Related provisions for REC 3.14.9

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GENPRU 2.2.17 R requires a firm to calculate its capital resources for the purpose of GENPRU in accordance with the capital resources table, subject to the limits in GENPRU 2.2.32 R to GENPRU 2.2.41 R. The capital resources table and GENPRU 2.2.251 R require a firm to deduct from total capital resources the value of any asset included in an insurance fund which is not an admissible asset as listed in GENPRU 2 Annex 7. GENPRU 2 Annex 7 provides that a derivative, quasi-derivative
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 (or, in relation to permitted links, in a manner which includes but is not limited to)1:(1) generating additional capital or income in one of the ways described in INSPRU 3.2.7 R; or(2)
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 permitted links1; or(2) receiving a premium for selling a covered call option or its equivalent, the underlying of which is an admissible asset or permitted link1, even if that additional
For the purposes of INSPRU 3.2.8 R, investment risk is the risk that the assets held by a firm:(1) (where they are admissible assets held by the firm to cover its technical provisions) might not be:(a) of a value at least equal to the amount of those technical provisions as required by INSPRU 1.1.20 R; or(b) of appropriate safety, yield and marketability as required by INSPRU 1.1.34R (1)(a); or(c) of an appropriate currency match as required by INSPRU 3.1.53 R;(2) (where they
In assessing whether investment risk is reduced, the impact of a transaction on both the assets and liabilities should be considered. In particular, where the amount of liabilities depends upon the fluctuations in an index or other factor, investment risk is reduced where assets whose value fluctuates in the same way match those liabilities. In appropriate circumstances this may include:(1) a derivative or quasi-derivative that is linked to the same index as the liabilities from
A firm must cover an obligation to transfer assets or pay monetary amounts that arises from:(1) a derivative or quasi-derivative; or(2) a contract (other than a contract of insurance) for the purchase, sale or exchange of assets.
An obligation to transfer assets or pay monetary amounts (see INSPRU 3.2.14 R) must be covered:(1) by assets, a liability or a provision (see INSPRU 3.2.16 R to INSPRU 3.2.24 R); or(2) by an offsetting transaction (see INSPRU 3.2.25 R to INSPRU 3.2.27 R).
An obligation to transfer assets (other than money) or to pay monetary amounts based on the value of, or income from, assets is covered if the firm holds:(1) those assets; or(2) in the case of an index or basket of assets, a reasonable approximation to those assets.
An obligation to pay a monetary amount (whether or not falling in INSPRU 3.2.16 R) is covered if:(1) the firm holds admissible assets or permitted links1 that are sufficient in value so that the firm reasonably believes that following reasonably foreseeable adverse variations (relying solely on cashflows from, or from realising, those assets) it could pay the monetary amount in the right currency when it falls due; or(2) the obligation to pay the monetary amount is offset by a
A firm must implicitly or explicitly set up a provision equal to the value of the assets or offsetting transactions held to cover a non-approved derivative or quasi-derivative transaction.
Where a firm partially covers a derivative (or other contract falling within INSPRU 3.2.14R (1) and INSPRU 3.2.14R (2)), the firm may split the derivative into a covered portion and an uncovered portion. The portion of the derivative that is covered (after taking into account the requirement to cover reasonably foreseeable adverse variations in INSPRU 3.2.17R (1)) is an approved derivative, provided it also meets the requirements in INSPRU 3.2.5R (1) and INSPRU 3.2.5R (3); the
Exposure to a transaction includes exposure that arises from a right at the firm's (or its subsidiary undertaking's) option to dispose of assets.
The third purpose of cover is that it protects against the risk that the firm may not be able to deliver assets (including money in any currency) of the right type when the obligation falls due under the transaction. An obligation to deliver assets is covered only if the firm holds those assets or has entered into an offsetting transaction that would deliver those assets when needed. An obligation to pay money is offset only if the firm holds cash in the right currency, its equivalent
