Transitional Provisions and Schedules

Part

BIPRU Prudential sourcebook for Banks, Building Societies and Investment Firms

Chapter

Transitional Provisions and Schedules

Printed on: 21/05/2024

Rulebook at: 01/04/2013

Transitional Provisions and Schedules

BIPRU TP 1

Applicable chapter of IPRU and other general provisions

TP 1

Applicable chapter of IPRU and other general provisions

Application

1.1

BIPRU TP 1 applies to:

(1)

a BIPRU firm; and

(2)

any firm to which BIPRU 8 (Group risk - consolidation) applies.

Version of IPRU to be used

1.2

Any reference in BIPRU TP to IPRU is to the version in force on 31 December 2006.

Categorisation of BIPRU investment firms

1.3

For the purposes of BIPRU TP the definitions of securities and futures firm, investment management firm and personal investment firm are amended as follows:

(1)

if a firm fell into one of those categories on 31 December 2006 it remains in that category unless changed under (2);

(2)

if a firm has got a permission that includes a requirement that it comply with the provisions of BIPRU TP applicable to one of those categories, that firm falls into that category; and

(3)

a BIPRU investment firm that is not an investment management firm, UCITS investment firm or a personal investment firm is a securities and futures firm.

Applicable part of IPRU on a solo basis

1.4

(1)

This rule identifies which part of IPRU applies where BIPRU TP applies IPRU to a firm on a solo basis.

(2)

IPRU(BANK) applies to a bank.

(3)

IPRU(BSOC) applies to a building society.

(4)

IPRU(INV) applies to a BIPRU investment firm as follows:

(a)

Chapter 5 applies to an investment management firm;

(b)

Chapter 7 applies to a UCITS investment firm;

(c)

Chapter 10 applies to a securities and futures firm; and

(d)

Chapter 13 applies to a personal investment firm.

General provisions about consolidation

1.5

Each provision of BIPRU TP that applies on a solo basis also applies for the purposes of BIPRU 8 (Group risk - consolidation). This is subject to the provisions of BIPRU TP concerned.

1.6

Many sections of BIPRU TP deal specifically with when and how they apply on a consolidated basis. However BIPRU TP will still apply for consolidation purposes even where this is not the case. BIPRU TP 1.5R does not apply to BIPRU TP 2.1 (Solo consolidation) as solo consolidation is a concept that only applies to solo requirements.

Classification of groups for certain consolidation rules

1.7

(1)

This rule sets out how to classify a UK consolidation group or non-EEA sub-group ("group") to which consolidated requirements are applied under certain parts of BIPRU TP.

(2)

If the answer to the question at stage 1 of the decision tree in BIPRU 8 Annex 5R (Decision tree for identifying the consolidated capital resources requirement of a UK consolidation group or a non-EEA sub-group) with respect to the group is Yes and there is a building society in the group, the group is referred to in BIPRU TP as a building society group.

(3)

If a non-EEA sub-group is part of a UK consolidation group that is a building society group then the non-EEA sub-group is also a building society group. However a firm may use (2) for the purposes of calculating the consolidated capital resources of the non-EEA sub-group where capital resources are calculated under IPRU.

(4)

If the answer to the question at stage 1 of the decision tree in BIPRU 8 Annex 2R with respect to the group is Yes and the group is not a building society group, the group is referred to in BIPRU TP as a banking group.

(5)

In any other case the group is referred to in BIPRU TP as an investment services group.

01/04/2013

BIPRU TP 2

Capital floors for a firm using the IRB or AMA approaches

Application

2.1

Subject to BIPRU TP 2.2R, this section applies to a BIPRU firm that applies the IRB approach or the advanced measurement approach.

2.2

BIPRU TP 2.30R to BIPRU TP 2.34G apply to any firm to which BIPRU 8 (Group risk - consolidation) applies and which applies the IRB approach or the advanced measurement approach on a consolidated basis.

Purpose

2.3

This section in part implements Articles 152(1) - (7) of the Banking Consolidation Directive and Article 43 of the Capital Adequacy Directive.

2.4

The purpose of this section is to limit the amount of capital reduction arising from the implementation of the Banking Consolidation Directive and the Capital Adequacy Directive compared with the requirements arising from the previous versions of those Directives. As such it is effectively a comparison of the capital resource requirements arising from BIPRU with those arising from the appropriate IPRU sourcebook that would have applied as at 31 December 2006. However the effect of changes to the market risk requirements is removed by requiring BIPRU 7 (Market risk) to be used for both sides of the comparison.

How to apply the capital floors

2.5

This section does not require a firm to continue to have capital resources equal to a fixed percentage of the capital requirement that applied to it as at 31 December 2006. Instead a firm should apply the requirements in this section to its business as it changes over time. So for example if a firm is calculating its capital requirements as at 31 December 2008 it will have two calculations. The first is carried out under BIPRU and GENPRU. The second is carried out under IPRU and this section. Both sets of requirements are applied to the firm's figures as at 31 December 2008.

2.6

The Directive provisions on which this section is based are written as a floor on a firm's capital resources requirement. This section however is written as a second capital resources requirement that sits beside the general capital resources requirements of BIPRU and GENPRU. The reason for this is that a firm should meet the general capital resources requirements of BIPRU and GENPRU using capital resources calculated under GENPRU 2.2 (Capital resources). On the other hand a firm should meet the capital resources requirements of this section (which are based on IPRU) using the relevant IPRU definition. In practice the two sets of definitions of capital resources are similar apart from the provisions about expected loss. Therefore as shown by the example in BIPRU TP 2.12G and BIPRU TP 2.13G, in practice a firm is subject to a single capital resources requirement.

