Group risk consolidation

Part

BIPRU Prudential sourcebook for Banks, Building Societies and Investment Firms

Chapter

Group risk consolidation

Printed on: 21/05/2024

Rulebook at: 01/01/2007

BIPRU 8

Group risk consolidation

BIPRU 8.1

Application

01/01/2007

BIPRU 8.1.1

This chapter applies to:

(1) a BIPRU firm that is a member of a UK consolidation group;
(2) a BIPRU firm that is a member of a non-EEA sub-group;
(3) an ELMI that is a member of a UK consolidation group or non-EEA sub-group if that group includes a BIPRU firm; and
(4) a firm that is not a BIPRU firm and is a parent financial holding company in a Member State in a UK consolidation group.

01/01/2007

BIPRU 8.1.2

This chapter does not apply to a firm in BIPRU 8.1.1R (1) to BIPRU 8.1.1R (3) which is a member of the UK consolidation group or non-EEA sub-group if the interest of the relevant UK consolidation group or non-EEA sub-group in that firm is no more than a participation.

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Purpose

BIPRU 8.1.3

This chapter implements articles 71, 73(1) and (2), 125, 126, 127(1), 133 and 134 of the Banking Consolidation Directive and articles 2 (in part), 22-27 and 37(1) (in part) of the Capital Adequacy Directive.

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How this chapter is organised

BIPRU 8.1.4

BIPRU 8.2 sets out the definition of UK consolidation group and the basic requirement to apply financial resources and concentration risk requirements to that group on a consolidated basis.

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BIPRU 8.1.5

BIPRU 8.3 sets out the definition of a non-EEA sub-group and the basic requirement to apply financial resources and concentration risk requirements to that group on a consolidated basis.

01/01/2007

BIPRU 8.1.6

BIPRU 8.4 sets out how a group of CAD investment firms can apply for a waiver from consolidated capital requirements although remaining subject to consolidated supervision (including reporting requirements).

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BIPRU 8.1.7

BIPRU 8.5 sets out the basis for including and excluding undertakings within the group for the purposes of consolidation.

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BIPRU 8.1.8

BIPRU 8.6 sets out the calculation of the consolidated capital resources of a group and the limits that apply.

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BIPRU 8.1.9

BIPRU 8.7 sets out the calculation of the consolidated capital resources requirement of a group.

01/01/2007

BIPRU 8.1.10

BIPRU 8.8 deals with the application of advanced prudential calculation approach on a consolidated basis.

01/01/2007

BIPRU 8.1.11

BIPRU 8.9 sets out consolidated concentration risk requirements.

01/01/2007

Consolidation requirements for BIPRU firms elsewhere in the Handbook

BIPRU 8.1.12

SYSC 12 (Group risk systems and controls requirement) deals with systems and controls requirements for groups.

01/01/2007

BIPRU 8.1.13

GENPRU 1.2 (Adequacy of financial resources) deals with the detail about how GENPRU 1.2 applies on a consolidated basis although the underlying requirement to apply it on a consolidated basis is in BIPRU 8.2 and BIPRU 8.3.

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BIPRU 8.1.14

BIPRU 11 (Disclosure) itself deals with how that chapter is applied on a consolidated basis.

01/01/2007

BIPRU 8.1.15

GENPRU 3.1 (Cross sector groups) deals with financial conglomerates.

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BIPRU 8.1.16

GENPRU 3.2 (Prudential rules for third country groups) deals, amongst other things, with banking and investment services groups headed by a parent undertaking outside the EEA.

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BIPRU 8.2

Scope and basic consolidation requirements for UK consolidation groups

01/01/2007

Main consolidation rule for UK consolidation groups

BIPRU 8.2.1

A firm that is a member of a UK consolidation group must comply, to the extent and in the manner prescribed in BIPRU 8.5, with the obligations laid down in GENPRU 1.2 (Adequacy of financial resources), the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) and BIPRU 10 (Concentration risk requirements) on the basis of the consolidated financial position of:

(1) where either Test 1A or Test 1B in BIPRU 8 Annex 1 (Decision tree identifying a UK consolidation group) apply, the parent institution in a Member State in the UK consolidation group; or
(2) where either Test 1C or Test 1D in BIPRU 8 Annex 1 apply, the parent financial holding company in a Member State.

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BIPRU 8.2.2

Further to BIPRU 8.2.1 R, a firm that is a member of a UK consolidation group must at all times ensure that the consolidated capital resources of the UK consolidation group are equal to or exceed its consolidated capital resources requirement.

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BIPRU 8.2.3

The base capital resources requirement does not apply on a consolidated basis.

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Definition of UK consolidation group

BIPRU 8.2.4

A firm's UK consolidation group means the group that is identified as a UK consolidation group in accordance with the decision tree in BIPRU 8 Annex 1 R (Decision tree identifying a UK consolidation group).

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BIPRU 8.2.5

For the purposes of this chapter, what would otherwise be a UK consolidation group is not a UK consolidation group if all the members of that UK consolidation group wholly form part of another UK consolidation group.

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BIPRU 8.2.6

BIPRU 8 Annex 2 (Examples of how to identify a UK consolidation group) sets out examples of how to identify a UK consolidation group.

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BIPRU 8.2.7

BIPRU 8 Annex 1 (Decision tree identifying a UK consolidation group) shows that Articles 125 and 126 of the Banking Consolidation Directive are important in deciding whether the FSA is obliged to supervise a group or part of a group and hence whether that group or part of a group is a UK consolidation group. BIPRU 8 Annex 4 (Text of Articles 125 and 126 of the Banking Consolidation Directive) sets out these articles together with an explanation of how those articles should be read in the case of a group which also contains CAD investment firms.

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BIPRU 8.3

Scope and basic consolidation requirements for non-EEA sub-groups

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Main consolidation rule for non-EEA sub-groups

BIPRU 8.3.1

(1) A BIPRU firm that is a subsidiary undertaking of a BIPRU firm or of a financial holding company must apply the requirements laid down in GENPRU 1.2 (Adequacy of financial resources), the main BIPRU firm Pillar 1 rules (but not the base capital resources requirement) and BIPRU 10 (Concentration risk requirements) on a sub-consolidated basis if the BIPRU firm, or the parent undertaking where it is a financial holding company, have a third country banking or investment services undertaking as a subsidiary undertaking or hold a participation in such an undertaking.
(2) (1) only applies if the FSA is required by the Banking Consolidation Directive or the Capital Adequacy Directive to supervise the group established under (1) under Article 73(2) of the Banking Consolidation Directive (Non-EEA sub-groups).

01/01/2007

BIPRU 8.3.2

Further to BIPRU 8.3.1 R, a firm that is a member of a non-EEA sub-group must at all times ensure that the consolidated capital resources of that non-EEA sub-group are equal to or exceed its consolidated capital resources requirement.

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BIPRU 8.3.3

The base capital resources requirement does not apply on a consolidated basis.

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BIPRU 8.3.4

The sub-group identified in BIPRU 8.3.1 R is called a non-EEA sub-group.

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How to identify a non-EEA sub-group

BIPRU 8.3.5

BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group) sets out examples of how to identify a non-EEA sub-group.

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BIPRU 8.3.6

The remainder of this section sets out a process for identifying a non-EEA sub-group in straightforward cases.

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BIPRU 8.3.7

A firm will not be a member of a non-EEA sub-group unless it is also a member of a UK consolidation group. So the first step is to identify each undertaking in the firm's UK consolidation group that satisfies the following conditions:

(1) it is an institution, financial institution or asset management company whose head office is outside the EEA (a third country banking or investment services undertaking);
(2) one of the following applies:

(a) it is a subsidiary undertaking of a BIPRU firm in that UK consolidation group; or
(b) a BIPRU firm in that UK consolidation group holds a participation in it; and

(3) that BIPRU firm is not a parent institution in a Member State.

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BIPRU 8.3.8

The sub-group of the BIPRU firm identified in BIPRU 8.3.7G (2)(a) or BIPRU 8.3.7G (2)(b) is a potential non-EEA sub-group.

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BIPRU 8.3.9

If more than one BIPRU firm is a direct or indirect parent undertaking in accordance with BIPRU 8.3.7G (2)(a) then the sub-groups of each of them are all potential non-EEA sub-groups. This is illustrated in example three in BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group), where the sub-group of UK bank 1 and the sub-group of UK bank 2 are potential non-EEA sub-groups.

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BIPRU 8.3.10

Similarly if there is more than one BIPRU firm that holds a participation in the third country banking or investment services undertaking in accordance with BIPRU 8.3.7G (2)(b) then the sub-group of each such BIPRU firm is a potential non-EEA sub-group.

01/01/2007

BIPRU 8.3.11

The effect of BIPRU 8.3.7G (3) is that a non-EEA sub-group cannot be headed by a parent institution in a Member State. This is illustrated in example one of BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group).

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BIPRU 8.3.12

The firm should then identify each undertaking in the firm's UK consolidation group that satisfies the following conditions:

(1) it is an institution, financial institution or asset management company whose head office is outside the EEA (a third country banking or investment services undertaking);
(2) one of the following applies:

(a) it is a subsidiary undertaking of a financial holding company in that UK consolidation group; or
(b) a financial holding company in that UK consolidation group holds a participation in it;

(3) the head office of that financial holding company is in the United Kingdom; and
(4) that financial holding company has a subsidiary undertaking that is a BIPRU firm.