Cover used for one transaction must not be used for cover in respect of another transaction or any other agreement to acquire, or dispose of, assets or to pay or repay money.
An offsetting transaction means:(1) an approved derivative, approved stock lending transaction or an approved quasi-derivative; or(2) a covered transaction with an approved counterparty for the purchase of assets.
A transaction offsets an obligation to transfer assets away from the firm only if it provides for the transfer to the firm of those assets, or their value, at the time, or before, the obligation falls due.
Assets that have been lent by the firm are not available for cover, unless:(1) they are non-monetary assets that have been lent under a transaction that fulfils the conditions in INSPRU 3.2.36 R; and(2) the firm reasonably believes the assets to be obtainable (by return or re-acquisition) in time to meet the obligation for which cover is required.
Assets that have been borrowed by the firm are not available for cover except as allowed by INSPRU 3.2.30 R.
Examples of cover by assets for the purposes of INSPRU 3.2.16 R:(1) a bought put option (or a sold call option) on 1000 1 shares (fully paid) of ABC plc is covered by an existing holding in the fund of 1000 1 shares (fully paid) of ABC plc;(2) a bought call option (or sold put option) on 1000 ordinary 1 shares (fully paid) of ABC plc is covered by cash (or its equivalent) which is sufficient in amount to meet the purchase price of the shares on exercise of the option;(3) a bought
Examples of cover by offsetting transactions for the purpose of INSPRU 3.2.25 R would include a bought future which is guaranteed to deliver to the firm at the relevant time sufficient assets to cover liabilities under a sold call option.
(1) For the purposes of GENPRU 2 Annex 7 (Admissible assets in insurance), a stock lending transaction is approved if:(a) the assets lent are admissible assets;(b) , the counterparty is an authorised person, an approved counterparty, a person registered as a broker-dealer with the Securities and Exchange Commission of the United States of America or a bank, or a branch of a bank, supervised, and authorised to deal in investments as principal, with respect to OTC derivatives by
(1) 1For the purposes of the rules on permitted links, a stock lending transaction (including a repo transaction) is approved if:(a) the assets lent are permitted links;(b) the counterparty is an authorised person, an approved counterparty, a person registered as a broker-dealer with the Securities and Exchange Commission of the United States of America or a bank, or a branch of a bank, supervised, and authorised to deal in investments as principal, with respect to OTC derivatives
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
INSPRU 1.5.18 R, INSPRU 1.5.21 R, INSPRU 1.5.30 R and INSPRU 1.5.31 R require a firm to identify the assets attributable to the receipts of the long-term insurance business, called long-term insurance assets, and only to apply those assets for the purpose of that business. This has the effect of prohibiting a composite firm from using long-term insurance assets to meet general insurance liabilities. It also keeps long-term insurance assets separate from shareholder funds.
A firm carrying on long-term insurance business must identify the assets relating to its long-term insurance business which it is required to hold by virtue of INSPRU 1.1.20 R or INSPRU 1.1.21 R.
INSPRU 1.1.16 R requires a firm to establish adequate technical provisions for its long-term insurance contracts. INSPRU 1.1.20 R requires a firm to hold admissible assets of a value at least equal to the amount of the technical provisions and its other long-term insurance liabilities. INSPRU 1.1.21 R ensures that a composite firm identifies separate admissible assets with a value at least equal to the technical provisions for long-term insurance business and its other long-term
INSPRU 1.5.18 R does not prohibit a firm from identifying other assets as being available to meet the liabilities of its long-term insurance business. It may transfer such other assets to a long-term insurance fund (see INSPRU 1.5.21 R and INSPRU 1.5.22 R ) and the transfer will take effect when it is recorded in the firm's accounting records (see INSPRU 1.5.23 R). After the transfer takes effect, a firm may not transfer the assets out of a long-term insurance fund except where