2.7

BIPRU TP 9 explains how the general principle in this section is applied to a personal investment firm.

Capital floors: solo

2.8

A firm calculating risk weighted exposure amounts in accordance with the IRB approach must during the following twelve-month periods after 31 December 2006 provide capital resources that equal or exceed the following amounts:

(1)

for the first twelve-month period, 95%;

(2)

for the second twelve-month period, 90%; and

(3)

for the third and each subsequent twelve-month period, 80%;

of the solo capital resources requirement that applies to the firm under whichever part of IPRU applies under BIPRU TP 1.4R.

2.9

A firm using the advanced measurement approach must, during each of the second, third and subsequent twelve-month periods after 31 December 2006, provide capital resources which are at all times more than or equal to the amounts indicated in BIPRU TP 2.8R(2) and BIPRU TP 2.8R(3).

Capital resources: solo

2.10

A firm must calculate its capital resources in accordance with whichever part of IPRU applies under BIPRU TP 1.4R.

2.11

Compliance with the requirements of this section must be on the basis of amounts of capital resources fully adjusted to reflect differences in the calculation of capital resources under IPRU and the calculation of capital resources under GENPRU and BIPRU deriving from the separate treatments of expected loss and unexpected loss under the IRB approach.

Waiver from IPRU capital resources requirement

2.11A

Article 152(5d) and (5e) of the Banking Consolidation Directive allows the appropriate regulator to waive the capital floor calculation based on the IPRU capital resources requirement in BIPRU TP 2.8R(3), or BIPRU TP 2.8R(3) as applied in BIPRU TP 2.9R, on a case-by-case basis only if a firm started to use the IRB approach or the advanced measurement approach on or after 1 January 2010. The appropriate regulator will consider an application for such a waiver in the light of the criteria in section 138A of the Act (Modification or waiver of rules).

2.11B

If a firm has a waiver referred to in BIPRU TP 2.11AG, it must provide capital resources that equal or exceed 80% of the capital resources requirement that the firm would be required to provide under the relevant sections of BIPRU applicable to it immediately before it started to use the IRB approach or the advanced measurement approach as those sections were in force on 31 December 2010.

Explanation of the calculation

2.12

The following provides an illustrative example of the application of this section to a bank in a period in which BIPRU TP 2.8R(1) applies (i.e. the 95% requirement). Say that under IPRU(BANK) the firm's capital resources requirement would be £8.00mn and this would be met in part by general/collective provisions of £0.5mn. This establishes the capital resources requirement under this section at 95% times (£8.0mn less £0.5mn), which equals £7.125mn.

2.13

Say that in the absence of this section, the Pillar 1 capital resources requirement of the firm in BIPRU TP 2.12G would be £6.4m, and the sum of value adjustments and provisions are £0.25mn less than expected losses. For the purposes of the expected loss calculation, if the result is negative (i.e. value adjustments and provisions are less than expected losses) that amount is deducted from capital resources (which is equivalent to an increase in the capital resources requirement). If the result is positive it is added to capital resources (which is equivalent to a decrease in the capital resources requirement). In this example the result is negative. As the sum of these two amounts (£6.65mn) is still less than the IPRU capital resources requirement of £7.125mn, the effect of this section is that the firm is subject to the (higher) IPRU requirement. If the sum of the BIPRU requirements had been greater than £7.125mn, then the firm would not have been subject to the capital resources requirement in this section.

Adjustments to the calculation of capital resources

2.14

A firm may treat any capital instrument that complies with the requirements of GENPRU 2.2 (Capital resources) as complying with the corresponding requirements of IPRU.

2.15

An example of BIPRU TP 2.14R is that a firm may treat subordinated debt with a term of five years or over that qualifies as lower tier two capital for the purposes of GENPRU as complying with the corresponding provisions for five year subordinated debt under IPRU.

Market risk

2.16

A firm must substitute the requirements in BIPRU for the calculation of the market risk capital requirement (excluding those provisions to the extent that they would involve using the IRB approach) for the corresponding provisions of IPRU.

2.17

BIPRU TP 4 to BIPRU TP 9 (Pre CRD capital requirements applying on a solo basis during 2007) explain which parts of IPRU correspond to the market risk capital requirement.

CAD 1 model and VaR model

2.18

If a firm has a CAD 1 permission or a VaR model permission it must also use it for the purposes of the capital floor calculations in this section.

2.19

In applying BIPRU TP 2.18R, a firm should not adjust the CAD 1 permission approach or VaR model approach (including the scope of the CAD 1 permission or VaR model permission) so that it is consistent with Directive 93/6 (the Capital Adequacy Directive) as it stood on 31 December 2006.

Individual capital guidance

2.20

The IPRU capital resources requirement does not include any individual capital ratio notified to a bank under Chapter CO of IPRU(BANK) or any similar notification by the appropriate regulator to any other firm.

2.21

Any further capital resource requirements that a firm is required to meet under GENPRU 1.2 (Adequacy of financial resources) (i.e. Pillar 2) should not be taken into account.

How to apply IPRU

2.22

If the part of IPRU that applies to a firm applies different calculations to different types of firm the firm must use the calculations that it would have to use under BIPRU TP 3 (Pre CRD capital requirements applying on a solo basis during 2007).

2.23

If the part of IPRU that applies to a firm gives the firm a choice between methods of calculating capital resources or capital resources requirements it must exercise that choice consistently with the corresponding choices it makes in calculating capital resources or capital resources requirement under GENPRU and BIPRU.