01/01/2007

BIPRU 8.3.13

The sub-group of the financial holding company identified in BIPRU 8.3.12G (2)(a) or BIPRU 8.3.12G (2)(b) is a potential non-EEA sub-group.

01/01/2007

BIPRU 8.3.14

The financial holding company identified in BIPRU 8.3.12 G may be a parent financial holding company in a Member State. This is illustrated by example 2 of BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group).

01/01/2007

BIPRU 8.3.15

If more than one financial holding company is a direct or indirect parent undertaking in accordance with BIPRU 8.3.12G (2)(a) then the sub-groups of each of them are all potential non-EEA sub-groups.

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BIPRU 8.3.16

Similarly if there is more than one financial holding company that holds a participation in the third country banking or investment services undertaking in accordance with BIPRU 8.3.12G (2)(b) then the sub-group of each such financial holding company is a potential non-EEA sub-group.

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BIPRU 8.3.17

The firm should apply the process in BIPRU 8.3.12 G to a third country banking or investment services undertaking even though it may be also be part of a potential non-EEA sub-group under BIPRU 8.3.7 G.

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BIPRU 8.3.18

Having identified potential non-EEA sub-groups for each third country banking or investment services undertaking in its UK consolidation group the firm should then eliminate overlapping potential non-EEA sub-groups in the following way. If:

(1) one potential non-EEA sub-group is contained within a wider potential non-EEA sub-group; and
(2) the third country banking or investment services undertakings in the two potential non-EEA sub-groups are the same;

then the smaller potential non-EEA sub-group is eliminated.

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BIPRU 8.3.19

If there is a chain of three or more potential non-EEA sub-groups, each with the same third country banking or investment services undertakings, the elimination process may remove all but the highest. This is illustrated in example three in BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group). In this example there are four potential non-EEA sub-groups and the elimination process results in just one remaining (the one headed by the UK parent financial holding company in a Member State).

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BIPRU 8.3.20

Each remaining potential non-EEA sub-group is a non-EEA sub-group, even though it may be part of a wider non-EEA sub-group.

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BIPRU 8.3.21

Examples four and five in BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group) show how the same group may contain two non-EEA sub-groups even though the smaller potential non-EEA sub-group is part of a bigger one. The reason for there being two non-EEA sub-groups in these examples is that one of the third country banking or investment services undertakings is not a member of both potential non-EEA sub-groups.

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BIPRU 8.3.22

If a UK consolidation group is headed by a parent financial holding company in a Member State the result of the elimination process may be that a firm's UK consolidation group contains only one non-EEA sub-group and that the non-EEA sub-group is the same as the UK consolidation group. In theory that means that there are two sets of consolidation requirements, one in relation to the UK consolidation group and one in relation to the non-EEA sub-group. However as the UK consolidation group and the non-EEA sub-group are the same, in practice this means that the additional non-EEA sub-group consolidation disappears. This is illustrated in example three in BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group). The effect of BIPRU 8.3.7G (3) is that this is not the case if the UK consolidation group is headed by a parent institution in a Member State, as illustrated in example 1 in BIPRU 8 Annex 3.

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BIPRU 8.3.23

Even where the requirements for a non-EEA sub-group are absorbed into those for the UK consolidation group a firm should still make clear in its regulatory reporting that the consolidation figures relate to a UK consolidation group and a non-EEA sub-group and that they both contain the same members.

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BIPRU 8.3.24

The examples in this section have so far assumed that the only EEA State involved is the United Kingdom. If a potential non-EEA sub-group that would otherwise be regulated by the FSA contains a potential non-EEA sub-group in another EEA State then the United Kingdom one is eliminated if the third country banking or investment services undertaking in the UK potential non-EEA sub-group and the potential non-EEA sub-group in the other EEA State are the same. The intention here is that the EEA competent authority closest to the third country banking or investment services undertaking should be responsible for the non-EEA sub-group subconsolidation. Example 6 in BIPRU 8 Annex 3 (Examples of how to identify a non-EEA sub-group) illustrates this situation.

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BIPRU 8.4

CAD Article 22 groups and investment firm consolidation waiver

01/01/2007

Application

BIPRU 8.4.1

This section applies to a BIPRU investment firm with an investment firm consolidation waiver.

01/01/2007

The effect of an investment firm consolidation waiver and the conditions for getting one

BIPRU 8.4.2

A BIPRU investment firm may apply for a waiver of the requirement in this chapter to apply capital requirements on a consolidated basis. Such a waiver is called an investment firm consolidation waiver.

01/01/2007

BIPRU 8.4.3

An investment firm consolidation waiver will waive the application of BIPRU 8.2.1 R and BIPRU 8.2.2 R (if it applies with respect to a UK consolidation group) or BIPRU 8.3.1 R and BIPRU 8.3.2 R (if it applies with respect to a non-EEA sub-group). The effect will be to switch off this chapter with respect to the group in question apart from this section.

01/01/2007

BIPRU 8.4.4

The FSA 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 FSA 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 6 (Capital resources table for a BIPRU investment firm with a waiver from consolidated supervision); and
(3) the firm demonstrates that the requirements in BIPRU 8.4.11 R to BIPRU 8.4.18 R will be met.

01/01/2007

BIPRU 8.4.5

The standards in BIPRU 8.4.4 G are minimum standards. Satisfaction of these conditions does not automatically mean the FSA will give an investment firm consolidation waiver. The FSA will in addition also apply the tests in section 148 of the Act (Modification or waiver of rules).

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BIPRU 8.4.6

SUP 8 (Waiver and modification of rules) and BIPRU 1.3 (Application for advanced approaches) are also relevant to applications for an investment firm consolidation waiver.

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Meeting the terms of an investment firm consolidation waiver

BIPRU 8.4.7

If a firm has an investment firm consolidation waiver with respect to its UK consolidation group or non-EEA sub-group but that UK consolidation group or non-EEA sub-group ceases to meet the definition of a CAD Article 22 group the firm must comply with the rest of this chapter rather than this section notwithstanding the investment firm consolidation waiver.

01/01/2007

BIPRU 8.4.8

Compliance with the capital requirements set out in BIPRU 8.4.11 R is a condition under the Capital Adequacy Directive for the exemption from capital requirements. Thus if they are breached the FSA is likely to revoke the investment firm consolidation waiver.

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Definition of a CAD Article 22 group

BIPRU 8.4.9

(1) A CAD Article 22 group means a UK consolidation group or non-EEA sub-group that meets the conditions in this rule.
(2) There must be no bank, building society or credit institution in the UK consolidation group or non-EEA sub-group.
(3) Each CAD investment firm in the UK consolidation group or non-EEA sub-group which is an EEA firm must use the definition of own funds given in the CRD implementation measure of its EEA State for Article 16 of the Capital Adequacy Directive.
(4) Each CAD investment firm in the UK consolidation group or non-EEA sub-group must be a:

(a) limited activity firm; or
(b) limited licence firm.

(5) Each CAD investment firm in the UK consolidation group or non-EEA sub-group which is an EEA firm must:

(a) meet the requirements imposed by the CRD implementation measures of its EEA State for Articles 18 and Article 20 of the Capital Adequacy Directive on an individual basis; and
(b) deduct from its own funds any contingent liability in favour of other members of the UK consolidation group or non-EEA sub-group.

(6) Each BIPRU investment firm in the UK consolidation group or non-EEA sub-group must comply with the main BIPRU firm Pillar 1 rules on an individual basis.

01/01/2007

BIPRU 8.4.10

GENPRU 2.2 (Capital resources) says that a BIPRU investment firm with an investment firm consolidation waiver should calculate its capital resources on a solo basis using GENPRU 2 Annex 6 (Capital resources table for a BIPRU investment firm with a waiver from consolidated supervision). GENPRU 2 Annex 6 requires a BIPRU investment firm to deduct contingent liabilities in favour of other members of the UK consolidation group or non-EEA sub-group. Therefore BIPRU 8.4.9R (5)(b) only imposes the requirement to deduct them on EEA firms.

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Capital adequacy obligations relating to a CAD Article 22 group: General rule

BIPRU 8.4.11

If a firm has an investment firm consolidation waiver, it must ensure that any financial holding company in the UK consolidation group or the non-EEA sub-group that is the UK parent financial holding company in a Member State of a CAD investment firm in the UK consolidation group or non-EEA sub-group has capital resources, calculated under BIPRU 8.4.12 R, in excess of the sum of the following (or any higher amount specified in the investment firm consolidation waiver):

(1) the sum of the solo notional capital resources requirements for each CAD investment firm, financial institution, asset management company and ancillary services undertaking in the UK consolidation group or the non-EEA sub-group, as calculated in accordance with BIPRU 8.4.13 R; and
(2) the total amount of any contingent liability in favour of CAD investment firms, financial institutions, asset management companies and ancillary services undertakings in the UK consolidation group or non-EEA sub-group.

01/01/2007

Capital adequacy obligations relating to a CAD Article 22 group: Capital resources

BIPRU 8.4.12

A firm must calculate the capital resources of the parent financial holding company in a Member State for the purpose of BIPRU 8.4.11 R as follows:

(1) the capital resources are the sum of capital resources calculated at stages D (Total tier one capital before deductions) and I (Total tier two capital) of the version of the capital resources table in GENPRU 2 Annex 4 (Capital resources table for a BIPRU investment firm deducting material holdings) as adjusted in accordance with this rule;
(2) capital resources at stage D must not include innovative tier one capital resources, but they may be included at stage I if (5) allows this;
(3) the amount of the items which may be included at stage I must not exceed the amount calculated at stage D of the capital resources table;
(4) the amount of the items which may be included in lower tier two capital in stage I must not exceed 50% of the amount calculated at stage D of the capital resources table; and
(5) GENPRU 2.2.25 R (Limits on the use of different forms of capital: Use of higher tier capital in lower tiers) and GENPRU 2.2.27 R (Use of innovative tier one capital in lower stages of capital) apply.