(1) A firm's long-term insurance assets are the items in (2), adjusted to take account of:(a) outgo in respect of the firm'slong-term insurance business; and(b) any transfers made in accordance with INSPRU 1.5.27 R.(2) The items are:(a) the assets identified under INSPRU 1.5.18 R (including assets into which those assets have been converted);(b) any other assets identified by the firm as being available to cover its long-term insurance liabilities;(c) premiums and other receivables
(1) Unless (2) applies, all the long-term insurance assets of the firm constitute its long-term insurance fund.(2) Where a firm identifies particular long-term insurance assets in connection with different parts of its long-term insurance business, the assets identified in relation to each such part constitute separate long-term insurance funds of the firm.
Firms must ensure that long-term insurance assets are separately identified and allocated to a long-term insurance fund at all times. Assets in external accounts, for example at banks, custodians, or brokers should be segregated in the firm's books and records into separate accounts for long-term insurance business and general insurance business. Where a firm has more than one long-term insurance fund, a separate accounting record must be maintained for each fund. Accounting records
INSPRU 1.1.27 R and INSPRU 1.1.28 R provide further constraints on the transfer of assets out of a with-profits fund. INSPRU 1.1.27 R requires a firm to have admissible assets in each of its with-profits funds to cover the technical provisions and other long-term insurance liabilities relating to all the business in that fund. INSPRU 1.1.28 R requires a realistic basis life firm to ensure that the realistic value of assets for each of its with-profits funds is at least equal to
(1) A firm must apply a long-term insurance asset only for the purposes of its long-term insurance business.(2) For the purpose of (1), applying an asset includes coming under any obligation (even if only contingently) to apply that asset.
A firm must not agree to, or allow, any mortgage or charge on its long-term insurance assets other than in respect of a long-term insurance liability.
Property-linked liabilities may be linked either to specified assets (with no contractual discretion given to the firm as to the choice of assets) or to assets of a specified kind where the selection of the actual assets is left to the firm.
The scheme property of each UCITS scheme must be invested only in accordance with the relevant provisions in sections COLL 5.2 to COLL 5.5 that are applicable to that UCITS scheme and up to any maximum limit so stated, but, the instrument constituting the scheme may further restrict:(1) the kind of property in which the scheme property may be invested;(2) the proportion of the capital property of the UCITS scheme be invested in assets of any description;(3) the descriptions of
COLL 5.2.18RRP
A UCITS scheme may invest in money-market instruments which are normally dealt in on the money market, are liquid and whose value can be accurately determined at any time, provided the money-market instrument is:(1) within COLL 5.2.8 R (3)(UCITS schemes: general); or(2) a money-market instrument issued or guaranteed by:(a) a central, regional or local authority or central bank of an EEA State, the European Central Bank, the European Union or the European Investment Bank, a non-EEA
COLL 5.2.19RRP
(1) A transaction in derivatives or a forward transaction must not be effected for a UCITS scheme unless:(a) the transaction is of a kind specified in COLL 5.2.20 R (Permitted transactions (derivatives and forwards)); and(b) the transaction is covered, as required by COLL 5.3.3 R (Cover for transactions in derivatives and forward transactions).(2) Where a UCITS scheme invests in derivatives, the exposure to the underlying assets must not exceed the limits in COLL 5.2.11 R (Spread:
COLL 5.2.20RRP
(1) A transaction in a derivative must:(a) be in an approved derivative; or(b) be one which complies with COLL 5.2.23 R (OTC transactions in derivatives).(2) The underlying of a transaction in a derivative must consist of any one or more of the following to which the scheme is dedicated:(a) transferable securities;(b) money-market instruments permitted under COLL 5.2.18 R (Investment in money-market instruments);(c) deposits permitted under COLL 5.2.26 R (Investment in deposits);(d)