2.24

BIPRU TP 4 to BIPRU TP 9 (Pre CRD capital requirements applying on a solo basis during 2007) explain how concepts in IPRU and GENPRU map onto the ones in IPRU. This will enable a firm to decide which calculations it should use for the purposes of BIPRU TP 2.22R and BIPRU TP 2.23R.

2.25

An example of the effect of BIPRU TP 2.22R and BIPRU TP 2.23R is that a securities and futures firm that calculates its capital resources under GENPRU 2 Annex 4 R (Capital resources table for a BIPRU investment firm deducting material holdings) should calculate its capital resources under IPRU using table 10-62(2)A of chapter 10 of IPRU(INV).

2.26

For the purpose of calculating the part of the IPRU capital resources requirement that corresponds to the concentration risk capital component a firm may identify the trading book exposures on which that requirement is based using BIPRU 10 (Large exposures requirements) except to the extent that BIPRU 10 involves the IRB approach.

2.27

The concentration risk capital component is the capital requirement for a firm that chooses to have trading book exposures that exceed the large exposure limits for the non-trading book. In most cases IPRU has a similar capital requirement. The purpose of BIPRU TP 2.26R is to allow a firm to calculate the amount of the excess trading book exposures for which it calculates the additional capital charge using BIPRU 10 (Large exposures requirements) in order to avoid having to apply the IPRU large exposure requirements for this purpose only.

2.28

The calculations under this section do not take into account the base capital resources requirement or the part of the IPRU solo capital resources requirement that corresponds to the base capital resources requirement.

Solo consolidation

2.29

If a firm has a solo consolidation waiver it also applies for the purpose of this section in place of any corresponding provision of IPRU.

Capital floors: consolidation

2.30

If a firm calculates risk weighted exposure amounts on a consolidated basis in accordance with the IRB approach or uses the advanced measurement approach on a consolidated basis, BIPRU TP 2.8R to BIPRU TP 2.27G apply on a consolidated basis in accordance with BIPRU TP 2.30R to BIPRU TP 2.31R.

2.31

A firm must calculate the consolidation requirements under BIPRU TP 2.30R for the group in question (the group in question is specified in BIPRU TP 2.32R) in accordance with the following:

(1)

if the group is a banking group as defined in BIPRU TP 1.7R (Classification of groups for certain consolidation rules), the consolidation provisions of IPRU(BANK) apply;

(2)

if the group is a building society group as defined in BIPRU TP 1.7R, the consolidation provisions of IPRU(BSOC) apply; and

(3)

if the group is an investment firm group as defined in BIPRU TP 1.7R, chapter 14 of IPRU(INV) applies.

2.32

The scope of the consolidation under BIPRU TP 2.30R and any exemption from consolidation is determined in accordance with BIPRU 8 (Group risk - consolidation) rather than IPRU. In particular, the following adjustments apply:

(1)

if a firm is a member of a UK consolidation group and applies the IRB approach or the AMA with respect to that UK consolidation group, BIPRU TP 2.30R applies with respect to that UK consolidation group; and

(2)

if a firm is a member of a non-EEA sub-group and applies the IRB approach or the AMA with respect to that non-EEA sub-group, BIPRU TP 2.30R applies with respect to that non-EEA sub-group.

2.33

If for example the consolidation rules that apply for the purposes of this section are those in chapter 14 of IPRU(INV) (Consolidated supervision of investment firms) then IPRU(INV) 14.1 (Application) and 14.2 (Scope of consolidation) do not apply. BIPRU 8.2 (Scope and basic consolidation requirements for UK consolidation groups), BIPRU 8.3 (Scope and basic consolidation requirements for non-EEA sub-groups), BIPRU 8.4 (CAD Article 22 groups and investment firm consolidation waiver) and BIPRU 8.5 (Basis of consolidation) apply instead.

Capital floors: waiver from consolidation

2.34

If a firm has an investment firm consolidation waiver and it is applying the IRB approach or the AMA, the waiver will explain how the investment firm consolidation waiver applies for the purpose of this section.

01/04/2013

BIPRU TP 11

IRB transitionals

Application

11.1

BIPRU TP 11 applies to a BIPRU firm that uses the IRB approach.

Purpose

11.2

BIPRU TP 11 implements Articles 154(2), (3) and (5) of the Banking Consolidation Directive and (in part) Article 17 of the Capital Adequacy Directive.

Residential properties

11.6

In accordance with Article 154(5) of the Banking Consolidation Directive, until 31 December 2012, the exposure-weighted average LGD for all retail exposures secured by residential properties and not benefiting from guarantees from central governments must not be lower than 10%.

Expected loss

11.7

BIPRU TP 11.3R to BIPRU TP 11.6R also apply for the purpose of BIPRU 14.2.18 R and BIPRU 14.2.19 R (Treatment of expected loss amounts under the IRB approach) and GENPRU 2.2.193 R (Upper tier two capital: Surplus provisions).

01/04/2013

BIPRU TP 13

Other operational risk transitionals

Application

13.1

BIPRU TP 13 applies to a BIPRU firm.

Purpose

13.2

BIPRU TP 13 implements Articles 155 of the Banking Consolidation Directive and Article 44 of the Capital Adequacy Directive.

Relevant indicator

13.3

Until 31 December 2012, a percentage of 15% applies to the business line "Trading and Sales" of a firm whose relevant indicator (as referred to in BIPRU 6.4.6 R) for the business line "Trading and Sales" represents at least 50% of the total of the relevant indicators for all of the firm's business lines in accordance with BIPRU 6.4.6 R to BIPRU 6.4.16 G (Calculating the ORCR under the standardised approach to operational risk).