01/01/2007

Capital adequacy obligations relating to a CAD Article 22 group: Capital resources requirement

BIPRU 8.4.13

The solo notional capital resources requirement as referred to in BIPRU 8.4.11R (1) is calculated in the same way as:

(1) (if each CAD investment firm in the UK consolidation group or non-EEA sub-group is a limited licence firm) the capital resources requirement for a BIPRU limited licence firm; or
(2) (in any other case) the capital resources requirement for a BIPRU limited activity firm.

01/01/2007

BIPRU 8.4.14

A firm must exclude material holdings in the notional calculation of the credit risk capital requirement for the purposes of BIPRU 8.4.13 R. A firm must identify whether it has any material holdings and the amount of them in accordance with GENPRU 2.2 (Capital resources) and GENPRU 2 Annex 4 (Capital resources table for a BIPRU investment firm deducting material holdings).

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BIPRU 8.4.15

The notional capital resources requirement calculated under BIPRU 8.4.13 R need not include a credit charge for material holdings. However it should include one for illiquid assets.

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BIPRU 8.4.16

Intra-group exposures must not be netted for the purpose of BIPRU 8.4.11 R.

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Capital adequacy obligations relating to a CAD Article 22 group: Advanced prudential calculation approaches

BIPRU 8.4.17

A firm may not use an advanced prudential calculation approach for the purpose of BIPRU 8.4.11 R.

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Additional rules that apply to a firm with an investment firm consolidation waiver

BIPRU 8.4.18

If a firm has an investment firm consolidation waiver, it must:

(1) ensure that each CAD investment firm in the UK consolidation group or non-EEA sub-group which is a firm or an EEA firm has in place systems to monitor and control the sources of capital and funding of all the members in the UK consolidation group or non-EEA sub-group;
(2) notify the FSA of any serious risk that could undermine the financial stability of the UK consolidation group or non-EEA sub-group, as soon as the firm becomes aware of that risk, including those associated with the composition and sources of the capital and funding of members of the UK consolidation group or non-EEA sub-group;
(3) report the amount of the consolidated capital resources and consolidated capital resources requirement of the UK consolidation group or non-EEA sub-group on a periodic basis as set out in the investment firm consolidation waiver;
(4) report any large exposures risks of members of the UK consolidation group or non-EEA sub-group including any undertakings not located in an EEA State on a periodic basis set out in the investment firm consolidation waiver;
(5) notify the FSA immediately it becomes aware that the UK consolidation group or non-EEA sub-group has ceased to meet the conditions for being a CAD Article 22 group; and
(6) notify the FSA immediately it becomes aware of any breach of BIPRU 8.4.11 R.

01/01/2007

BIPRU 8.4.19

Although an investment firm consolidation waiver switches off most of this chapter, a firm should still carry out the capital adequacy calculations in BIPRU 8.3 to BIPRU 8.8 as if those parts of this chapter still applied to the UK consolidation group or non-EEA sub-group and report these to the FSA . It should also still monitor large exposure risk on a consolidated basis.

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BIPRU 8.5

Basis of consolidation

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Undertakings to be included in consolidation

BIPRU 8.5.1

A firm must include only the following types of undertaking in a UK consolidation group or non-EEA sub-group for the purposes of this chapter:

(1) a BIPRU firm;
(2) an institution;
(3) a financial institution;
(4) an asset management company;
(5) a financial holding company; and
(6) an ancillary services undertaking.

01/01/2007

BIPRU 8.5.2

Although an undertaking falling outside BIPRU 8.5.1 R will not be included in a UK consolidation group or non-EEA sub-group it may be relevant in deciding whether one undertaking in the banking sector or the investment services sector is a subsidiary undertaking of another with the result that they should be included in the same UK consolidation group or non-EEA sub-group.

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BIPRU 8.5.3

An example of BIPRU 8.5.2 G is as follows. Say that the undertaking at the head of a bank's UK group is a parent financial holding company in a Member State. One of its subsidiary undertakings is the bank . The parent financial holding company in a Member State also has an insurer as a subsidiary undertaking. That insurer has several investment firms as subsidiary undertakings. Say that the UK group is not a financial conglomerate. The UK consolidation group will include the parent financial holding company in a Member State and the bank . It will also include the investment firms that are subsidiary undertakings of the insurer. This is because the investment firms are subsidiary undertakings of the parent financial holding company in a Member State through the parent financial holding company in a Member State's holding in the insurer. However it will not include the insurer itself.

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Basis of inclusion of undertakings in consolidation

BIPRU 8.5.4

A firm must include any subsidiary undertaking in the UK consolidation group or non-EEA sub-group in full in the calculations in this chapter.

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BIPRU 8.5.5

In carrying out the calculations for the purposes of this chapter a firm must only include the relevant proportion of an undertaking that is a member of the UK consolidation group or non-EEA sub-group:

(1) by virtue of a consolidation Article 12(1) relationship;
(2) by virtue of an Article 134 relationship; or
(3) because the group holds a participation in it.

01/01/2007

BIPRU 8.5.6

In BIPRU 8.5.5 R, the relevant proportion is either:

(1) (in the case of a participation) the proportion of shares issued by the undertaking held by the UK consolidation group or the non-EEA sub-group; or
(2) (in the case of a consolidation Article 12(1) relationship or an Article 134 relationship), such proportion (if any) as stated in the Part IV permission of the firm.

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Basis of inclusion of UCITS investment firms in consolidation

BIPRU 8.5.7

GENPRU 2.1.46 R (Adjustment of the variable capital requirement calculation for UCITS investment firms) and BIPRU 10.1.5 R (Restricted application for UCITS investment firms) do not apply for the purpose of this chapter.

01/01/2007

BIPRU 8.5.8

In general a UCITS investment firm only calculates its capital and concentration risk requirements in relation to its designated investment business and does not calculate them with respect to scheme management activity. The effect of BIPRU 8.5.7 R is that this does not apply on a consolidated basis. For the purpose of this chapter the calculations are carried with respect to the whole of the activities of a UCITS investment firm.

01/01/2007

Exclusion of undertakings from consolidation: Balance sheet size

BIPRU 8.5.9

A firm may, having first notified the FSA in writing in accordance with SUP 15.7 (Form and method of notification), exclude an institution, asset management company, financial institution or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group if the balance sheet total of that undertaking is less than the smaller of the following two amounts:

(1) 10 million Euros;
(2) 1% of the balance sheet total of the parent undertaking or the undertaking that holds the participation.

01/01/2007

BIPRU 8.5.10

A firm must include undertakings, to which BIPRU 8.5.9 R would otherwise apply, if the balance sheet total of those undertakings taken together breaches the limit in BIPRU 8.5.9 R.

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Exclusion of undertakings from consolidation: Other reasons

BIPRU 8.5.11

Article 73(1) of the Banking Consolidation Directive allows the FSA to decide to exclude an institution, financial institution, asset management company or ancillary services undertaking that is a subsidiary undertaking in, or an undertaking in which a participation is held by, the UK consolidation group or non-EEA sub-group for the purposes of this chapter in the following circumstances:

(1) where the head office of the undertaking concerned is situated in a country outside the EEA where there are legal impediments to the transfer of the necessary information; or
(2) where, in the opinion of the FSA, the undertaking concerned is of negligible interest only with respect to the objectives of monitoring institutions; or
(3) where, in the opinion of the FSA, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of institutions are concerned.

01/01/2007

BIPRU 8.5.12

If a firm wishes to exclude an undertaking on the basis of any of the grounds set out in BIPRU 8.5.11 G it should apply to the FSA for a waiver. The FSA will consider such applications in the light of the criteria in section 148 of the Act.

01/01/2007

BIPRU 8.5.13

If several undertakings meet the criteria in BIPRU 8.5.11G (2), the FSA will not agree to a waiver to exclude them all from consolidation where collectively they are of non-negligible interest with respect to the objectives of the supervision of institutions.

01/01/2007

Information about excluded undertakings

BIPRU 8.5.14

The FSA may require a firm to provide information about the undertakings excluded from consolidation of the UK consolidation group or non-EEA sub-group pursuant to this section.

01/01/2007

BIPRU 8.6

Consolidated capital resources

01/01/2007

General

BIPRU 8.6.1

A firm must calculate the consolidated capital resources of its UK consolidation group or its non-EEA sub-group by applying GENPRU 2.2 (Capital resources) to its UK consolidation group or non-EEA sub-group on an accounting consolidation basis, treating the UK consolidation group or non-EEA sub-group as a single undertaking. The firm must adjust GENPRU 2.2 in accordance with this section for this purpose.

01/01/2007

Limits on the use of different forms of capital

BIPRU 8.6.2

The capital resources gearing rules apply for the purposes of calculating consolidated capital resources. They apply to the UK consolidation group or non-EEA sub-group on an accounting consolidation basis, treating the UK consolidation group or non-EEA sub-group as a single undertaking.

01/01/2007

BIPRU 8.6.3

As the various components of capital differ in the degree of protection that they offer, the capital resources gearing rules as applied on a consolidated basis place restrictions on the extent to which certain types of capital are eligible for inclusion in a UK consolidation group or non-EEA sub-group's consolidated capital resources. GENPRU 2.2.25 R (Limits on the use of different forms of capital: Use of higher tier capital in lower tiers) also applies.