1COLL 5.2.22R (3) to (4) reflect the provisions of Article 7 of the Commission Recommendation on the use of financial derivative instruments.
COLL 5.2.31RRP
(1) A UCITS scheme may invest up to 20% in value of the scheme property in shares and debentures which are issued by the same body where the investment policy of that scheme as stated in the most recently published prospectus is to replicate the composition of a relevant index which satisfies the criteria specified in COLL 5.2.33 R (Relevant indices).(2) The limit in (1) can be raised for a particular UCITS scheme up to 35% in value of the scheme property, but only in respect
In the FSA's view, this means that the reasonable investor must be satisfied that what he will get when he realises his investment is his proportionate share in the value of BC's underlying assets, less any dealing costs. In other words, that he is satisfied he will get net asset value. The investment condition focuses on the way the body corporate operates over time, and not by reference to particular issues of shares or securities (see PERG 9.6.3 G (The investment condition
For the 'satisfaction test' to be met, there must be objectively justifiable grounds on which the reasonable investor could form a view. He must be satisfied that the value of BC's property will be the basis of a calculation used for the whole, or substantially the whole, of his investment. The FSA considers that the circumstances, or combination of circumstances, in which a reasonable investor would be in a position to form this view include:(1) where the basis of net asset valuation
PERG 9.9.3 G (2)and PERG 9.9.3 G (3) refer to circumstances where the reasonable investor may be satisfied that he can realise his investment at net asset value because of arrangements made to ensure that the shares or securities trade at net asset value on a market. There may, for example, be cases of market dealing where the price of shares or securities will not depend on the market. An example is where BC or a third party undertakes to ensure that the market value reflects
However, where there is a market, the FSA does not consider that the test in section 236(3)(b) would be met if the price the investor receives for his investment is wholly dependent on the market rather than specifically on net asset value. In the FSA's view, typical market pricing mechanisms introduce too many uncertainties to be able to form a basis for calculating the value of an investment (linked to net asset value) of the kind contemplated by the satisfaction test. As a
The fact that the definition must be applied to BC as a whole (see PERG 9.6.3 G (The investment condition (section 236(3) of the Act): general)) is also relevant here. So, for example, in a take-over situation the fact that a bidder may be willing to provide an exit route for an investment at net asset value will be irrelevant within the context of the definition. This is so even if an investor invests in particular shares or securities in the knowledge or expectation or in anticipation
The expression 'wholly or mainly' in section 236(3)(b) determines the extent of the permissible departure from the link between the price of BC's shares or securities and the value of its net assets. The word 'mainly' introduces some flexibility to the process to allow for limited account to be taken of factors other than the value of BC's assets that may result in the sum realised failing to reflect the true net asset value. Such factors may include:(1) the payment by the investor
INSPRU 3.1 addresses the impact of market risk on insurance business in the ways set out below:(1) Any firm that carries on long-term insurance business which is a regulatory basis only life firm2must comply with the resilience capital requirement. This requires the firm to hold capital to cover market risk. The resilience capital requirement is dealt with in INSPRU 3.1.9 G to INSPRU 3.1.26 R.(2) For a firm that carries on long-term insurance business, the assets that it must
Where the assets of a firm invested in a significant territory of a kind referred to in INSPRU 3.1.23R (1), INSPRU 3.1.23R (2) or INSPRU 3.1.23R (3)(a) represent less than 0.5% of the firm'slong-term insurance assets (excluding assets held to cover index-linked liabilities or property-linked liabilities), measured by market value, the firm may assume for those assets the market risk scenario for assets of that kind invested in the United Kingdom set out in INSPRU 3.1.16 R instead
