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Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

You are viewing the version of the document as on 2021-01-01.

Status: In this content, we have included all amendments made by EU exit-related instruments up to end September 2020. There will be more amendments to be made later this year, further to the September QCP.

Article 14 Specification of technical calculation under method 1 pursuant to Annex 2 (Table 1) of the Financial Conglomerates Part of the PRA Rulebook and Annex 1R (Table 1) of Chapter 3 of the FCA General Prudential sourcebook

  1. (1)

    The own funds of a financial conglomerate shall be calculated on the basis of the consolidated accounts according to the relevant accounting framework applied to the scope of supplementary supervision under the laws of the United Kingdom that implemented Directive 2002/87/EC and shall take paragraph 5 into account where applicable.

  2. (2)

    With regard to banking and investment services conglomerates the following treatments shall be applied to unconsolidated investments when calculating the own funds of the financial conglomerate:

    1. (a)

      unconsolidated significant investments held in a financial sector entity, within the meaning of Article 43 of Regulation (EU) No 575/2013, which belongs to the insurance sector, shall be fully deducted from the conglomerate's own funds;

    2. (b)

      unconsolidated investments, other than those referred to in point (a), held in a financial sector entity which belongs to the insurance sector shall be fully deducted from the conglomerate's own funds in accordance with Article 46 of Regulation (EU) No 575/2013.

  3. (3)

    Subject to paragraph 2, any own funds issued by an entity in a financial conglomerate and held by another entity in that financial conglomerate shall be deducted from the conglomerate's own funds if not already eliminated in the accounting consolidation process.

  4. (4)

    An undertaking which is a jointly controlled entity for the purpose of the relevant accounting framework shall be treated in accordance with sectoral rules on proportional consolidation or the inclusion of proportional shares.

  5. (5)

    Where an insurance undertaking or reinsurance undertaking within the meaning of section 417 FSMA forms part of a financial conglomerate, the calculation of the supplementary capital adequacy requirements at the level of the financial conglomerate shall be based on the valuation of assets and liabilities calculated in accordance with the Valuation and Technical Provisions Parts of PRA Rulebook.

  6. (6)

    Where asset or liability values are subject to prudential filters and deductions in accordance with Title I of Part 2 of Regulation (EU) No 575/2013, the asset or liability values used for the purpose of the calculation of the supplementary capital adequacy requirements shall be those attributable to the relevant entities under that Regulation, excluding assets and liabilities attributable to other entities of the financial conglomerate.

  7. (7)

    Where calculation of a threshold or limit is required by sectoral rules, the threshold or limit at conglomerate level shall be calculated on the basis of the consolidated data of the financial conglomerate and after deductions required by paragraphs 2 and 3.

  8. (8)

    For the purposes of calculating thresholds or limits, regulated entities in a financial conglomerate which fall within the scope of an institution's consolidated situation pursuant to Section 1 of Chapter 2 of Title II of Part One of Regulation (EU) No 575/2013 shall be considered together.

  9. (9)

    For the purpose of calculating thresholds or limits, regulated entities in a financial conglomerate which fall within the scope of group supervision according to the Group Supervision Part of the PRA Rulebook and Part 3 of the Solvency 2 Regulations 2015 shall be considered together.

  10. (10)

    For the purposes of calculating thresholds or limits at the regulated entity level, regulated entities in a financial conglomerate to which neither paragraph 8 nor paragraph 9 applies, shall calculate their respective thresholds and limits on an individual basis according to the sectoral rules of the regulated entity.

  11. (11)

    When summing the relevant sectoral solvency requirements there shall be no adjustment other than as required by Article 11 or as a result of adjustments to sectoral thresholds and limits pursuant to paragraph 7.