01/01/2007

BIPRU 8.6.4

The prohibition in GENPRU 2.2 (Capital resources) on including innovative tier one capital in tier one capital for the purposes of meeting capital resources requirements applies under this section. However GENPRU 2.2.27 R (innovative tier one capital may be included in lower stages of capital when excluded from tier one capital) also applies. So, for example, a firm should not include consolidated indirectly issued capital in tier one capital but should generally include it as upper tier two capital.

01/01/2007

BIPRU 8.6.5

The rules in GENPRU 2.2 (Capital resources) on what tier two capital and tier three capital can be used for also apply under this section.

01/01/2007

Calculation of consolidated capital resources if there is a building society in the group

BIPRU 8.6.6

Where a firm's UK consolidation group or non-EEA sub-group includes a building society, the firm must calculate that group's consolidated capital resources using the calculation of capital resources for building societies.

01/01/2007

Calculation of consolidated capital resources if there is a bank or credit institution in the group

BIPRU 8.6.7

Where a firm's UK consolidation group or non-EEA sub-group includes a bank or credit institution but not a building society, the firm must calculate that group's consolidated capital resources using the calculation of capital resources for banks.

01/01/2007

Calculation of consolidated capital resources for an investment firm group

BIPRU 8.6.8

Where a firm's UK consolidation group or non-EEA sub-group does not include a bank, building society or credit institution, the firm must calculate that group's consolidated capital resources using the calculation of capital resources in GENPRU 2 Annex 4 (Capital resources table for a BIPRU investment firm deducting material holdings) or GENPRU 2 Annex 5 (Capital resources table for a BIPRU investment firm deducting illiquid assets).

01/01/2007

BIPRU 8.6.9

A firm must give one Month's prior notice to the FSA before starting to use or stopping using the method in GENPRU 2 Annex 5 (Capital resources table for a BIPRU investment firm deducting illiquid assets).

01/01/2007

Treatment of minority interests

BIPRU 8.6.10

(1) This rule sets out how to determine whether minority interests in an undertaking in a UK consolidation group or non-EEA sub-group may be included in tier one capital, tier two capital or tier three capital for the purpose of calculating consolidated capital resources (each referred to as a "tier" of capital in this rule).
(2) A firm must identify the item of capital of the undertaking in question that gives rise to that minority interest.
(3) A firm must include the minority interest in the tier of capital in which that undertaking would have to include the capital referred to in (2) if it were a firm calculating its capital resources on a solo basis under whichever method applies to the group under BIPRU 8.6.6 R to BIPRU 8.6.8 R.
(4) This rule does not apply to a minority interest created by consolidated indirectly issued capital.

01/01/2007

Indirectly issued capital and group capital resources

BIPRU 8.6.11

For the purposes of this chapter, GENPRU 2.2.123 R to GENPRU 2.2.137 R (Indirectly issued tier one capital (BIPRU firm only)) do not apply. A firm may only include consolidated indirectly issued capital in consolidated capital resources (whether as a minority interest or otherwise) in accordance with this section.

01/01/2007

BIPRU 8.6.12

Consolidated indirectly issued capital means any capital instrument issued by a member of the UK consolidation group or non-EEA sub-group where:

(1) some or all of the following conditions are satisfied:

(a) that capital is issued to an SPV; or
(b) that capital is issued by an SPV; or
(c) the subscription for the capital issued by the member of the group in question is funded directly or indirectly by an SPV; and

(2) any of the SPVs referred to in (1) is a member of the UK consolidation group or non-EEA sub-group or a subsidiary undertaking of any member of the UK consolidation group or non-EEA sub-group.

01/01/2007

BIPRU 8.6.13

A firm may only include consolidated indirectly issued capital in the consolidated capital resources of its UK consolidation group or non-EEA sub-group if:

(1) it is issued by an SPV that is a member of the UK consolidation group or non-EEA sub-group to persons who are not members of the UK consolidation group or non-EEA sub-group; and
(2) the conditions in BIPRU 8.6.16 R to BIPRU 8.6.18 R are satisfied.

01/01/2007

BIPRU 8.6.14

Consolidated indirectly issued capital that is eligible for inclusion in the consolidated capital resources of a UK consolidation group or non-EEA sub-group may only be included as a minority interest created by the capital instrument issued by the SPV referred to in BIPRU 8.6.13 R. If it is eligible, it is innovative tier one capital.

01/01/2007

BIPRU 8.6.15

For the purposes of this section, an undertaking is an SPV if the main activity of the SPV is to raise funds for undertakings in:

(1) (in the case of a UK consolidation group) that UK consolidation group; or
(2) (in the case of a non-EEA sub-group) that non-EEA sub-group or any UK consolidation group of which it forms part.

01/01/2007

BIPRU 8.6.16

The SPV referred to in BIPRU 8.6.13 R must satisfy the conditions in GENPRU 2.2.127 R (Conditions that an SPV has to satisfy if indirectly issued capital is to be included in capital resources on a solo basis) as modified by the following:

(1) references in GENPRU 2.2.127R (1) to being controlled by the firm are to being controlled by a member of the firm's UK consolidation group or non-EEA sub-group as the case may be; and
(2) references to the firm's group are to the firm's UK consolidation group or non-EEA sub-group as the case may be.

01/01/2007

BIPRU 8.6.17

The capital issued by the SPV referred to in BIPRU 8.6.13 R must satisfy the conditions in GENPRU 2.2.129 R (Conditions that capital issued by an SPV has to satisfy if indirectly issued capital is to be included in capital resources on a solo basis) as modified by the following:

(1) references to the firm's group are to the firm's UK consolidation group or non-EEA sub-group as the case may be;
(2) the substitution obligation in GENPRU 2.2.129R (2) need not be the firm's but may apply to any member of the UK consolidation group or non-EEA sub-group as the case may be; and
(3) that substitution obligation applies if the consolidated capital resources of the UK consolidation group or non-EEA sub-group, as the case may be, fall, or are likely to fall, below its consolidated capital resources requirement.

01/01/2007

BIPRU 8.6.18

The SPV referred to in BIPRU 8.6.13 R must invest the funds raised from the issue of capital by the SPV by subscribing for capital resources issued by an undertaking that is a member of the UK consolidation group or non-EEA sub-group. Those capital resources must satisfy the following conditions:

(1) those capital resources must at least comply with the requirements for lower tier two capital; and
(2) the first call date or fixed maturity date (if any) of those capital resources must not arise before the first call date on the instrument issued by the SPV.

01/01/2007

BIPRU 8.6.19

In relation to the obligation to substitute described in BIPRU 8.6.17R (2), a firm must take all reasonable steps to ensure that the undertaking in question has at all times sufficient authorised and unissued tier one instruments other than innovative tier one instruments (and authority to issue them) to enable it to discharge the obligation to substitute.

01/01/2007

BIPRU 8.6.20

A firm must comply with the requirements set out in GENPRU 2.2.135R (Notifying the FSA of unusual transactions in relation to indirectly issued capital) and GENPRU 2.2.137 R (Contents of marketing documents in relation to indirectly issued capital) in relation to consolidated indirectly issued capital included in consolidated capital resources.

01/01/2007

BIPRU 8.7

Consolidated capital resources requirements

01/01/2007

General approach

BIPRU 8.7.1

The calculation of the consolidated capital resources requirement of a firm's UK consolidation group or non-EEA sub-group involves taking the individual components that make up the capital resources requirement on a solo basis and applying them on a consolidated basis. Those components are the capital charge for credit risk (the credit risk capital requirement), the capital charge for market risk (the market risk capital requirement), the capital charge for operational risk (the operational risk capital requirement) and the fixed overheads requirement.

01/01/2007

BIPRU 8.7.2

Each of the capital charges in BIPRU 8.7.1 G, as applied on a consolidated basis, is called a consolidated requirement component. The name of each consolidated requirement component reflects the solo capital charge on which it is based. Solo capital charges are called risk capital requirements. Thus for example the consolidated requirement component for market risk is called the consolidated market risk requirement. The calculation of the consolidated market risk requirement is based on the calculation of the capital charge for market risk that applies on a solo basis (the market risk capital requirement). So the risk capital requirement applicable to the consolidated market risk requirement is the market risk capital requirement.

01/01/2007

BIPRU 8.7.3

The first step is for a firm to identify what sort of group it belongs to as the calculation of the consolidated capital resources requirement differs between different types of groups. This is set out in BIPRU 8 Annex 5 (Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group). BIPRU 8 Annex 5 shows, for each type of group:

(1) which of the consolidated requirement components apply and which do not; and
(2) how to add up the different consolidated requirement components to reach the overall consolidated capital resources requirement.

01/01/2007

BIPRU 8.7.4

BIPRU 8 Annex 5 (Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group) categorises groups by reference to what kind of undertakings they contain (credit institutions, limited licence firms, limited activity firms or CAD full scope firms).

01/01/2007

BIPRU 8.7.5

In general a firm should calculate each consolidated requirement component using the FSA's rules, even in the case of group members who are subject to the capital requirements of an overseas regulator. However this section sets out certain circumstances in which a firm may use the capital requirements of an overseas regulator.

01/01/2007

BIPRU 8.7.6

BIPRU 8.8 (Advanced prudential calculation approaches) says that a firm should not apply an advanced prudential calculation approach on a consolidated basis unless the advanced prudential calculation approach permission allowing the firm to use the advanced prudential calculation approach specifically allows it to be used on consolidated basis.

