GENPRU 2.2.19 R sets out three different methods of calculating capital resources for BIPRU firms16. 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 a firm does
8A BIPRU firm must not include a capital instrument at stage B1 of the calculation in the capital resources table unless (in addition to satisfying all the other requirements in relation to tier one capital and hybrid capital) its contractual terms are such that:(1) it cannot be redeemed in cash but can only be converted into core tier one capital;(2) it must be converted into core tier one capital by the firm during emergency situations; (3) the emergency situations referred
In relation to a tier two instrument, a firm must notify the :(1) [deleted]18(2) [deleted]18FCA one month18 before it becomes committed to7 the proposed repayment (unless that firm intends to repay an instrument on its final maturity date). When giving notice, the firm must provide details of its position after such repayment in order to show how it will:777(3) meet its capital resources requirement; and7(4) have sufficient financial resources to meet the overall financial adequacy
(1) The purpose of GENPRU 2.2.177R (2) is to ensure that a firm which issues an item of capital with a coupon retains flexibility over the payments of such coupon and can preserve cash in times of financial stress. However, a firm may include, as part of the capital instrument terms, a right to make payments of a coupon mandatory if an item of capital becomes ineligible to form part of its capital resources (for example, through a change in the relevant rules) and the firm has
A BIPRU firm which includes subordinated debt in its tier three capital resources must notify the FCA18 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.
(1) As part of its obligation under the overall Pillar 2 rule, a firm that is a significant IFPRU firm must:(a) for the major sources of risk identified in line with IFPRU 2.2.7R(2), carry out stress tests and scenario analyses that are appropriate to the nature, scale and complexity of those major sources of risk and to the nature, scale and complexity of the firm's business; and(b) carry out the reverse stress testing under SYSC 20 (Reverse stress testing).(2) In carrying out
A firm must also allocate the total amount of financial resources, own funds 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 or sub-consolidated basis between each firm which is a member of the FCA consolidation group on the following basis:(1) the amount allocated to each firm must be decided on the basis of the principles in IFPRU 2.2.53 R (2); and(2) if the process in (1)
The purpose of IFPRU 2.2.52 R to IFPRU 2.2.55 G is to enable the FCA to assess the extent, if any, to which a firm's assessment, calculated on a consolidated basis, is lower than it would be if each separate legal entity were to assess the amount of capital it would require to mitigate its risks (to the same level of confidence) were it not part of a group subject to consolidated supervision under Part One, Title II, Chapter 2 of the EUCRR (Prudential consolidation). The reason
If a firm disagrees with the FCA's assessment as to the amount or quality of capital planning buffer that it should hold, it should, consistent with Principle 11 (Relations with regulators), notify the FCA of its disagreement. The FCA may reconsider its initial assessment if, after discussion with the firm, the FCA concludes that the amount or quality of capital that the firm should hold as capital planning buffer is different from the amount or quality initially suggested.
(1) This paragraph applies to a proportional ICAAP in the case of a firm that is a significant IFPRU firm (see IFPRU 1.2.3 R) whose activities are complex.(2) A proportional approach to that firm'sICAAP should cover the matters identified in IFPRU 2.3.34 G and IFPRU 2.3.35 G, but is likely also to involve the use of models, most of which will be integrated into its day-to-day management and operation.(3) Models of the kind referred to in (2) may be linked to generate an overall
The FCA will not grant an investment firm consolidation waiver unless:(1) the UK consolidation group or non-EEA sub-group meets the conditions for being a CAD Article 22 group;(2) the FCA is satisfied that each BIPRU firm in the UK consolidation group or non-EEA sub-group will be able to meet its capital requirements using the calculation of capital resources in GENPRU 2 Annex 6R (Capital resources table for a BIPRU 2firm with a waiver from consolidated supervision); and(3) the
A firm must notify the FCA of any change, or any likely change, in its financial resources requirement1 within 14 days of that change, or it becoming aware that the change is likely, whichever is the earlier.
Except for operational risk, a firm that is permitted to use internal approaches for the calculation of risk weighted exposure amounts or own fund requirements must report annually to the FCA: (1) the results of the calculations of its internal approaches for its exposures or positions that are included in the benchmark portfolios; and(2) an explanation of the methodologies used to produce those calculations in (1).[Note: article 78(1) of CRD]
A firm must submit the results of the calculations referred to in IFPRU 1.3.1 R (1), in line with the template set out in the Commission Regulation adopted under article 78(8) of CRD, to the FCA and to EBA.
Where the FCA has chosen to develop specific portfolios in accordance with article 78(2) of CRD, a firm must report the results of the calculations separately from the results of the calculations for EBA portfolios. [Note: article 78(2) of CRD]
A firm may only make use of the non-core large exposure group exemption where the following conditions are met: (1) the total amount of the non-trading book exposures from the firm to its non-core large exposures group does not exceed 100% of the firm'seligible capital; or (if the firm has a core UK grouppermission) the total amount of non-trading book exposures from its core UK group (including the firm) to its non-core large exposures group does not exceed 100% of the core
The FCA considers the following to be examples of features which generally indicate a positive incentive to call or, at least, to constitute grounds for discussion with the FCA prior to the conclusion of the transaction:(1) the transaction contains terms, such as payments at maturity or payments upon early termination or significant premiums, which may reduce risk transfer;(2) the transaction includes a requirement for the protection buyer to incur additional costs or obligations
Firms are not expected to include in their EAD/CF estimates the probability of increases in limits between observation and default date. If the reference data set includes the impact of such increases, the FCA expects firms to be able to adjust their estimates accordingly with the aim of assessing what the exposure would have been at default if the limit had not been increased.
(1) [deleted]55(2) The FCA5 would normally expect a UK RIE to hold, in addition to the minimum amount determined under REC 2.3.9G (1)(a)(i), an operational risk buffer consistent with a risk-based approach.5(a) Where the amount of eligible financial resources calculated by a UK RIE under REC 2.3.17G (5) (the risk-based approach) is greater than the amount of eligible financial resources calculated under REC 2.3.13 G (the standard approach), and the difference is of an amount sufficient
(1) The FCA interprets 'main' by reference to the share of the firm's business in the group, its contribution to the group's
balance sheet (measured on the basis of total assets) or profit and loss statement (measured on the basis of gross income). (2) The form in SUP 16 Ann 19 R, together with the guidance in SUP 16 Ann 20 G, shows the mechanics of the calculation.