A firm must cover its property-linked liabilities with:(1) (as closely as possible) the assets to which those liabilities are linked; or(2) a property-linked reinsurance contract; or(3) a combination of (1) and (2).
A firm must cover its index-linked liabilities with:(1) either:(a) the assets which represent that index; or(b) assets of appropriate security and marketability which correspond, as closely as possible, to the assets which are comprised in, or which form, the index or other reference of value to which those liabilities are linked; or(2) a portfolio of assets whose value or yield is reasonably expected to correspond closely with the index-linked liability; or(3) an index-linked
For the purposes of INSPRU 3.1.57 R and INSPRU 3.1.58 R, a firm is not permitted to hold different assets and to cover the mismatch by holding excess assets.
If a firm has incurred a policy liability which cannot be exactly matched by appropriate assets (for example the Limited Price Index (LPI)), the firm should seek to match assets that at least cover the liabilities. For example, an LPI limited to 5% per annum may be matched by an RPI bond or a fixed interest investment matching cash flows increasing at 5% per annum compound.
In selecting the appropriate cover, the firm should ensure that both credit risk, and the risk that the value or yield in the assets will not, in all circumstances, match fluctuations in the relevant index, are within acceptable limits. Rules and guidance relating to credit risk are set out in INSPRU 2.1.
A pure reinsurer must invest its assets in accordance with the following requirements:(1) the assets must take account of the type of business carried out by the firm, in particular the nature, amount and duration of expected claims payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its investments;(2) the firm must ensure that the assets are diversified and adequately spread and allow the firm to respond adequately
LR 13.4.1RRP
A class 1 circular must also include the following information:(1) the information given in the notification (see LR 10.4.1R);(2) the information required by LR 13 Annex 1;(3) the information required by LR 13.5 (if applicable); and(4) a declaration by its directors in the following form (with appropriate modifications):"The directors of [the company], whose names appear on page [ ], accept responsibility for the information contained in this document. To the best of the knowledge
LR 13.4.4RRP
If a class 1 transaction relates to:(1) the acquisition or disposal of property; or(2) the acquisition of a property company that is not listed;the class 1 circular must include a property valuation report.
LR 13.4.6RRP
If a class 1 transaction relates to an acquisition or disposal of mineral resources the class 1 circular must include:(1) a mineral expert's report; and(2) a glossary of the technical terms used in the mineral expert's report.
LR 13.4.7GRP
For a disposal, the FSA may modify the information requirements in LR 13.4.6 R if the information would not provide significant additional information.
LR 13.4.8RRP
If a class 1 transaction relates to the acquisition of a scientific research based company or related assets, the class 1 circular must contain an explanation of the transaction's impact on the acquirer's business plan and the information set out in Section 1c of Part III (Scientific research based companies) 1of the CESR recommendations.1
The scenario matrix approach may be employed for all types of options on all types of underlying asset.
(1) This paragraph provides an outline of the initial steps to be taken when using the scenario matrix approach.(2) A value for an option should be obtained using the firm'soptions valuation model.(3) The inputs into the options valuation model for implied volatility of the underlying asset and the price of the underlying asset should then be altered so that a new value for the option is obtained (details of the amount by which the implied volatility and the price of the underlying
The alteration to the implied volatility (known as the implied volatility shift) referred to in BIPRU 7.9.29G (3) may be a proportional shift. The size of the shift depends on the remaining life of the option and the asset class of the underlying. The table in BIPRU 7.9.32G sets out the shifts that should be applied where a proportional shift is used. Alternatively, a firm may use a single shift across all maturities or use an absolute rather than a proportional implied volatility