01/01/2007

BIPRU 8.7.7

BIPRU 8.8 (Advanced prudential calculation approaches) has further details about how capital requirements are calculated on a consolidated basis if a firm uses an advanced prudential calculation approach.

01/01/2007

BIPRU 8.7.8

A firm has a choice about how it should apply a risk capital requirement to the group. It may do this by treating the whole of the group as a single entity and applying the risk capital requirement to the group (a line by line approach), calculating a separate risk capital requirement for each group member (an aggregation approach) or a mixture of the two.

01/01/2007

BIPRU 8.7.9

A firm may make the choice between an aggregation and a line by line approach differently for each consolidated requirement component. So for example a firm may decide to calculate the consolidated market risk requirement on an aggregation basis and the consolidated fixed overheads requirement on a line by line basis.

01/01/2007

Method of calculation to be used

BIPRU 8.7.10

A firm must calculate the consolidated capital resources requirement of its UK consolidation group or non-EEA sub-group in accordance with the method identified by the decision tree in BIPRU 8 Annex 5 (Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group).

01/01/2007

Calculation of the consolidated requirement components

BIPRU 8.7.11

A firm must calculate a consolidated requirement component by applying the risk capital requirement applicable to that consolidated requirement component to the UK consolidation group or non-EEA sub-group in accordance with BIPRU 8.7.13 R. Except where BIPRU 8.7.34 R to BIPRU 8.7.38 R allow the requirements of another regulator to be used, the risk capital requirement must be calculated in accordance with the FSA's rules. The risk capital requirement applicable to a consolidated requirement component is the one specified in the second column of the table in BIPRU 8.7.12 R.

01/01/2007

BIPRU 8.7.12

Table: Capital charges relating to consolidated requirement components
This table belongs to BIPRU 8.7.11 R

Consolidated requirement component

Rules on which the consolidated requirement component are based (the applicable risk capital requirement)

Consolidated credit risk requirement

Credit risk capital requirement

Consolidated fixed overheads requirement

Fixed overheads requirement

Consolidated market risk requirement

Market risk capital requirement

Consolidated operational risk requirement

Operational risk capital requirement

01/01/2007

Choice of consolidation method

BIPRU 8.7.13

(1) A firm must calculate a consolidated requirement component by using one of the methods in this rule.
(2) Under the first method a firm must:

(a) apply the risk capital requirement set out in BIPRU 8.7.12 R to each undertaking in the UK consolidation group or non-EEA sub-group; and
(b) add the risk capital requirements together.

(3) Under the second method a firm must:

(a) treat the whole UK consolidation group or non-EEA sub-group as a single undertaking; and
(b) apply the risk capital requirement set out in BIPRU 8.7.12 R to the group on an accounting consolidation basis.

(4) The third method is a mixture of methods one and two. Under the third method a firm must:

(a) treat one or more parts of the UK consolidation group or non-EEA sub-group as separate single undertakings;
(b) apply the risk capital requirement set out in BIPRU 8.7.12 R to each such part of the group on an accounting consolidation basis;
(c) apply the risk capital requirement set out in BIPRU 8.7.12 R to each of the remaining undertakings in the UK consolidation group or non-EEA sub-group (if any); and
(d) add the risk capital requirements together.

(5) A firm may use different methods for different consolidated requirement components.

01/01/2007

BIPRU 8.7.14

An accounting consolidation basis means applying the rules in BIPRU 8.7.12 R on a line by line consolidation basis rather than an aggregation basis.

01/01/2007

BIPRU 8.7.15

The provisions of this section on credit risk and market risk restrict the choice given by BIPRU 8.7.13 R in certain circumstances.

01/01/2007

Notifying the FSA of the choice of consolidation technique

BIPRU 8.7.16

A firm must notify the FSA which method under BIPRU 8.7.13 R it applies for which consolidated requirement component and to which parts of the UK consolidation group or non-EEA sub-group it is applying an aggregation approach and to which parts it is applying an accounting consolidation approach.

01/01/2007

Special rules for the consolidated credit risk requirement

BIPRU 8.7.17

BIPRU 8.7.18 G to BIPRU 8.7.23 R relate to the calculation of the consolidated credit risk requirement.

01/01/2007

BIPRU 8.7.18

The credit risk capital requirement (on which the consolidated credit risk requirement is based) is split into three capital charges. One relates to credit risk in the non-trading book (the credit risk capital component). One relates to credit risk in the trading book (the counterparty risk capital component). The third is a capital charge for exposures in the trading book that exceed the limits in BIPRU 10.5 (Limits on exposures and large exposures). This is called the concentration risk capital component. BIPRU 8.9 (Consolidated concentration risk requirements) explains how to calculate the part of the consolidated credit risk requirement that corresponds to the concentration risk capital component.

01/01/2007

BIPRU 8.7.19

In particular BIPRU 8.9 (Consolidated concentration risk requirements) says that a firm should calculate the part of the consolidated credit risk requirement that corresponds to the concentration risk capital component on an accounting consolidation basis. This means using method two in BIPRU 8.7.13 R.

01/01/2007

BIPRU 8.7.20

A firm may use a combination of the CCR standardised method, the CCR mark to market method and the CCR internal model method on a permanent basis with respect to the firm's UK consolidation group or non-EEA sub-group for the purposes of calculating the consolidated credit risk requirement. In particular, where the firm is permitted to apply the CCR internal model method on a consolidated basis with respect to its UK consolidation group or non-EEA sub-group, it may combine the use of CCR standardised method and CCR mark to market method on a permanent basis for financial derivative instruments and long settlement transaction not covered by its CCR internal model method permission.

01/01/2007

BIPRU 8.7.21

BIPRU 9.4.1 R (Minimum requirements for recognition of significant credit risk transfer) as applied on a consolidated basis requires the transfer to be to a person outside the UK consolidation group or non-EEA sub-group.

01/01/2007

BIPRU 8.7.22

A firm must not use both the financial collateral simple method and the financial collateral comprehensive method with respect to its UK consolidation group or non-EEA sub-group.

01/01/2007

BIPRU 8.7.23

(1) A firm may only treat an exposure as exempt under BIPRU 3.2.25 R (Zero risk-weighting for intra-group exposures) as applied on a consolidated basis if the member of the UK consolidation group or non-EEA sub-group that has the exposure:

(a) is a BIPRU firm and that exposure is exempt under BIPRU 3.2.25 R as it applies to that BIPRU firm on a solo basis; or
(b) meets the conditions in BIPRU 3.2.25 R (1)(d) (Condition relating to establishment in the UK) and that exposure would be exempt under (a) if that member was a BIPRU firm.

(2) The notification obligation in BIPRU 3.2.35 R applies.

01/01/2007

Special rules for the consolidated market risk requirement

BIPRU 8.7.24

For the purposes of calculating the consolidated market risk requirement of a UK consolidation group or non-EEA sub-group, a firm must apply BIPRU 1.2.3 R (Definition of the trading book) and BIPRU 1.2.17 R (Size thresholds for the purposes of the definition of the trading book) to the whole UK consolidation group or non-EEA sub-group as if the group were a single undertaking.

01/01/2007

BIPRU 8.7.25

A firm may not apply the second method in BIPRU 8.7.13R (3) (accounting consolidation for the whole group) or apply accounting consolidation to parts of its UK consolidation group or non-EEA sub-group under method three as described in BIPRU 8.7.13R (4)(a) for the purposes of the calculation of the consolidated market risk requirement unless the group or sub-group and the undertakings in that group or sub-group satisfy the conditions in this rule. Instead the firm must use the aggregation approach described in BIPRU 8.7.13R (2) (method one) or BIPRU 8.7.13R (4)(c). Those conditions are as follows:

(1) each of the undertakings in that group or sub-group is an institution that is:

(a) a BIPRU firm;
(b) an EEA firm;
(c) a recognised third country credit institution; or
(d) a recognised third country investment firm;

(2) each of the undertakings referred to in (1) that is a BIPRU firm has capital resources that are equal to or in excess of its capital resources requirement and complies with BIPRU 10 (Concentration risk requirements);
(3) each of the undertakings referred to in (1) that is an EEA firm complies with the CRD implementation measures in its EEA State that correspond to the requirements in (2);
(4) each of the undertakings referred to in (1) that is a recognised third country credit institution or recognised third country investment firm complies with laws in the state or territory in which it has its head office that are equivalent to the requirements of the Banking Consolidation Directive or Capital Adequacy Directive relating to capital adequacy and concentration risk;
(5) there is no material legal, regulatory or contractual impediment to the transfer of funds between those undertakings in that group or sub-group;
(6) there is no material legal, regulatory or contractual impediment to mutual financial support between those undertakings in that group or sub-group;
(7) the market risk position of the undertakings are monitored and managed on a co-ordinated basis; and
(8) there is satisfactory allocation of capital within the group or sub-group.

01/01/2007

Special rules for the consolidated operational risk requirement

BIPRU 8.7.26

For the purposes of calculating the consolidated operational risk requirement, a firm must apply BIPRU 6.2.9 R to BIPRU 6.2.12 R (Combination of different methodologies) to the whole UK consolidation group or non-EEA sub-group as if the group were a single undertaking.