Reduced operational risk charge in 2007

13.4

[deleted]

Systems and controls in 2007

13.5

[deleted]

01/04/2013

BIPRU TP 20

Standardised credit risk transitionals

Application

20.1

This section applies to a BIPRU firm.

Days past due

20.2

[deleted]

20.3

[deleted]

20.4

[deleted]

Central government exposures

20.5

Until 31 December 2015, a 0% risk weight applies to exposures to the central government of the United Kingdom and of the Bank of England denominated and funded in the currency of another EEA State.

20.6

If the CRD implementation measures of another EEA State apply a 0% risk weight to exposures to its central government or central bank denominated and funded in the domestic currency of another EEA State a firm must risk weight such exposures in the same manner.

20.7

BIPRU TP 20.6R applies until 31 December 2015 or any earlier date on which the relevant CRD implementation measure ceases to apply.

20.8

BIPRU TP 20.5R to BIPRU TP 20.7R implements (in part) Article 153 of the Banking Consolidation Directive.

01/04/2013

BIPRU TP 21

Close substitutes for commodities

Application

21.1

This section applies to a BIPRU firm that on 31 December 2006 was applying the approach referred to in the first column of the table in BIPRU TP 21.3R with respect to particular grades or brands of the same commodity-class.

Commodities: close substitutes

21.2

A notice given under the IPRU provision in the second column of the table in BIPRU TP 21.3R is treated as having been given under BIPRU 7.4.23 R (Notice to the appropriate regulator about treatment of different grades or brands of the same commodity) for the purposes of BIPRU 7.4.22 R (Treatment of different grades or brands of the same commodity) with respect to the commodity grades or brands referred to in BIPRU TP 21.1R.

21.3

Table: Commodity treatments under IPRU
This table belongs to BIPRU TP 21.2R

IPRU provisions setting out commodity approach

IPRU provisions under which notice given

Paragraph 22(2) of appendix 6 of chapter 10 of IPRU(INV)

Paragraph 23 of appendix 6 of chapter 10 of IPRU(INV)

Paragraph 22(2) of chapter CM of IPRU(BANK)

Paragraph 23 of chapter CM of IPRU(BANK)

Explanation

21.3

BIPRU 7.4.22 R (1)(b) says that a firm should treat positions in different grades or brands of the same commodity-class as different commodities unless they are close substitutes and have price movements which have exhibited a stable correlation coefficient of at least 0.9 over the last 12 months. BIPRU 7.4.23 R says that a firm should notify the appropriate regulator in writing at least 20 business days prior to the date the firm starts relying on this treatment. The purpose of this section is to allow a notice given under the corresponding provisions of chapter 10 of IPRU(INV) or IPRU(BANK) to continue to have effect without the firm having to serve a new notice under BIPRU 7.4.23 R.

01/04/2013

BIPRU TP 22

Solo consolidation

Application

22.1

This section applies to a BIPRU firm that:

(1)

is a bank or building society; and

(2)

on 31 December 2006, was, in accordance with the provision of IPRU referred to in BIPRU TP 22.2R and in accordance with a concession (as defined in BIPRU TP 22.8R), solo-consolidating a subsidiary undertaking.

22.2

The provisions of IPRU referred to in BIPRU TP 22.1R are:

(1)

(in the case of a bank) section 9 of chapter CS of IPRU(BANK); and

(2)

(in the case of a building society) section 1.11 of chapter 1 of volume 1 of IPRU(BSOC).

Deemed solo consolidation waiver

22.3

A concession referred to in BIPRU TP 22.1R is treated as a solo consolidation waiver with respect to the subsidiary undertaking to which it relates if the firm notifies the FSA that the firm wishes to apply the treatment in BIPRU 2.1 (Solo consolidation) to that subsidiary undertaking.

Notice to the FSA

22.4

The following requirements apply to a notice under BIPRU TP 22.3R:

(1)

the firm must give the FSA the notice on or after 1 June 2006 and on or before 29 December 2006;

(2)

the notice must contain details of the concession concerned;

(3)

the notice must give the name of the subsidiary undertaking concerned and say where it is incorporated and has its head office; and

(4)

the notice must say whether that subsidiary undertaking is a body corporate and state the legal form of that subsidiary undertaking.

Limitations

22.5

Any condition, limitation or requirement to which a concession referred to in BIPRU TP 22.1R is subject continues to apply to the extent that it is compatible with BIPRU. In particular, if the concession was only for the purpose of large exposures it only has effect for the purposes of BIPRU 10 (Concentration risk) and if it was only for the purposes of capital adequacy it only has effect for the purposes of GENPRU 2.1.13 R (Obligation to hold capital resources equal to or greater than the capital resources requirement) or GENPRU 2.1.60 R (Calculation of base capital resources requirement for banks authorised before 1993).

Obligation to meet other qualifying conditions

22.6

A firm with a deemed solo consolidation waiver under BIPRU TP 22.3R may not apply the treatment in BIPRU 2.1 (Solo consolidation) to the subsidiary undertaking concerned unless the conditions in BIPRU 2.1.20 R to BIPRU 2.1.24 R (Solo consolidation - Minimum standards) are met with respect to that subsidiary undertaking.

Notification of relevance etc of concession

22.7

A firm which has the benefit of a concession that has effect under BIPRU TP 22.3R must notify the PRA immediately if it becomes aware of any matter which is material to the relevance or appropriateness of the concession.

