included in the UCITS Prospectus and AIF disclosure to investors:

_

General description of the SFTs and total return swaps used by the collective investment undertaking and the rationale for their use.

_

Overall data to be reported for each type of SFTs and total return swaps

_

Types of assets that can be subject to them.

_

Maximum proportion of AUM that can be subject to them.

_

Expected proportion of AUM that will be subject to each of them.

_

Criteria used to select counterparties (including legal status, country of origin, minimum credit rating).

_

Acceptable collateral: description of acceptable collateral with regard to asset types, issuer, maturity, liquidity as well as the collateral diversification and correlation policies.

_

Collateral valuation: description of the collateral valuation methodology used and its rationale, and whether daily mark-to-market and daily variation margins are used.

_

Risk management: description of the risks linked to SFTs and total return swaps as well as risks linked to collateral management, such as operational, liquidity, counterparty, custody and legal risks and, where applicable, the risks arising from its reuse.

_

Specification of how assets subject to SFTs and total return swaps and collateral received are safe-kept (e.g. with fund custodian).

_

Specification of any restrictions (regulatory or self-imposed) on reuse of collateral.

_

Policy on sharing of return generated by SFTs and total return swaps: description of the proportions of the revenue generated by SFTs and total return swaps that is returned to the collective investment undertaking, and of the costs and fees assigned to the manager or third parties (e.g. the agent lender). The prospectus or disclosure to investors shall also indicate if these are related parties to the manager.

[Note: section B of the annex to the Securities Financing Transactions Regulation and article 3 for relevant definitions.]

[Note: AUM means assets under management.]

LR 10.1.3RRP
In this chapter (except where specifically provided to the contrary) a reference to a transaction by a listed company:(1) (subject to paragraphs (3),(4) and (5)) includes all agreements (including amendments to agreements) entered into by the listed company or its subsidiary undertakings;(2) includes the grant or acquisition of an option as if the option had been exercised except that, if exercise is solely at the listed company's or subsidiary undertaking's discretion, the transaction
BIPRU 14.1.2GRP
(1) BIPRU 14.2 deals with the calculation of the capital requirement for CCR for trading book positions arising from financial derivative instruments, securities financing transactions and long settlement transactions. The approaches used to calculate exposure values and risk weighted exposure amounts for these positions are largely based on the approaches applicable to non-trading book positions (BIPRU 3, BIPRU 4, BIPRU 5 and BIPRU 13). However, there are some treatments that
COLL 8.3.4AGRP
(1) 15The Securities Financing Transactions Regulation sets out the additional information which an authorised fund manager who is a full-scope UK AIFM of a qualified investor scheme must make available to investors before they invest.(2) COLL 4.2.5BEU and COLL 4.2.5CEU copy out the relevant provisions of that regulation.(3) An authorised fund manager who is a full-scope UK AIFM of a qualified investor scheme should publish the information in the schemeprospectus.(4) An authorised
COLL 8.3.5AAGRP
(1) 15The Securities Financing Transactions Regulation sets out the additional information which an authorised fund manager who is a full-scope UK AIFM of a qualified investor scheme must include in the scheme’s annual report.(2) COLL 4.5.8ABEU and COLL 4.5.8ACEU copy out the relevant provisions of that regulation.(3) An authorised fund manager of a qualified investor scheme that has not used securities financing transactions or total return swaps during the relevant annual accounting
BIPRU 14.2.12GRP
For the purpose of calculating counterparty exposure values for financial derivative instruments, securities financing transactions and long settlement transactions, or for credit risk mitigation, the effect of BIPRU 14.2.11 R is to direct a firm to BIPRU 13 or BIPRU 5 as appropriate.
BIPRU 13.3.7GRP
A firm is not required to calculate the exposure value of a transaction as a long settlement transaction for the purposes of BIPRU 13 if the transaction is a financial derivative instrument or a securities financing transaction and the firm chooses to calculate the capital requirement for the transaction according to the methods applicable to those exposures.
BIPRU 5.6.19AGRP
2This paragraph provides guidance in relation to BIPRU 5.6.19R (8). In carrying out the stress testing programme, a firm should evaluate the simultaneous impact of individual stress scenarios on its counterparty exposures, its positions and the aggregate amount of margin calls that it would receive. A firm's stress scenarios should take into account the possibility that the liquidation period may be substantially longer than 5 days for repurchase transactions and securities lending
BIPRU 13.1.6GRP
BIPRU 13.8 sets out a summary of the treatment of securities financing transactions.