Table: proportional implied volatility shifts

This table belongs to BIPRU 7.9.30G

Remaining life of option

Proportional shift

Equities, foreign currency and commodities

Interest rates and CIUs

≤ 1 month



> 1 ≤ 3 months



> 3 ≤ 6 months



> 6 ≤ 9 months



> 9 ≤ 12 months



> 1 ≤ 2 years



> 2 ≤ 4 years



> 4 years



The size of the underlying price/rate shift depends on the asset class of the underlying as referred to in BIPRU 7.9.29G (3) and is set out in the table in BIPRU 7.9.34 G.

Table: underlying price/rate shifts

This table belongs to BIPRU 7.9.33G

Underlying asset class




Foreign currency



±15%, (but a firm may use the percentages applicable under the commodity extended maturity ladder approach if it would qualify under BIPRU 7.4 (Commodity PRR) to use that approach).

Interest rates

±100bp (but a firm may use the sliding scale of shifts by maturity as applicable to the interest rate duration method).


±32%, (but a firm may use the percentages applicable to the underlyings if the firm applies one of the CIU look through methods under BIPRU 7.7 (Position risk requirements for collective investment undertakings)).

(1) A different scenario matrix should be set up for each underlying asset type in accordance with this paragraph.(2) For equities (including single equities, baskets and indices) there should be a separate matrix for each national market or non-decomposed basket or non-decomposed multi-national index.(3) For foreign currency products there should be a separate matrix for each currency pair where appropriate.(4) For commodity products there should be a separate matrix for each
(1) A firm may take into account factors other than those identified in the overall Pillar 2 rule when it assesses the level of capital it wishes to hold. These factors might include external rating goals, market reputation and its strategic goals. However, a firm should be able to distinguish, for the purpose of its dialogue with the FSA, between capital it holds in order to comply with the overall financial adequacy rule and to meet the risks set out in the overall Pillar 2
A firm should assess its exposure to risks transferred through the securitisation of assets should those transfers fail for whatever reason. A firm should consider the effect on its financial position of a securitisation arrangement failing to operate as anticipated or of the values and risks transferred not emerging as expected.
A firm should assess, and monitor, in detail its exposure to sectoral, geographic, liability and asset concentrations. The FSA considers that concentrations in these areas increase a firm's exposure to credit risk. Where a firm identifies such concentrations it should consider the adequacy of its CRR.
When assessing liquidity risk, a firm should consider the extent to which there is a mismatch between assets and liabilities.
Some further areas to consider in developing the liquidity risk scenario might include:(1) any mismatching between expected asset and liability cash flows;(2) the inability to sell assets quickly;(3) the extent to which a firm's assets have been pledged; and(4) the possible need to reduce large asset positions at different levels of market liquidity and the related potential costs and timing constraints.
Where a securities firm deals in illiquid securities (for example, unlisted securities or securities listed on illiquid markets), or holds illiquid assets, potentially large losses can arise from trades that have failed to settle or because of large unrealised market losses. A securities firm may therefore consider the impact of liquidity risk on its exposure to:(1) credit risk; and(2) market risk.
(1) Where the credit risk mitigation used relies on the right of a firm to liquidate or retain assets, eligibility depends upon whether risk weighted exposure amounts, and, as relevant, expected loss amounts, are calculated under the standardised approach or the IRB approach.(2) Eligibility further depends upon whether the financial collateral simple method is used or the financial collateral comprehensive method.(3) In relation to repurchase transactions and securities or commodities
(1) Units in CIUs may be recognised as eligible collateral if the following conditions are satisfied:(a) they have a daily public price quote; and(b) the CIU is limited to investing in instruments that are eligible for recognition under BIPRU 5.4.2 R to BIPRU 5.4.5 R.(2) The use (or potential use) by a CIU of derivative instruments to hedge permitted investments shall not prevent units in that CIU from being eligible.[Note:BCD Annex VIII Part 1 point 9]
(1) In addition to the collateral set out in BIPRU 5.4.2 R to BIPRU 5.4.7 R, where a firm uses the financial collateral comprehensive method, the following financial items may be recognised as eligible collateral:(a) equities or convertible bonds not included in a main index but traded on a recognised investment exchange or a designated investment exchange;(b) units in CIUs if the following conditions are met:(i) they have a daily public price quote; and(ii) the CIU is limited
The operational requirements referred to in BIPRU 5.4.9 R (3) are as follows:(1) the collateral arrangements must be properly documented, with a clear and robust procedure for the timely liquidation of collateral;(2) a firm must employ robust procedures and processes to control risks arising from the use of collateral – including risks of failed or reduced credit protection, valuation risks, risks associated with the termination of the credit protection, concentration risk arising