Meaning of concession

22.8

A concession means for the purposes of BIPRU TP 22:

(1)

a consent or approval which was given by the FSA under the provisions of IPRU(BANK) or IPRU(BSOC) referred to in BIPRU TP 22.2R; and

(2)

a concession also means for the purposes of BIPRU TP 22 a written concession as defined in SUP TP 1.4 (Grandfathering of concessions which were granted by the FSA's predecessor regulators: rules in the Handbook) or SUP TP 1.2.6A (Grandfathering of concessions which were granted by the FSA's predecessor regulators: guidance in the Handbook) that had effect for the purposes of the provisions of IPRU(BANK) or IPRU(BSOC) referred to in BIPRU TP 22.2R.

22.9

BIPRU TP 22.8R(2) provides a mechanism for keeping in effect solo consolidation concessions granted by the Bank of England and the Building Societies Commission.

01/04/2013

BIPRU TP 25

Exclusions from consolidation

Application

25.1

This section applies to a firm to which BIPRU 8 (Group risk - consolidation) applies.

Duration of transitional

25.2

This section applies until 1 January 2008. However BIPRU TP 25.8R continues in force until it is revoked.

Transitional rule

25.3

[deleted]

25.4

[deleted]

Limitations

25.5

[deleted]

Obligation to meet other qualifying conditions

25.6

[deleted]

Notification of relevance etc of concession

25.7

[deleted]

Small balance sheet size exclusion

25.8

If a firm excluded a member of its UK consolidation group or non-EEA sub-group from the firm's UK consolidation group in accordance with:

(1)

bullet point two of paragraph 6 of section 4 of Chapter CS of IPRU(BANK) (exclusion from consolidation where combined balance sheet is below certain thresholds);

(2)

IPRU(INV) 14.2.5R(1) (exclusion from consolidation where combined balance sheet is below certain thresholds); or

(3)

a written consent or approval by the appropriate regulator under IPRU(BSOC) on the ground set out in indent two of Article 52(3) of the Directive 2000/12 (the previous version of the Banking Consolidation Directive) (exclusion from consolidation where combined balance sheet is below certain thresholds);

the firm need not notify the appropriate regulator under BIPRU 8.5.9 R (exclusion from consolidation where combined balance sheet is below certain thresholds) as long as it has notified the appropriate regulator of its intention to take advantage of this rule and that notice complies with BIPRU TP 25.4R.

01/04/2013

BIPRU TP 30

Liquidity floor for certain banks

Application

30.1

BIPRU TP 30 applies to a firm which as at 1 December 2009 is a standard ILAS BIPRU firm and which as at 30 November 2009 calculated its liquidity resources in accordance with Chapter LM of IPRU(BANK).

Duration of transitional provisions

30.2

BIPRU TP 30 applies:

(1)

in the case of an incoming EEA firm or a third country BIPRU firm, from 1 November 2010 until the earlier of the date on which the firm receives individual liquidity guidance from the PRA and 31 December 2012; and

(2)

in the case of any other firm, from 1 October 2010 until the earlier of the date on which the firm receives individual liquidity guidance from the PRA and 31 December 2012.

Transitional provisions

30.3

A standard ILAS BIPRU firm falling into BIPRU TP 30.1 must ensure that at all times between 1 October 2010 or 1 November 2010 (as relevant) and the expiry of BIPRU TP 30 it maintains liquidity resources which are no less in amount than the higher of:

(1)

the amount it assesses as adequate in its ILAA; and

(2)

the amount that it would have maintained during that period had it calculated its liquidity resources solely in accordance with Chapter LM of IPRU(BANK) in the form in which it appeared on 30 September 2010 or 31 October 2010 (as relevant).

30.4

(1)

For the purpose of BIPRU 12.9.14 R(Regulatory intervention points for ILAS BIPRU firms) and for the duration of BIPRU TP 30, there is added one further event which is to constitute a regulatory intervention point for a standard ILAS BIPRU firm.

(2)

The further event to which (1) refers is the amount of the firm's liquid assets falling below, or being expected to fall below, the level required in BIPRU TP 30.3.

30.5

(1)

BIPRU TP 30.3 R deals with the overall amount of liquidity resources a firm is required to hold. It does not specify the proportion of those liquidity resources that a firm must hold in a liquid assets buffer that meets the liquid asset buffer requirements (BIPRU 12.2.8 R (1) and BIPRU 12.7).

(2)

The PRA recognises that it may take time for a firm to build a buffer which is of a sufficient size and quality and that the transition from the PRA's liquidity regime in force immediately prior to the BIPRU 12 regime is likely to be a gradual one (see BIPRU 12.2.10 G).

(3)

In carrying out its ILAA, a firm must record the evidence which supports its assessment of the adequacy of its liquid assets buffer (see BIPRU 12.5.13 R (3)). While a firm is building up its liquid assets buffer, its assessment of the adequacy of that buffer should include an analysis of its ability to satisfy its liquidity needs with liquidity resources that are not eligible to be included in the liquid assets buffer.

01/04/2013

BIPRU TP 33

Intra-group exposures: Transitional provisions for core UK group and large exposures

Application

33.1

(1)

This section applies to a BIPRU firm that on 30 December 2010 was applying any of the exemptions under the following provisions in the version in force on that date:

(a)

BIPRU 3.2.25 R (Zero risk-weighting for intra-group exposures);

(b)

BIPRU 10.6.5 R to BIPRU 10.6.7 R (Parental guarantees and capital maintenance arrangements);

(c)

BIPRU 10.7 (Treasury concession and intra-group securities financing transactions);

(d)

BIPRU 10.8 (UK integrated group); or

(e)

BIPRU 10.9 (Wider integrated group), if it has a wider integrated group waiver that expires after 31 December 2010.