01/01/2007

BIPRU 8.7.27

(1) This rule sets out how BIPRU 6.3.2 R (3) (Negative figure arising in calculation of the relevant indicator under the basic indicator approach) applies on a consolidated basis.
(2) If the calculation for any individual undertaking under method one in BIPRU 8.7.13R (2) (application of aggregation approach to the whole group) or method three as described in BIPRU 8.7.13R (4)(c) (mixture of aggregation and accounting consolidation) or for any sub-group created under method three as described in BIPRU 8.7.13R (4)(a) results in a figure of zero or a negative figure, that figure must be excluded.
(3) If a firm is using method two in BIPRU 8.7.13 R (accounting consolidation approach for the whole group), BIPRU 6.3.2 R (3) applies to the UK consolidation group or non-EEA sub-group as if it were a single undertaking.
(4) (3) also applies to a sub-group created under method 3 as described in BIPRU 8.7.13R (4)(a).

01/01/2007

Special rules for calculating specific consolidated requirement components

BIPRU 8.7.28

BIPRU 8.7.21 R to BIPRU 8.7.26 R are generally examples of the application of the general principles in BIPRU 8.2.1 R (Main consolidation rule for UK consolidation groups) and BIPRU 8.3.1 R (Main consolidation rule for non-EEA sub-groups). BIPRU 8.7.20 R and BIPRU 8.7.25 R are exceptions to those principles.

01/01/2007

Elimination of intra-group transactions

BIPRU 8.7.29

In accordance with BIPRU 8.2.1 R and BIPRU 8.3.1 R (The basic consolidation rules for a UK consolidation group or non-EEA sub-group), a firm may exclude that part of the risk capital requirement that arises as a result of:

(1) (in respect of the consolidated credit risk requirement) intra-group balances; or
(2) (in respect of the consolidated operational risk requirement and consolidated fixed overheads requirement) intra-group transactions;

with other undertakings in the UK consolidation group or non-EEA sub-group.

01/01/2007

Other provisions about calculating risk capital requirements

BIPRU 8.7.30

(1) This rule applies when the rules applicable under BIPRU 8.7.12 R apply differently for different types of firms.
(2) Where a firm's UK consolidation group or non-EEA sub-group is a group identified at Stage 1 in BIPRU 8 Annex 5 (Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group), the rules that apply are those that apply to a bank that is a BIPRU firm.
(3) Where a firm's UK consolidation group or non-EEA sub-group is a group identified at Stage 2 in BIPRU 8 Annex 5, the rules that apply are those that apply to a full scope BIPRU investment firm.
(4) Where a firm's UK consolidation group or non-EEA sub-group is a group identified at Stage 3 in BIPRU 8 Annex 5, the rules that apply are those that apply to a BIPRU limited activity firm.
(5) Where a firm's UK consolidation group or non-EEA sub-group is a group identified at Stage 4 in BIPRU 8 Annex 5, the rules that apply are those that apply to a BIPRU limited licence firm.

01/01/2007

BIPRU 8.7.31

If a firm is calculating a risk capital requirement for an undertaking that is not a BIPRU firm it should calculate it as if the undertaking were a BIPRU firm.

01/01/2007

BIPRU 8.7.32

Similarly BIPRU 8.7.30 R may have the effect that the risk capital requirement for a BIPRU firm is calculated differently from the way it is on a solo basis. Thus for example if the risk capital requirement is being calculated for a BIPRU limited licence firm that is a subsidiary undertaking of a bank the risk capital requirement should be calculated using the rules for a bank.

01/01/2007

BIPRU 8.7.33

A firm should not use an advanced prudential calculation approach for calculating a risk capital requirement unless this is permitted as explained in BIPRU 8.8 (Advanced prudential calculation approaches).

01/01/2007

Use of the solo requirements of another EEA competent authority

BIPRU 8.7.34

A firm may calculate the risk capital requirement for an institution in the firm's UK consolidation group or non-EEA sub-group that is an EEA firm in accordance with the CRD implementation measures in the EEA firm's EEA State that correspond to the FSA's rules that would otherwise apply under this section if the institution is subject to those CRD implementation measures.

01/01/2007

Use of the solo requirements of a regulator outside the EEA

BIPRU 8.7.35

(1) This rule applies where:

(a) an institution in a firm's UK consolidation group or non-EEA sub-group is subject to any of the sectoral rules applicable to its financial sector for a state or territory outside the EEA that correspond to the FSA's rules that would otherwise apply under this section;
(b) those sectoral rules are shown in BIPRU 8 Annex 6 (Non-EEA regulators' requirements deemed CRD-equivalent for individual risks) as having been assessed as being equivalent to the FSA rules in relation to the consolidated requirement component in question; and
(c) that institution is incorporated in and has its head office in that state or territory.

(2) If the conditions in this rule are satisfied, a firm may apply the sectoral rules referred to in (1) in order to calculate the risk capital requirement for the institution referred to in (1) provided that:

(a) the firm has no reason to believe that the use of the sectoral rules referred to in (1) would produce a lower figure for the consolidated requirement component than would be produced by calculating the risk capital requirement under the FSA's rules in accordance with this section; or
(b) the firm increases the amount produced under the sectoral rules referred to in (1) and the firm has no reason to believe that the use of such figures would produce a lower figure for the consolidated requirement component than would be produced by calculating the risk capital requirement under the FSA's rules in accordance with this section.

01/01/2007

BIPRU 8.7.36

If a firm wants to include in its consolidated capital resources requirement a solo capital resource requirement for an individual risk calculated under the rules of a non-EEA regulator not assessed as equivalent in BIPRU 8 Annex 6 (Non -EEA regulators' requirements deemed CRD-equivalent for individual risks) it will need to apply for a waiver. A firm applying for such a waiver should demonstrate that the local requirements result in a capital charge that is at least as much as required under the corresponding FSA rules.

01/01/2007

Use of the consolidated requirements of another EEA competent authority

BIPRU 8.7.37

(1) This rule applies if:

(a) a firm is applying an accounting consolidation approach to part of its UK consolidation group or non-EEA sub-group under method three as described in BIPRU 8.7.13R (4)(a); and
(b) the part of the group in (a) constitutes the whole of a group subject to the consolidated capital requirements of a competent authority under the CRD implementation measures relating to consolidation under the Banking Consolidation Directive or the Capital Adequacy Directive.

(2) If the conditions in this rule are satisfied, a firm may apply the consolidated capital requirement in (1)(b) as the risk capital requirement for the group identified in (1)(a) so far as that consolidated capital requirement corresponds to the FSA's rules that would otherwise apply under this section.

01/01/2007

Use of the consolidated requirements of a regulator outside the EEA

BIPRU 8.7.38

(1) This rule applies if:

(a) a firm is applying an accounting consolidation approach to part of its UK consolidation group or non-EEA sub-group under method three as described in BIPRU 8.7.13R (4)(a);
(b) the part of the group in (a) constitutes the whole of a group subject to the consolidated capital requirements of a third country competent authority under the sectoral rules for the banking sector or the investment services sector; and
(c) those sectoral rules are shown in BIPRU 8 Annex 6 (Non-EEA regulators' requirements deemed CRD-equivalent for individual risks) as having been assessed as being equivalent to the FSA's rules in relation to the consolidated requirement component in question.

(2) If the conditions in this rule are satisfied, a firm may apply the consolidated capital requirement in (1)(b) as the risk capital requirement for the group identified in (1)(a) so far as that consolidated capital requirement corresponds to the FSA's rules that would otherwise apply under this section. However a firm may only do this if it also complies with BIPRU 8.7.35R (2).

01/01/2007

Use of an advanced prudential calculation approach under the rules of an overseas regulator

BIPRU 8.7.39

A firm should not use the requirements of an overseas regulator if that would involve the use of an advanced prudential calculation approach unless this is permitted under BIPRU 8.8 (Advanced prudential calculation approaches).

01/01/2007

BIPRU 8.8

Advanced prudential calculation approaches

01/01/2007

General

BIPRU 8.8.1

A firm must not apply any advanced prudential calculation approach for the purposes of this chapter unless it has an advanced prudential calculation approach permission and that advanced prudential calculation approach permission requires the firm to use that advanced prudential calculation approach for those purposes.

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BIPRU 8.8.2

BIPRU 1.3 (Applications for advanced approaches) deals with how to apply for an advanced prudential calculation approach permission.

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Prohibition on using the rules of an overseas regulator

BIPRU 8.8.3

Even if a firm has an advanced prudential calculation approach permission that allows it to use an advanced prudential calculation approach for the purposes of this chapter, the firm may not use the requirements of another state or territory to the extent they provide for that advanced prudential calculation approach. Therefore a firm may not use BIPRU 8.7.34 R to BIPRU 8.7.38 R (Use of the capital requirements of an overseas regulator) if that would involve using an advanced prudential calculation approach.

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Special provisions relating to the internal ratings based approach

BIPRU 8.8.4

The conditions in BIPRU 4.2.26 R (Combined use of methodologies under the IRB approach) apply to a firm's UK consolidation group or non-EEA sub-group as if that group were a single undertaking.

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Special provisions relating to the advanced measurement approach

BIPRU 8.8.5

BIPRU 6.5.27 R (6) (Insurance should be provided by a third party entity for the purposes of the advanced measurement approach) is amended to provide that the insurance must be provided by an undertaking that is not in the same group as the firm or other members of the UK consolidation group or non-EEA sub-group. In the case of insurance through captives and affiliates, the exposure must be laid off to an independent undertaking that is not in the same group as the firm or other members of the UK consolidation group or non-EEA sub-group, for example through reinsurance that meets the eligibility criteria.

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BIPRU 8.8.6

In the case of insurance through captives and affiliates, the exposure should be laid off outside the firm's group to an independent third party.