For eligible units in CIUs the volatility adjustment is the weighted average volatility adjustments that would apply, having regard to the liquidation period of the transaction as specified in BIPRU 5.4.39 R, to the assets in which the fund has invested. If the assets in which the fund has invested are not known to the firm, the volatility adjustment is the highest volatility adjustment that would apply to any of the assets in which the fund has the right to invest.[Note:BCD Annex
A firm must take into account the illiquidity of lower-quality assets. The liquidation period must be adjusted upwards in cases where there is doubt concerning the liquidity of the collateral. A firm must also identify where historical data may understate potential volatility, e.g. a pegged currency. Such cases must be dealt with by means of a stress scenario.[Note:BCD Annex VIII Part 3 point 50]
A firm must recognise an asset or liability, and measure its amount, in accordance with the relevant accounting principles applicable to it for the purpose of preparing its annual financial statements unless a rule requires otherwise.
The capital resources requirement for a social housing firm whose Part IV permission is limited to carrying on the regulated activities of: (1) home financing;1 or11(2) home finance administration1(or both);11is that the firm's net tangible assets must be greater than zero.
If a social housing firm is carrying on home financing1or home finance administration1(and no other regulated activity), its net tangible assets must be greater than zero. However, if it carries on insurance mediation activity or home finance mediation activity1, there is no special provision and the capital resources requirement for firms carrying on designated investment business or mediation activities only applies to it as appropriate. 11111
(1) The capital resources requirement for a firm carrying on home financing, 1or home financing1and home finance administration1 (and no other regulated activity) is the higher of:111111(a) £100,000; and(b) 1% of:(i) its total assets plus total undrawn commitments and unreleased amounts under the home reversion plan1; less:(ii) excluded loans or amounts 1plus intangible assets (see Note 1 in the table in MIPRU 4.4.4 R).(2) Undrawn commitments and unreleased amounts 1means the
When calculating total assets, the firm may exclude a loan or plan 1which has been transferred to a third party only if it meets the following conditions:(1) the first condition is that the loan or the plan 1has been transferred in a legally effective manner by:(a) novation; or(b) legal or equitable assignment; or(c) sub-participation; or(d) declaration of trust; and(2) the second condition is that the home finance provider1:1(a) retains no material economic interest in the loan
LR 10.7.1RRP
LR 10 Annex 1 is modified as follows in relation to acquisitions or disposals of property by a listedproperty company:(1) for the purposes of paragraph 2R(1) (the gross assets test), the assets test is calculated by dividing the transaction consideration by the gross assets of the listedproperty company and paragraphs 2R(5) and 2R(6) do not apply;(2) for the purposes of paragraph 2R(1) (the gross assets test), if the transaction is an acquisition of land to be developed, the assets
LR 10.7.3RRP
LR 10 does not apply to the acquisition or disposal by a listedproperty company of a property in the ordinary course of business which:(1) for an acquisition, will be classified as a current asset in the company's published accounts; or(2) for a disposal, was so classified in the company's published accounts.
LR 10.7.4GRP
LR 10 may apply to subsequent transfers of property assets from current to fixed assets or from fixed to current assets in the accounts of a property company.
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
LR 15.6.2RRP
In addition to the requirements in LR 9.8 (Annual financial report), a closed-ended investment fund must include in its annual financial report:(1) a statement (including a quantitative analysis) explaining how it has invested its assets with a view to spreading investment risk in accordance with its published investment policy; (2) a statement, set out in a prominent position, as to whether in the opinion of the directors, the continuing appointment of the investment manager
LR 15.6.3RRP
A closed-ended investment fund that, as at the end of its financial year, has invested more than 20% of its assets in property must include in its annual financial report a summary of the valuation of its portfolio, carried out in accordance with LR 15.6.4 R.
LR 15.6.5RRP
The summary described in LR 15.6.3 R must include:(1) the total value of properties held at the year end;(2) totals of the cost of properties acquired;(3) the net book value of properties disposed of during the year; and(4) an indication of the geographical location and type of properties held at the year end.
LR 15.6.8RRP
A closed-ended investment fund must notify a RIS of the following:(1) within two business days of the end of each calendar month, a list of all investments in other listedclosed-ended investment funds, as at the last business day of that month, which themselves do not have stated investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds; and(2) within two business days of the end of each quarter, a list of all investments
If a CRD implementation measure in another EEA State implements the discretion in point 53 of Part 1 of Annex VI of the Banking Consolidation Directive, a firm may apply the same treatment as that CRD implementation measure to exposures related to property leasing transactions concerning offices or other commercial premises situated in that EEA State and governed by statutory provisions whereby the lessor retains full ownership of the rented assets until the tenant exercises his