(2)

In order to continue applying any of the exemptions in (1), a firm must be able on an ongoing basis to demonstrate to the appropriate regulator that it continues to comply fully with the provisions applicable to that exemption.

Duration of transitional

33.2

This section applies until 31 December 2012.

Zero risk-weighting for intra-group exposures

33.3

A firm may assign a risk weight of 0% to exposures that are eligible for that treatment under the criteria in BIPRU 3.2.25 R in the version in force on 30 December 2010.

Exemptions from large exposures limits for intra-group exposures

33.4

A firm may, to the extent permitted by this section, treat an exposure to a concentration risk group counterparty as exempt or partially exempt in accordance with BIPRU 10 (Concentration risk requirements) in the version in force on 30 December 2010.

33.5

The term concentration risk group counterparty broadly covers group members if they and the firm are subject to consolidated supervision by the appropriate regulator , another EEA competent authority or certain non-EEA regulators. The full definition can be found in the Glossary in the version in force on 30 December 2010.

33.6

If the context requires, BIPRU 8.9 (Consolidated concentration risk requirements) as it was in force on 30 December 2010 continues to apply to a firm that applies BIPRU TP 33.4 R.

Effect of this section on intra-group exemptions in BIPRU 10

33.7

If a firm applies this section, BIPRU 10.8A (Intra-group exposures: core UK group) to BIPRU 10.9A (Intra-group exposures: exposures outside of the core UK group) do not apply.

33.8

The effect of BIPRU TP 33.7 is that a firm should not apply BIPRU 10.8A (Intra-group exposures: core UK group) to BIPRU 10.9A (Intra-group exposures: exposures outside the core UK group) to some exposures to core concentration risk group counterparties or non-core concentration risk group counterparties and this section to others. The purpose of BIPRU TP 33.7 R is that a firm should choose between treating intra-group exposures under BIPRU 10.8A (Intra-group exposures: core UK group) to BIPRU 10.9A (Intra-group exposures: exposures outside the core UK group) and treating them under this section but that it should not mix the approaches.

Notice to the appropriate regulator

33.9

A firm may only apply the treatment in BIPRU TP 33.3 R or BIPRU TP 33.4 R if the firm has notified the appropriate regulator in writing that it intends to apply the relevant rule to the particular counterparty or concentration risk group counterparty respectively.

33.10

The notice in BIPRU TP 33.9 R must comply with the following requirements:

(1)

the appropriate regulator was notified on or before 31 December 2010;

(2)

the notice must give the following:

(a)

in the case of the treatment in BIPRU TP 33.3 R:

(i) the name of the counterparty concerned; and

(ii) details of the firm's initial plans on how and when it will ensure that exposures that will not be within its core UK group are treated in accordance with the relevant rules in BIPRU 3;

(b)

in the case of the treatment in BIPRU TP 33.4 R:

(i) the name of the concentration risk group counterparty concerned and the intra-group exemption or exemptions that apply to it; and

(ii) details of the firm's initial plans on how and when it intends to comply with the large exposures limits that apply to a core UK group or non-core large exposures group.

01/04/2013

BIPRU Sch 1

Record keeping requirements

01/01/2007

1 The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements.

2 It is not a complete statement of those requirements and should not be relied on as if it were.

3 Table

Handbook
reference

Subject of Record

Contents of Record

When record must be made

Retention Period

BIPRU 2.2.5 G

Firm's ICAAP

(1) The results of the ICAAP
(2) An explanation of the processes used
(3) How the process is used internally and for what purpose
(4) Internal governance
(5) The main sources of risk to which the firm is exposed
(6) How the firm is managing each of those risks
(7) Details of stress and scenario testing that has been conducted
(8) The rationale behind the chosen scenarios
(9) The results of those scenario tests

Annually

Not specified

BIPRU 5.2.3 R,
BIPRU 5.4.11 R (2),
BIPRU 9.5.1 R (5)

Legal opinions confirming enforceability

A record of the legal review showing enforceability of credit protection arrangements in all relevant jurisdictions

Not specified, but before risk mitigant is recognised

Review conducted as necessary

BIPRU 5.2.9 R

Risk management processes

Documented risk management processes to control the risks that firm may be exposed to as a result of carrying out credit risk mitigation

Not specified, but before risk mitigant is recognised

Not specified

BIPRU 5.4.12 R

Collateral procedures

(1) A clear and robust procedure for the liquidation of collateral
(2) Documented policies covering the types and amounts of collateral accepted

Not specified, but before collateral is recognised

Not specified

BIPRU 5.4.59 R,
BIPRU 5.4.60 R

Volatility adjustments for financial collateral

(1) Documentation of a system estimating volatility adjustments and the integration of the volatility adjustments in its risk management process
(2) Review of system estimating volatility adjustments

Not specified, but before own estimates of volatility adjustments approach is used for capital purposes

Not specified

BIPRU 5.7.8 R

System to manage concentration of risk arising from guarantees and credit derivatives

Documentation of a system to manage potential concentration risk arising from unfunded credit protection and how this interacts with its management of its overall risk profile

Not specified, but before unfunded credit protection is recognised

Not specified

BIPRU 7.10.53 R,
BIPRU 7.10.54 G

Material risks not captured in the firm's VaR model

Documented risks not captured in the VaR model and creation of a prudent incremental PRR charge for the risk not captured

Not specified

BIPRU 9.4.3 R

Legal opinions for securitised exposures

A record of the legal opinions confirming that the securitised exposures have been put beyond the reach of the originator

