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Application provision

1.1 Unless otherwise stated, this Part applies to every firm except:

  1. (1) an incoming EEA firm;
  2. (2) an incoming Treaty firm; and
  3. (3) an insurer that is not a UK Solvency II firm.

1.1

01/01/2016

Unless otherwise stated, this Part applies to every firm except:

  1. (1) an incoming EEA firm;
  2. (2) an incoming Treaty firm; and
  3. (3) an insurer that is not a UK Solvency II firm.

1.2

01/01/2016

This Part does not apply to a firm with respect to a financial conglomerate of which it is a member if the interest of the financial conglomerate in that firm is no more than a participation.

1.3

01/01/2016

The rules in 3.2, 4.2 and Chapter 7 do not apply with respect to a third country financial conglomerate.

1.4

12/10/2016

In this Part, the following definitions shall apply:

alternative investment fund manager

means a manager of alternative investment funds within the meaning of Article 4(1)(b), (l) and (ab) of the AIFMD or an undertaking which is outside the EEA and which would require authorisation in accordance with the AIFMD if it had its registered office within the EEA.

ancillary insurance services undertaking

in relation to any undertaking in a consolidation group, an undertaking complying with the following conditions:

        1. (1) its principal activity consists of:
          1. (a) owning or managing property;
          2. (b) managing data-processing services;
          3. (c) providing health and care services; or
          4. (d) any other similar activity;
        2. (2) the activity in (1) is ancillary to the principal activity of one or more insurance undertakings; and
        3. (3) those insurance undertakings are also members of that consolidation group.

applicable sectoral consolidation rules

means in respect of a financial sector the PRA’s sectoral rules about capital adequacy and solvency on a consolidated basis applicable to that financial sector under the table in paragraph 8 of Annex 2 of this Part (Application of sectoral consolidation rules).

applicable sectoral rules

means in respect of a financial sector, applicable sectoral consolidation rules for that financial sector and the PRA’s sectoral rules about capital adequacy and solvency for:

        1. (1) the banking and investment services sector as set out in paragraph 6.2 of Annex 2 to this Part; or
        2. (2) the insurance sector as set out in paragraph 6.4 of Annex 2 to this Part;

which of those sets of rules apply for the purpose of a particular calculation depends on the nature of that calculation.

asset management company

means a management company within the meaning of Article 2(1)(b) of the UCITS Directive, as well as an undertaking the registered office of which is outside the EEA and which would require authorisation in accordance with Article 6(1) of the UCITS Directive if it had its registered office within the EEA.

authorised electronic money institution

means in accordance with regulation 2(1) of the Electronic Money Regulations:

        1. (1) a person included by the FCA in the Financial Services Register as an authorised electronic money institution pursuant to regulation 4(1)(a) of the Electronic Money Regulations; or
        2. (2) a person deemed to have been granted authorisation by virtue of regulation 74 of the Electronic Money Regulations.

banking and investment services sector

means the investment services sector and the banking sector taken together.

banking sector

means a sector composed of one or more of the following entities:

        1. (1) a credit institution;
        2. (2) a financial institution; and
        3. (3) an ancillary services undertaking that is not an ancillary insurance services undertaking.

collective portfolio management investment firm

has the meaning given in the PRA Handbook Glossary.

competent authority

means any national authority of an EEA State which is empowered by law or regulation to supervise regulated entities, whether on an individual or group-wide basis.

conglomerate capital resources

in relation to a financial conglomerate with respect to which 3.3 applies capital resources as defined in whichever of paragraphs 1.1 of Part 1 or 2.1 of Part 2 of Annex 2 applies with respect to that financial conglomerate.

conglomerate capital resources requirement

in relation to a financial conglomerate with respect to which 3.3 applies the capital resources requirement defined in whichever of paragraphs 1.3 or 2.4 of Annex 2  applies with respect to that financial conglomerate.

consolidation group

means:

        1. (1) a conventional group; or
        2. (2) undertakings linked by an Article 12(1) relationship or an Article 18(6) relationship.

If a parent undertaking or subsidiary undertaking in a conventional group (the first person) has a consolidation Article 12(1) relationship or an Article 18(6) relationship with another person (the second person), the second person, and any subsidiary undertaking of the second person, is also a member of the same consolidation group.

conventional group

means a group of undertakings that consists of a parent undertaking and

any person that is either:

        1. (1) a subsidiary undertaking of that parent undertaking; or
        2. (2) an undertaking in which that parent undertaking or a subsidiary undertaking of that parent undertaking holds a participation.