BIPRU 3.4.107RRP
(1) Covered bonds means covered bonds as defined in paragraph (1) of the definition in the glossary (Definition based on Article 22(4) of the UCITS Directive) and collateralised by any of the following eligible assets:(a) exposures to or guaranteed by central governments, central bank, public sector entities, regional governments and local authorities in the EEA;(b) (i) exposures to or guaranteed by non-EEA central governments, non-EEAcentral banks, multilateral development banks,
BIPRU 3.4.121RRP
Where BIPRU 3.4.116 R does not apply, a firm may determine the risk weight for a CIU as set out in BIPRU 3.4.123 R to BIPRU 3.4.125 R, if the following eligibility criteria are met:(1) one of the following conditions is satisfied:(a) the CIU is managed by a company which is subject to supervision in an EEA State; or(b) the following conditions are satisfied:(i) the CIU is managed by a company which is subject to supervision that is equivalent to that laid down in Community law;
BIPRU 3.4.127RRP
Tangible assets within the meaning of Article 4(10) of the Bank Accounts Directive must be assigned a risk weight of 100%.[Note: BCD Annex VI Part 1 point 82]
BIPRU 3.4.132RRP
In the case of asset sale and repurchase agreements and outright forward purchases, the risk weight must be that assigned to the assets in question and not to the counterparties to the transactions.[Note: BCD Annex VI Part 1 point 88]
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)
The assets that a firm holds will include assets to back both the liabilities and any capital requirement. These assets carry risk, both in their own right and to the extent that they do not match the liabilities that they are backing. The risk associated with these assets should be considered over the full term for which the firm expects to carry the liabilities.
The valuation of the assets and of the liabilities should reflect their economic substance. A realistic valuation basis should be used for assets and liabilities taking into account the actual amounts and timings of cash flows under any projections used in the assessment.
In carrying out the ICA, wherever possible the value of assets should be marked to market. Where marking to market is not possible, the ICA should use a method suitable for assessing the underlying economic benefit of holding each asset.
The methodology used to place a value on an asset or a liability following a risk event should be consistent with the methodology used prior to the risk event.
FIT 2.3.1GRP
In determining a person's financial soundness, the FSA will have regard to any factors including, but not limited to:(1) whether the person has been the subject of any judgment debt or award, in the United Kingdom or elsewhere, that remains outstanding or was not satisfied within a reasonable period;(2) whether, in the United Kingdom or elsewhere, the person has made any arrangements with his creditors, filed for bankruptcy, had a bankruptcy petition served on him, been adjudged
FIT 2.3.2GRP
The FSA will not normally require the candidate to supply a statement of assets or liabilities. The fact that a person may be of limited financial means will not, in itself, affect his suitability to perform a controlled function.
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
LR 10.1.4GRP
This chapter is intended to cover transactions that are outside the ordinary course of the listed company's business and may change a security holder's economic interest in the company's assets or liabilities (whether or not the change in the assets or liabilities is recognised on the company's balance sheet).
LR 10.4.1RRP
(1) A listed company must notify a RIS as soon as possible after the terms of a class 2 transaction are agreed.(2) The notification must include:(a) details of the transaction, including the name of the other party to the transaction;(b) a description of the business carried on by, or using, the net assets the subject of the transaction;(c) the consideration, and how it is being satisfied (including the terms of any arrangements for deferred consideration);(d) the value of the
LR 10.4.2RRP
(1) A listed company must notify a RIS as soon as possible if, after the notification under LR 10.4.1 R, it becomes aware that:(a) there has been a significant change affecting any matter contained in that earlier notification; or(b) a significant new matter has arisen which would have been required to be mentioned in that earlier notification if it had arisen at the time of the preparation of that notification.(2) The supplementary notification must give details of the change
LR 10.2.7RRP
(1) A break fee or break fees payable in respect of a transaction are to be treated as a class 1 transaction if the total value of the fee or the fees in aggregateexceeds:(a) if the listed company is being acquired, 1% of the value of the listed company calculated by reference to the offer price; and(b) in any other case, 1% of the market capitalisation of the listed company.(2) For the purposes of paragraph (1)(a):(a) the 1% limit is to be calculated on the basis of the fully
LR 10.2.8RRP
If:(1) a major subsidiary undertaking of a listed company issues equity shares for cash or in exchange for other securities or to reduce indebtedness;(2) the issue would dilute the listed company's percentage interest in the major subsidiary undertaking; and(3) the economic effect of the dilution is equivalent to a disposal of 25% or more of the aggregate of the gross assets or profits (after the deduction of all charges except taxation) of the group;the issue is to be treated