Not specified, but before securitised exposures are excluded from capital calculation

Review conducted as necessary

BIPRU 9.13.12 R (1)

Capital plan in case of early amortisation

For controlled amortisation, the capital/liquidity plan to ensure that sufficient capital and liquidity are available in the event of early amortisation

Not specified

BIPRU 9.13.21 R

Capital plan in case of either scheduled or early amortisation

The capital plan to address the capital implications of both scheduled and early amortisation

Not specified

BIPRU 12.3.8 R (1)

A firm's liquidity risk tolerance

An appropriately documented account of the firm's liquidity risk tolerance

Not specified

BIPRU 12.4.13 R

A firm's contingency funding plan

Formal documentation of the contingency funding plan

Not specified

BIPRU 12.5.4 R (2)

An ILAS BIPRU firm's ILAA

A written record of the firm's ILAA

Not specified

BIPRU 12.5.13 R (2)

ILAA methodology

Evidence supporting the behavioural assumptions that an ILAS BIPRU firm makes in carrying out its BIPRU 12.5.6 R stress tests for the purpose of its ILAA

Not specified

BIPRU 12.5.13 R (3)

ILAA methodology

Evidence supporting an ILAS BIPRU firm's assessment of the adequacy of its liquidity buffer for the purpose of its ILAA

Not specified

BIPRU 12.6.13 R

The simplified ILAS waiver application

A written policy statement assessing the likelihood of withdrawal of retail deposits in the circumstances described in BIPRU 12.6.11 R (2)(a)

Not specified

BIPRU 12.6.21 R

A simplified ILAS BIPRU firm's ILSA

A written record of the firm's ILSA

Not specified

BIPRU 12.7.11 R

Periodic realisation of assets

A written policy setting out the firm's approach to periodic realisation of its assets

Not specified

BIPRU 13.6.48 R

Operation of CCR management system

Documented set of internal policies, controls and procedures concerning the operation of the CCR management system

Prior to application for CCR internal model method permission

Continuous

BIPRU 13.7.6 R (2)

Legal opinion regarding netting agreements

A record of legal opinions that, in the event of a legal challenge, relevant courts and administrative authorities would find that the firm's claims and obligations would be limited to the net sum in BIPRU 13.7.6 R (1)

On entering into a transaction and making use of netting agreements

While transaction held

01/04/2013

BIPRU Sch 2

Notification and reporting requirements

01/01/2007

1 The aim of the guidance in the following table is to give the reader a quick overall view of the relevant notification requirements.

2 It is not a complete statement of those requirements and should not be relied on as if it were.

3 Table

Handbook reference

Matter to be notified

Contents of notification

Trigger event

Time allowed

BIPRU 1.2.30 R

Adoption of or significant change to a trading book policy statement

Copy of the trading book policy statement

Adoption of or significant change to a trading book policy statement

Immediately

BIPRU 3.2.35 R (5)

Fact of exposure or firm ceasing to meet the conditions in BIPRU 3.2.25 R

(5): Fact of exposure or firm ceasing to meet the conditions in BIPRU 3.2.25 R

(5): Ceasing to meet conditions

(5): First report date after the obligation to notify becomes due

BIPRU 7.2.48B R

Total sum of a firm's weighted net long and net short securitisation and resecuritisation positions, broken down by types of underlying assets

Periodically as set out in SUP 16.12

In accordance with SUP 16.12

BIPRU 7.4.23 R

Intention to rely on approach in BIPRU 7.4.22 R (1)(b)

Fact of intention and details on which commodities the firm intends to treat as same commodity-class and justification

Intention to rely

At least 20 business days prior to the date the firm starts relying on BIPRU 7.4.23 R

BIPRU 7.5.4 R

Intention to use an exclusion under BIPRU 7.5.4 R (1)

Fact of intention and the terms on which the relevant item will be excluded from the firm's foreign currency PRR calculation

Intention to use

Before use of the exclusion

BIPRU 7.10.55ZA R

Material shortfall in the amount of capital required under the all price risk measure identified as a result of performing the stress tests under BIPRU 7.10.55Z R

Information about the stress tests and the material shortfall in capital

Existence of a material shortfall in capital

No later than two business days after the business day on which the material shortfall occurred

BIPRU 7.10.104 R

Occurrence of backtesting exception

Fact of backtesting exception

Backtesting exception

Orally within 2 business days, and written account of all backtesting exceptions that Month, within 5 business days after the Month

BIPRU 7.10.129 R

Operation of the VaR model, systems and controls relating to it and changes to the VaR model and those systems and controls

Documentation specified in the VaR model waiver/VaR model permission

appropriate regulator specified requirements

No later than number of business days after the end of each quarter specified in the VaR model permission

BIPRU 7.10.130 R

Details of significant planned changes to the VaR model

Information about the nature of the change and an estimate of the impact on VaR numbers and the incremental risk charge

Intention to change

Prior to any changes being implemented

BIPRU 8.4.18 R(2)

Serious risk that could undermine the financial stability of the CAD Article 22 group

Fact of serious risk to group financial stability

Events/
activities leading to serious risk to group financial stability

As soon as the firm becomes aware of that risk

BIPRU 8.4.18 R (3)

Consolidated capital resources and consolidated capital resources requirement of the CAD Article 22 group as set out in the investment firm consolidation waiver

Amount of CAD Article 22 group consolidated capital resources and consolidated capital resources requirement

Periodically as set out in the investment firm consolidation waiver

Not specified

BIPRU 8.4.18 R (4)

