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Application Provision

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1

Application and Definitions

1.1

Unless otherwise stated, this Part applies to:

  1. (1) every firm that is a CRR firm; and
  2. (2) a CRR consolidation entity.

1.2

In this Part the following definitions shall apply:

[Note: there are currently no Part-specific definitions]

1.3

[Deleted]

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3

Third Country Banking and Investment Groups

3.1

This Chapter applies where a firm is subject to a requirement obliging it to comply with 3.2 to 3.4 with respect to a third country banking and investment group of which it is a member.

[Note: Art 127 of the CRD]

3.2

A firm must comply with:

  1. (1) those requirements of the CRR that apply to the firm on a consolidated basis; and
  2. (2) rules that apply to the firm on a consolidated basis,

on the basis of the consolidated situation of the third country banking and investment group.

3.3

A firm must comply with Group Risk Systems in respect of the third country banking and investment group.

3.4

The scope of the CRR requirements and rules referenced in 3.2 and 3.3 is adjusted:

  1. (1) to remove any provisions disapplying those rules for third country banking and investment groups;
  2. (2) to remove all limitations relating to where a member of the third country banking and investment group is incorporated or has its head office; and
  3. (3) so that the scope covers every member of the third country banking and investment group that would have been included in the scope of those rules if those members had their head offices, and were incorporated, in the UK.

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5

Level of Application of Requirements (Title II, Part One CRR)

Chapter 1 Application Of Requirements On An Individual Basis

Article 9 Individual Consolidation Method

1.

Where an institution is required to comply with a PRA rule on an individual basis, it must not, for the purposes of such compliance, include any subsidiary unless permission has first been granted by the PRA under section 138BA FSMA, to the extent and subject to any modifications set out in the permission.

[Note: This rule corresponds to Article 9 of the CRR as it applied immediately before revocation by the Treasury]

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Chapter 2 Prudential Consolidation

Article 11 General Treatment

1.

CRR consolidation entities and institutions must, in relation to a consolidation group of which they are a member, set up a proper organisational structure and internal control mechanisms to ensure that data required for such consolidation are duly processed and distributed. In particular, they must ensure that subsidiaries which are not subject to PRA rules implement arrangements, processes and mechanisms to ensure proper consolidation.

2.

For the purpose of ensuring that a PRA rule is applied on a consolidated basis, the terms ‘institution’, ‘UK parent institution’, ‘parent undertaking’, ‘firm’ and ‘CRR firm’ shall, as the case may be, also refer to:

  1. (a) a financial holding company or mixed financial holding company approved in accordance with Part 12B FSMA;
  2. (b) a PRA designated institution controlled by a UK parent financial holding company or UK parent mixed financial holding company where such a parent is not subject to approval in accordance with section 192P(2) and (3) FSMA; and
  3. (c) a financial holding company, mixed financial holding company or institution designated in accordance with section 192T(2)(c) FSMA.

The consolidated situation  of an undertaking referred to in point (a) shall be the consolidated situation of the financial holding company or mixed financial holding company.

The consolidated situation of an undertaking referred to in point (b) shall be the consolidated situation of the UK parent financial holding company or the UK parent mixed financial holding company.

The consolidated situation of an undertaking referred to in point (c) shall be the consolidated situation of its UK parent financial holding company or UK parent mixed financial holding company.

[Note: This rule corresponds to the first and second sub-paragraphs of Article 11 of the CRR as it applied immediately before revocation by the Treasury]

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Article 18 Methods Of Prudential Consolidation

1.

CRR consolidation entities and institutions that are required to comply with a PRA rule on a consolidated basis must carry out a full consolidation of all institutions and financial institutions that are their subsidiaries or, in the case of a PRA designated institution, subsidiaries of its UK parent undertaking.

2.

Ancillary services undertakings must be included in consolidation in the cases, and in accordance with the methods, laid down in this Article.

3.

A CRR consolidation entity or institution must include the relevant proportion of an undertaking with whom it has a common management relationship. The relevant proportion is such proportion (if any) specified in a requirement imposed on or a direction given to the institution or CRR consolidation entity in accordance with section 55M or section 192C FSMA.

4.

A CRR consolidation entity or institution must carry out a proportional consolidation according to the share of capital held of participations in institutions and financial institutions managed by an undertaking included in the consolidation together with one or more undertakings not included in the consolidation, where those undertakings’ liability is limited to the share of capital they hold.

5.

A CRR consolidation entity or institution must carry out a proportional consolidation according to the share of capital held of any undertaking with whom it has a relationship linked by participations or capital ties other than those referred to in paragraphs (1) and (4) of this Article.

6.

A CRR consolidation entity or institution must include the relevant proportion of an undertaking with whom it has an Article 18(6) relationship. The relevant proportion is such proportion (if any) specified in a requirement imposed on or a direction given to the institution or the CRR consolidation entity in accordance with section 55M or section 192C FSMA.

7.

Where a CRR consolidation entity or institution has a subsidiary which is an undertaking other than an institution, a financial institution or an ancillary services undertaking, or holds a participation in such an undertaking, it must apply to that subsidiary or participation the equity method. That method shall not, however, require inclusion of the undertakings concerned in supervision on a consolidated basis.

8.

A CRR consolidation entity or institution must include any entity that is not an institution, financial institution, or ancillary services undertaking in its consolidation (in full or in part) to the extent specified in a requirement or direction imposed on the institution or CRR consolidation entity in accordance with section 55M or section 192C FSMA.

[Note: Paragraphs 1 to 8 of this rule correspond to paragraphs 1 to 8 of Article 18 of the CRR as it applied immediately before revocation by the Treasury]

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Article 19 Entities Excluded From The Scope Of Prudential Consolidation

1.

A CRR consolidation entity or institution may exclude from the scope of consolidation an institution, financial institution or an ancillary services undertaking which is a subsidiary or an undertaking in which a participation is held where the total amount of assets and off-balance sheet items of the undertaking concerned is less than the smaller of the following two amounts:

  1. (a)  £8.8 million; and
  2. (b)  1% of the total amount of assets and off-balance sheet items of the parent undertaking or the undertaking that holds the participation.

1A.

A CRR consolidation entity must notify the PRA as soon as possible if it excludes a subsidiary or an undertaking in which it has a participation under paragraph (1).

2.

[Note: Provision left blank]

3.

Where the total amount of assets and off-balance sheet items of several undertakings in aggregate exceeds the smaller of the two amounts set out in paragraph (1), a CRR consolidation entity or institution must include such undertakings in the scope of consolidation insofar as the assets and items of such undertakings collectively exceed that amount.

[Note: Paragraphs 1 and 3 of this rule correspond to paragraphs 1 and 3 of Article 19 of the CRR as it applied immediately before revocation by the Treasury]

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Article 23 Undertakings In Third Countries

For the purposes of applying supervision on a consolidated basis in accordance with this Chapter 2, the terms ‘investment firm’, ‘credit institution’, ‘financial institution’, and ‘institution’ shall also include within the scope of consolidation undertakings established in third countries which, were they established in the United Kingdom, would fulfil the definitions of those terms in Article 4 of CRR.

[Note: This rule corresponds to Article 23 of the CRR as it applied immediately before revocation by the Treasury]

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Article 24 Valuation Of Assets And Off-Balance Sheet Items

The valuation of assets and off-balance sheet items must be effected in accordance with the applicable accounting framework.

[Note: This rule corresponds to Article 24 of the CRR as it applied immediately before revocation by the Treasury]

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