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BIPRU 8.8.7

BIPRU 8.7.26 R deals with the combination of the advanced measurement approach with other approaches to operational risk on a group level.

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Special provisions relating to the CCR internal model method

BIPRU 8.8.8

BIPRU 8.7.17 R deals with the combination of the CCR internal model method with other approaches to calculating exposure values on a group level.

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Corporate governance arrangement for the IRB approach and the AMA

BIPRU 8.8.9

The governance arrangements that apply to the governing body, the senior management and any designated committee of a firm in relation to the IRB approach or the AMA also apply to the body or persons with equivalent powers with respect to the UK consolidation group or non-EEA sub-group. Where the parent undertaking and its subsidiary undertakings use rating systems on a unified basis, the approval and reporting process described in BIPRU 4.3.12 G (Approval and reporting arrangements for the IRB approach where rating systems are used on a unified group basis) and BIPRU 6.5.32 G (Approval and reporting arrangements for the AMA where rating systems are used on a unified group basis) apply for the purpose of this paragraph too.

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BIPRU 8.9

Consolidated concentration risk requirements

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Main rule

BIPRU 8.9.1

BIPRU 10 (Concentration risk requirements) applies to a firm's UK consolidation group or non-EEA sub-group as if it were a single undertaking, subject to the rest of this section.

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Definition of consolidated capital resources for concentration risk purposes

BIPRU 8.9.2

BIPRU 8.6 (Consolidated capital resources) applies for the purpose of this section subject to the adjustments required by BIPRU 8.9.1 R. In particular BIPRU 10.5.2 R to BIPRU 10.5.5 R (Definition of capital resources for concentration risk purposes) apply on a consolidated basis.

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Calculation of the concentration risk capital component

BIPRU 8.9.3

A firm must calculate the consolidated credit risk requirement so far as it relates to the concentration risk capital component under BIPRU 8.9.1 R. In particular a firm must not use the capital requirements of a regulator other than the FSA so far as they correspond to the concentration risk capital component.

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Treasury Concession

BIPRU 8.9.4

A firm may only treat an exposure as exempt under BIPRU 10.7.1 R (Treasury Concession) as applied on a consolidated basis if the exposure is of a member of the UK consolidation group or non-EEA sub-group that is a BIPRU firm or that has its head office in the UK and that exposure is or (if that rule applied to the undertaking in question) would be exempt under BIPRU 10.7.1 R on a solo basis. The following adjustments apply:

(1) the exposure must be to a consolidation concentration risk group counterparty; and
(2) the limit in BIPRU 10.7.2 R (Exemption limited to 50% of a firm's capital resources) is calculated on a consolidated basis.

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Intra-group securities financing transactions

BIPRU 8.9.5

A firm may only treat an exposure as exempt under BIPRU 10.7.4 R (Intra-group securities financing transactions) as applied on a consolidated basis if the exposure is or (if that rule applied to the undertaking in question) would be exempt under BIPRU 10.7.4 R on a solo basis. BIPRU 10.7.6 R (Abuse of the exemption) continues to apply. The exemption is not available if the firm uses the CCR internal model method for securities financing transactions for the purpose of this chapter.

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UK integrated groups and wider integrated groups

BIPRU 8.9.6

In many cases there is no need for the UK integrated groups and wider integrated groups regime in BIPRU 10.8 and BIPRU 10.9 to apply on a consolidated basis under this chapter as intra-group exposures within a UK consolidation group will be eliminated on consolidation. However it may be applicable to some group structures. For example a UK consolidation group may be part of a wider EEA or third country group. If the group has two or more UK consolidation groups in the United Kingdom because there is no common parent undertaking in the United Kingdom the regime may enable exposures between the two UK consolidation groups to be exempted. Likewise the regime may allow a firm to exempt exposures between its UK group and the wider worldwide group of which it forms part.

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BIPRU 8.9.7

BIPRU 10.8 (Concentration risk requirements: UK integrated groups) and BIPRU 10.9 (Concentration risk requirements: Wider integrated groups) do not apply on a consolidated basis under this chapter. BIPRU 8.9.8 R to BIPRU 8.9.27 R apply instead.

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UK integrated groups: Introduction

BIPRU 8.9.8

(1) BIPRU 8.9.9 R to BIPRU 8.9.15 R apply with respect to a firm's UK consolidation group or non-EEA sub-group (a "group") if:

(a) the group is part of a consolidation UK integrated group; and
(b) the firm gives notice in accordance with BIPRU 8.9.27 R that it will apply those rules with respect to that group.

(2) If (1) applies with respect to a firm's UK consolidation group or non-EEA sub-group, the firm must apply BIPRU 8.9.9 R to BIPRU 8.9.15 R to all exposures to all consolidation concentration risk group counterparties and not just some of them.

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UK integrated groups: Definition of consolidation UK integrated group

BIPRU 8.9.9

An undertaking which is not itself a member of a firm's UK consolidation group or non-EEA sub-group (a "group") is a member of that group's consolidation UK integrated group if it satisfies the following conditions:

(1) it is a consolidation concentration risk group counterparty;
(2) it is an institution, financial holding company, financial institution, asset management company or ancillary services undertaking;
(3) it is established in the United Kingdom and either it is incorporated in the United Kingdom or (if that undertaking is of a type that falls within the scope of that Regulation) the centre of its main interests is situated within the United Kingdom within the meaning of the Council Regulation of 29 May 2000 on insolvency proceedings (Regulation 1346/2000/EC);
(4) the group and that undertaking are subject to the same risk evaluation, measurement and control procedures; and
(5) there is no current or foreseen material practical or legal impediment to the prompt transfer of capital resources or repayment of liabilities from the undertaking to any member of the group that has an exposure to that undertaking.

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BIPRU 8.9.10

Firms are referred to the guidance in BIPRU 3.2.30 G and BIPRU 3.2.31 G (guidance relating to 0% risk weights for intra-group exposures under the standardised approach) on the prompt transfer of capital resources and repayment of liabilities.

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UK integrated groups: Definition of consolidation concentration risk group counterparty

BIPRU 8.9.11

A consolidation concentration risk group counterparty means, in relation to a firm's UK consolidation group or non-EEA sub-group (a "relevant group"), an undertaking that satisfies the following conditions:

(1) it is not a member of the relevant group;
(2) it is:

(a) a parent undertaking of a member of the relevant group;
(b) a subsidiary undertaking of a member of the relevant group; or
(c) a subsidiary undertaking of a parent undertaking falling into (a); and

(3) the undertaking and each member of the relevant group are:

(a) (if the relevant group is a non-EEA sub-group) included within the scope of consolidation on a full basis with respect to the same UK consolidation group ;
(b) included within the scope of consolidation on a full basis with respect to the same group by a competent authority of an EEA State other than the UK under the CRD implementation measures about consolidated supervision in that EEA State; or
(c) (provided that this consolidation is carried out to standards equivalent to those in (a) and (b)) included within the scope of consolidation on a full basis with respect to the same group by a third country competent authority under prudential rules for the banking sector or investment services sector of or administered by that third country competent authority.

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BIPRU 8.9.12

For the purposes of BIPRU 8.9.11R (3)(c), a group is subject to consolidation to equivalent standards only if a member of that group has been notified in writing by the FSA or a competent authority of another EEA State pursuant to Article 143 of the Banking Consolidation Directive that that group is subject to equivalent supervision.

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BIPRU 8.9.13

An undertaking is included within the scope of consolidation of a group on a full basis if it is at the head of the group or if its assets and liabilities are taken into account in full as referred to in BIPRU 8.5.4 R (Basis of inclusion of undertakings in consolidation).

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UK integrated groups: Revised concentration risk limits

BIPRU 8.9.14

A firm must treat exposures of members of the firm's UK consolidation group or non-EEA sub-group (the "relevant group") to consolidation concentration risk group counterpartsies as follows:

(1) exposures of a member of the relevant group that has its head office in the UK to a member of the relevant group's consolidation UK integrated group are exempt; and
(2) all exposures falling into this rule not in (1) must be treated in accordance with BIPRU 8.9.15 R.

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BIPRU 8.9.15

A firm must treat exposures falling into BIPRU 8.9.14R (2) as follows:

(1) the firm must apply the rules set out in BIPRU 10.8.7 R (List of concentration risk rules that apply to UK integrated groups) on a consolidated basis under BIPRU 8.9.1 R with respect to its UK consolidation group or non-EEA sub-group;
(2) the other limits in BIPRU 10.5 (Concentration risk requirements: Limits on exposures and large exposures) do not apply, subject to BIPRU 8.9.26 R; and
(3) all those exposures must be treated as being to a single undertaking.

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Wider integrated groups: Introduction

BIPRU 8.9.16

BIPRU 8.9.17 R to BIPRU 8.9.24 R apply with respect to a firm's UK consolidation group or non-EEA sub-group (a "group") if:

(1) the firm has a wider integrated group permission that applies on a consolidated basis with respect to that group; and
(2) the group is part of a consolidation UK integrated group and of a consolidation wider integrated group.

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BIPRU 8.9.17

If BIPRU 8.9.16 R applies with respect to a firm's UK consolidation group or non-EEA sub-group, the firm must apply BIPRU 8.9.18 R to BIPRU 8.9.24 R to all to exposures to all consolidation concentration risk group counterparties and not just some of them.

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BIPRU 8.9.18

If BIPRU 8.9.16 R applies, BIPRU 8.9.8 R to BIPRU 8.9.12 R do not apply.