Large exposures risks of the CAD Article 22 group including undertakings not located in a member State

Periodically as set out in the investment firm consolidation waiver

Not specified

BIPRU 8.5.9 R

Intention to exclude an undertaking from consolidation

Fact of intention and details of undertaking to be excluded

Intention to exclude

In accordance with SUP 15.7

BIPRU 8.6.1B R

Intention of a group undertaking to issue a capital instrument for inclusion in capital resources or consolidated capital resources

Fact of intention and details of intended amount, issue date, type of investor, stage of capital, features of instrument and confirmation of compliance with rules

Intention to issue

As soon as proposed issue becomes known to firm

BIPRU 8.6.1C R

Proposed changes to details of the issue of a capital instrument notified under BIPRU 8.6.1B R

Proposed change and all information required under BIPRU 8.6.1B R (1) to BIPRU 8.6.1B R (4)

Intention to change any details of the issue previously notified to the appropriate regulator

As soon as the changes are proposed

BIPRU 8.6.1D R

Proposed establishment of a debt securities program by a group undertaking

All information required under BIPRU 8.6.1B R (1) to BIPRU 8.6.1B R (4)

Intention to establish

As soon as proposed establishment becomes known to firm

BIPRU 8.6.1F R

Issue of capital instruments by a group undertaking under BIPRU 8.6.1E R

All information required under BIPRU 8.6.1B R (1) to BIPRU 8.6.1B R (3) and confirmation no changes have been made to the terms of the instrument from a previous similar issue

Intention to issue

No later than the date of issue

BIPRU 8.7.16 R

(1) The choice of consolidation technique in BIPRU 8.7.13 R it applies for which consolidated requirement component: and
(2) to which members of the relevant group it is applying the different methods in BIPRU 8.7.13 R

(1) The choice of consolidation technique in BIPRU 8.7.13 R to be applied for each consolidated requirement component
(2) the members of the relevant group to which it is applying the different methods in BIPRU 8.7.13 R

See SUP 16

BIPRU 9.6.2 R

Provision of implicit support to a securitisation

(1) Provision of non-contractual support, and
(2) The regulatory capital impact of providing implicit support

Provision of implicit support

Not specified

BIPRU 10.8A.12 R

Exposure being treated as exempt under BIPRU 10.8A (Core UK group) ceases to meet the conditions for application of the treatment

Fact or expectation of any exposure to which it has applied the treatment ceases to meet the conditions for application of the treatment

Awareness of situation

Immediately

BIPRU 10.9A.8 R (2)

Intention to use BIPRU 10.9A.8 R (1) to concentrate an exposure to a particular member of the non-core large exposures group that exceeds 25% of the capital resources of the firm's core UK group

Fact of intention and the information in BIPRU 10.9A.8 R (3)

Intention to use BIPRU 10.9A.8 R (1)

Not specified

BIPRU 10.9A.12 R

Exposure being treated as exempt under BIPRU 10.9A (Intra-group exposures: exposures outside the core UK group) ceases to meet the conditions for application of the treatment

Fact or expectation of any exposure to which it has applied the treatment ceases to meet the conditions for application of the treatment

Awareness of situation

Immediately

BIPRU 10.12.6 R

Artificial transfer, transaction or arrangement.

Fact of entry into a transfer, transaction or arrangement of the type mentioned in BIPRU 10.12.5 R

Entry into an artificial transfer, transaction or arrangement

Not specified

BIPRU 12.4.9 R

Results of the BIPRU 12.4 stress tests

The results referred to in column (2)

The carrying out of the BIPRU 12.4 stress tests

To be reported in a timely manner

BIPRU 12.6.13 R (2)

A simplified ILAS BIPRU firm's policy statement prepared in accordance with BIPRU 12.6.13 R

The policy statement referred to in column (2)

The firm's decision to apply for a simplified ILAS waiver

Prior to the firm's application for a simplified ILAS waiver

BIPRU 12.9.13 R

The occurrence of any of the events identified in BIPRU 12.9.14 R

Fact of occurrence and adequately reasoned explanation for the deviation

The occurrence of any of the events identified in BIPRU 12.9.14 R

As soon as the firm becomes aware of the event in question

BIPRU 12.9.18 R

A firm's liquidity remediation plan

The matters identified in BIPRU 12.9.18 R

The occurrence of any of the events identified in BIPRU 12.9.14 R

Within two days of the notification made under BIPRU 12.9.13 R

BIPRU 13.2.2 R

Counterparty risk exposure of non-standard type

Fact of exposure, counterparty involved, nature of the exposure and capital treatment adopted

Entry into non-standard exposure

Immediately

BIPRU 13.6.20 R

Cessation to comply with requirements set out in BIPRU 13.6 for CCR internal model method permission

Plan for timely return to compliance or demonstration that the effect of non-compliance is immaterial

Ceasing to comply with requirements

Immediately

01/04/2013

BIPRU Sch 3

Fees and other requirement payments

01/01/2007

There are no requirements for fees or other payments in BIPRU.

01/04/2013

BIPRU Sch 6

Rules than can be waived

01/01/2007

The rules in BIPRU may be waived by the appropriate regulator under section 138A of the Act (Modification or waiver of rules). However, if the rules incorporate requirements laid down in European directives, it will not be possible for the appropriate regulator to grant a waiver that would be incompatible with the United Kingdom's responsibilities under those directives. It therefore follows that if a rule in BIPRU contains provisions which derive partly from a directive, and partly not, the appropriate regulator will be able to consider a waiver of the latter requirements only, unless the directive provisions are optional rather than mandatory.

01/04/2013