CRD full-scope firm

means an investment firm as defined in article 4(1)(2) of the CRR that is subject to the requirements imposed by MiFID, or which would be subject to that Directive if its head office were in an EEA State, and that is not a limited activity firm or a limited licence firm.

delegated acts

means Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).

EEA insurer

means an  undertaking whose head office is in any EEA State except the UK and which has received authorisation in accordance with article 14 of the Solvency II Directive.

EEA prudential sectoral legislation

means, in relation to a financial sector, requirements applicable to persons in that financial sector in accordance with EEA legislation with respect to prudential supervision of regulated entities in that financial sector.

EEA regulated entity

means a regulated entity that is an EEA firm or a UK firm.

electronic money institution

means, in accordance with regulation 2(1) of the Electronic Money Regulations, an authorised electronic money institution or a small electronic money institution.

Electronic Money Regulations

means the Electronic Money Regulations 2011 (SI 2011/99).

financial conglomerate notification

means a notification issued in respect of a financial conglomerate that has been identified as a financial conglomerate as contemplated by Article 4(2) of the Financial Groups Directive.

Financial Conglomerates Regulations

means The Financial Conglomerates and Other Financial Groups Regulations 2004 (SI 2004/1862).

financial sector

means one of the banking and investment services sector or the insurance sector.

Financial Services Register

means a public record, as required by section 347 of FSMA (The public record), regulation 4 of the Payment Services Regulations (SI 2009/209) and, regulation 4 of the Electronic Money Regulations.

full-scope IFPRU investment firm

means a CRD full-scope firm that is an IFPRU investment firm.

IFPRU investment firm

means an investment firm, as defined in article 4(1)(2) of the CRR, including a collective portfolio management investment firm, that satisfies the following conditions:

        1. (1) it is a FCA-authorised firm;
        2. (2) its head office is in the UK; and
        3. (3) it is not excluded under IFPRU 1.1.5 in the FCA Handbook.

IFPRU limited activity firm

means a limited activity firm that meets the following conditions:

        1. (1) it is an FCA-authorised firm;
        2. (2) its head office is in the UK; and
        3. (3) it is not excluded under IFPRU 1.1.5 in the FCA Handbook.

insurance conglomerate

means a financial conglomerate that is identified in paragraph 3.1 of Annex 2 as an insurance conglomerate.

insurance sector

means a sector composed of one or more of the following entities:

        1. (1) a Solvency II undertaking;
        2. (2) third country insurance undertaking or a third country reinsurance undertaking;
        3. (3) an insurance holding company; and
        4. (4) in the relevant circumstances described in 5, an asset management company or an alternative investment fund manager.

investment firm

has the meaning given by Article 2(3) of the Financial Groups Directive.

investment services sector

means a sector composed of one or more of the following entities:

        1. (1) an investment firm;
        2. (2) a financial institution; and
        3. (3) in the relevant circumstances described in 5, an asset management company or an alternative investment fund manager.

limited activity firm

has the meaning given by article 96(1) of the CRR.

limited licence firm

has the meaning given by article 95(1) of the CRR.

mixed financial holding company

has the meaning given in Article 2(15) of the Financial Groups Directive.   

most important financial sector

means the financial sector with the largest average referred to in the box titled Threshold Test 2 in Annex 1; and so that the investment services sector and the banking sector are treated as one for the purpose of the definition of financial conglomerate and for the purposes of 1 to 5 of this Part.

overall financial sector

means a sector composed of one or more the following types of entities:

        1. (1) members of each of the financial sectors; and
        2. (2) except where 1 to 5 and Annex 2 to this Part  provide otherwise, a mixed financial holding company.

own funds requirements

has the meaning given by Article 92 of the CRR.

parent undertaking

has the meaning in Article 2(9) of the Financial Groups Directive.

participation

has the meaning given in article Article 2(11) of the Financial Groups Directive.