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Wider integrated groups: Definition of wider integrated group

BIPRU 8.9.19

An undertaking that is not itself a member of a firm's UK consolidation group or non-EEA sub-group (a "relevant group") is a member of the relevant group's consolidation wider integrated group if it satisfies all the conditions for membership of the consolidation UK integrated group except BIPRU 8.9.9R (3).

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Wider integrated groups: Revised concentration risk limits

BIPRU 8.9.20

A firm must treat exposures of members of the firm's UK consolidation group or non-EEA sub-group (the "relevant group") to consolidation concentration risk group counterparties as follows:

(1) exposures of a member of the relevant group with its head office in the UK to a member of the relevant group's consolidation UK integrated group are exempt; and
(2) all exposures falling into this rule not in (1) must be treated in accordance with BIPRU 8.9.21 R.

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BIPRU 8.9.21

A firm must treat exposures falling into BIPRU 8.9.20R (2) as follows:

(1) the firm must apply the rules set out in BIPRU 10.9.9 R (List of concentration risk rules that apply to wider integrated group) on a consolidated basis under BIPRU 8.9.1 R with respect to its UK consolidation group or non-EEA sub-group;
(2) the other limits in BIPRU 10.5 (Concentration risk requirements: Limits on exposures and large exposures) do not apply, subject to BIPRU 8.9.26 R;
(3) the firm must treat all exposures in a single diverse block as exposures to a single undertaking; and
(4) the firm must treat all exposures in the residual block as exposures to a single undertaking.

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Wider integrated groups: Definition of diverse block

BIPRU 8.9.22

Exposures are treated as being in a single diverse block if:

(1) they are eligible to be included in a diverse block; and
(2) they are to undertakings that are designated by the wider integrated group permission as being associated with the same diverse block.

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BIPRU 8.9.23

An exposure is only eligible for inclusion in a diverse block if one of the following conditions is satisfied:

(1) it is an exposure of a member of the firm's UK consolidation group or non-EEA sub-group (the "group") with its head office in the UK to a member of the group's consolidation wider integrated group; or
(2) it is an exposure of a member of the group with its head office outside the UK to:

(a) a member of the consolidation UK integrated group; or
(b) a member of the consolidation wider integrated group.

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Wider integrated groups: Definition of residual block

BIPRU 8.9.24

The residual block consists of all exposures to group concentration risk group counterparties falling into BIPRU 8.9.20R (2) not included in a diverse block.

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Capital base for a UK integrated groups or wider integrated group

BIPRU 8.9.25

The capital base against which exposure limits are tested under the consolidation UK integrated group or consolidation wider integrated group regimes under this section remains that of the firm's UK consolidation group or non-EEA sub-group. It is not extended to cover the consolidation UK integrated group. This is in contrast with the integrated groups regime on a solo basis, where the capital base is extended from the firm to cover the firm's UK integrated group.

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Trading book excesses for UK integrated groups and wider integrated groups

BIPRU 8.9.26

BIPRU 10.10 (Concentration risk requirements: Trading book excess) (as applied by BIPRU 8.9.1 R) applies to a firm applying the treatments set out BIPRU 8.9.8 R to BIPRU 8.9.24 R.

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Notification procedures for UK integrated groups and wider integrated groups

BIPRU 8.9.27

BIPRU 10.11 (Concentration risk requirements: Notification procedures) (as applied by BIPRU 8.9.1 R) applies to a firm applying the treatments set out in BIPRU 8.9.8 R to BIPRU 8.9.24 R.

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BIPRU 8 Annex 1

Decision tree identifying a UK consolidation group

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BIPRU 8 Annex 2

Examples of how to identify a UK consolidation group

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BIPRU 8 Annex 3

Examples of how to identify a non-EEA sub-group

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BIPRU 8 Annex 4

Text of Articles 125 and 126 of the Banking Consolidation Directive

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Article 125

Where a parent undertaking is a parent credit institution in a Member State or an EU parent credit institution, supervision on a consolidated basis shall be exercised by the competent authorities that authorised it under Article 6.

Where the parent of a credit institution is a parent financial holding company in a Member State or an EU parent financial holding company, supervision on a consolidated basis shall be exercised by the competent authorities that authorised that credit institution under Article 6.

Article 126

Where credit institutions authorised in two or more Member States have as their parent the same parent financial holding company in a Member State or the same EU parent financial holding company supervision on a consolidated basis shall be exercised by the competent authorities of the credit institution authorised in the Member State in which the financial holding company was set up.

Where the parents of credit institutions authorised in two or more Member States comprise more than one financial holding company with head offices in different Member States and there is a credit institution in each of these States, supervision on a consolidated basis shall be exercised by the competent authority of the credit institution with the largest balance sheet total.

Where more than one credit institution authorised in the Community has as its parent the same financial holding company and none of these credit institutions has been authorised in the Member State in which the financial holding company was set up, supervision on a consolidated basis shall be exercised by the competent authority that authorised the credit institution with the largest balance sheet total, which shall be considered, for the purposes of this Directive, as the credit institution controlled by an EU parent financial holding company.

In particular cases, the competent authorities may by common agreement waive the criteria referred to in paragraphs 1 and 2 if their application would be inappropriate, taking into account the credit institutions and the relative importance of their activities in different countries, and appoint a different competent authority to exercise supervision on a consolidated basis. In these cases, before taking their decision, the competent authorities shall give the EU parent credit institution, or EU parent financial holding company, or credit institution with the largest balance sheet total, as appropriate, an opportunity to state its opinion on that decision.

[Omitted]

Note

The Capital Adequacy Directive says that generally references in Articles 125 and 126 of the Banking Consolidation Directive to credit institution should be read as including ones to CAD investment firms. Also, the Banking Consolidation Directive and the Capital Adequacy Directive apply to the EEA. Therefore for the purposes of BIPRU 8 Articles 125 and 126 of the Banking Consolidation Directive should be read with the following adjustments:

(1)

a reference to a credit institution should be read as being one to a credit institution or CAD investment firm;

(2)

a reference to a parent credit institution in a Member State should be read as being one to a parent institution in a Member State;

(3)

a reference to a EU parent credit institution should be read as being one to an EEA parent institution;

(4)

a reference to a EU parent financial holding company should be read as being one to an EEA parent financial holding company;

(5)

a reference to a Member State should be read as being one to an EEA State;

(6)

a reference to a credit institution authorised in the Community should be read as being to a credit institution or CAD investment firm authorised in an EEA State.

Parent financial holding company in a Member State and financial holding company have the same meaning as they do in the Glossary.

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BIPRU 8 Annex 5

Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group.

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BIPRU 8 Annex 6

Non-EEA regulators' requirements deemed CRD-equivalent for individual risks

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Part 1 (Non-EEA banking regulators' requirements deemed CRD-equivalent for individual risks)

Regime regulators

Market risk

Credit
risk

Operational Risk

USA
Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve System
^* a US banking subsidiary will be deemed equivalent for credit risk if:

• it is categorised as well capitalised: and•it scales up its US Basel 1 credit risk requirement by 25%

√
√

X^*
X^*

X
X

Australia
Australian Prudential Regulation Authority [APRA]

√

Canada
Office of the Superintendent of Financial Institutions [OSFI]

√

Switzerland
Swiss Federal Banking Commission [EBK]

√

√ See note 2

√

Japan
Financial Services Agency, Japan [JFSA]

√

South Africa
South African Reserve Bank [SARB]

√

Hong Kong
Hong Kong Monetary Authority [HKMA]

√

Singapore
Monetary Authority of Singapore [MAS]

√

India
Reserve Bank of India [RBI]

√

Korea
Financial Supervisory Service [FSS]

√

Jersey

√

Guernsey

√

Isle of Man

√

Note 1: A √ denotes that the requirements have been assessed as equivalent to EEA standards.
A X denotes that the requirements have been assessed as not being equivalent to EEA standards.

Note 2: √ International standardised approach only. The treatment of the Lombard loans is not equivalent and they must be treated under the FSA's rules.

Part 2 (Non-EEA investment firm regulators' requirements deemed CRD-equivalent for individual risks)

Regime regulators

Market risk

Credit risk

Operational Risk

Australia
Sydney Futures Exchange
Australian Stock Exchange

√
√

X
X

Canada
Ontario Securities Commission
Quebec Securities Commission
British Columbia Securities Commission
Alberta Securities Commission
Investment dealers Association of Canada

√
√
√
√
√

X
X
X
X
X

Hong Kong
Hong Kong Monetary Authority [HKMA]
Hong Kong Securities and Futures Commission

√
√

X
X

Japan
Financial Services Agency, Japan [JFSA]

√

Singapore
Monetary Authority of Singapore [MAS]
Stock Exchange of Singapore

√
√

X
X

South Africa
South African Futures Exchange
Johannesburg Stock Exchange
Bond Exchange of South Africa

√
√
√

X
X
X

Switzerland
Swiss Federal Banking Commission [EBK]

√

√ Note 2

√

USA
Securities & Exchange Commission (SEC): Net Capital rule only
Commodities and Futures Trading Commission

√ Note 3
√

√
X

X
X

Note 1: A √ denotes that the requirements have been assessed as equivalent to EEA standards.
A X denotes that the requirements have been assessed as not being equivalent to EEA standards.

Note 2: √ International standardised approach only. The treatment of Lombard loans is not equivalent and they must be treated under the FSA's rules.

Note 3: √ Where entities are subject to a local regulatory capital requirement.

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