PRA financial conglomerate notification

means a notification in respect of a financial conglomerate in accordance with Regulation 2 of the Financial Conglomerates Regulations issued by the PRA or by the UK Financial Services Authority and attributed to the PRA on 1 April 2013, identifying that financial conglomerate and its coordinator.

recognised third country investment firm

has the meaning given by the PRA Handbook Glossary.

regulated entity

means one of the following:

        1. (1) a credit institution;
        2. (2) a Solvency II undertaking, a third country insurance undertaking, a third country reinsurance undertaking;
        3. (3) an investment firm;
        4. (4) an asset management company for the purposes described in 5; or
        5. (5) an alternative investment fund manager for the purposes described in 5;

whether or not it is incorporated in, or has its head office in, an EEA State.

relevant competent authorities

in relation to a financial conglomerate, means those competent authorities which are, or which have been appointed as, relevant competent authorities in relation to that financial conglomerate under Article 2(17) of the Financial Groups Directive.

small electronic money institution

means, in accordance with regulation 2(1) of the Electronic Money Regulations, a person included by the FCA in the Financial Services Register pursuant to regulation 4(1)(b) of the Electronic Money Regulations.

smallest financial sector

means the financial sector with the smallest average referred to in the box titled Threshold Test 2 in Annex 1, the investment services sector and the banking sector being treated as one in the circumstances set out in 1 to 5 of this Part.

sectoral rules

means, in relation to a financial sector, the following rules and requirements relating to the prudential supervision of regulated entities within that financial sector:

        1. (1) for the purposes of 2.8, EEA prudential sectoral legislation for that financial sector together with, as appropriate, the rules and requirements in (3);
        2. (2) for the purpose of calculating solo capital resources and a solo capital resources requirement:
          1. (a) to the extent provided for in paragraphs 6.4 to 6.6 of Annex 2, rules and requirements that are referred to in those paragraphs; and
          2. (b) the rules and requirements in (3); or
        3. (3) for all other purposes, rules and requirements of the PRA.
        4. and so that:
        5. (4) in relation to prudential rules about consolidated supervision for any financial sector, those requirements include ones relating to the form and extent of consolidation;
        6. (5) in relation to any financial sector, those requirements include ones relating to the eligibility of different types of capital;
        7. (6) in relation to any financial sector, those requirements include both ones applying on a solo basis and ones applying on a consolidated basis; and
        8. (7) references to the PRA’s sectoral rules are to sectoral rules in the form of rules.

solo capital resources

means capital resources that are or would be eligible as capital under the sectoral rules that apply for the purpose of calculating its solo capital resources requirement. Paragraph 7.1 of Annex 2 applies for the purpose of this definition in the same way as it does for the definition of solo capital resources requirement.

solo capital resources requirement

a capital resources requirement calculated on a solo basis as defined in paragraph 6.2 to 6.7 of Annex 2.

solvency deficit

in Annex 2 and in respect of a member of the overall financial sector, means the amount, if any, by which its solo capital resources fall short of its solo capital resources requirement.

subsidiary undertaking

has the meaning given in Article 2(10) of the Financial Groups Directive.

third country financial conglomerate

a financial conglomerate that is of a type that falls under Article 5(3) of the Financial Groups Directive.

third country insurance undertaking

means an undertaking that has its head office outside the EEA and that would require authorisation as an insurance undertaking in accordance with Article 14 of the Solvency II Directive if its head office was situated in the EEA.

third country reinsurance undertaking

means an undertaking that has its head office outside the EEA and that would require authorisation as a reinsurance undertaking in accordance with Article 14 of the Solvency II Directive if its head office were situated in the EEA.

UCITS management company

    1. (1) except in relation to MiFID business, a firm which is either:
      1. (a) a UCITS firm; or
      2. (b) a UCITS investment firm.
    2. (2) in relation to MiFID business, a management company as defined in the UCITS Directive.

[Note: article 4(1)(24) of MiFID]

UK-regulated EEA financial conglomerate

means a financial conglomerate other than a third country financial conglomerate that satisfies one of the following conditions:

        1. (1) 3.3 applies with respect to it; or
        2. (2) a firm that is a member of that financial conglomerate is subject to obligations imposed through its Part 4A permission or section 55M of FSMA to ensure that the financial conglomerate meets levels of capital adequacy based on or stated to be based on Annex I of the Financial Groups Directive.

1.5

01/01/2016

Unless otherwise defined in this Part, any italicised expression used in this Part and in the CRR or the Solvency II Directive has the same meaning as in the CRR or the Solvency II Directive.