Part

Internal Capital Adequacy Assessment

Chapter

Application of this Part on an Individual Basis, a Consolidated Basis and a Sub-Consolidated Basis

Printed on: 29/04/2024

Rulebook at: 31/12/2020

14

Application of this Part on an Individual Basis, a Consolidated Basis and a Sub-Consolidated Basis

The ICAAP rules

14.1

A firm that is neither a subsidiary of a parent undertaking incorporated in or formed under the law of any part of the UK nor a parent undertaking must comply with the ICAAP rules on an individual basis.
  • 01/01/2014

14.2

A firm that is not a member of a consolidation group must comply with the ICAAP rules on an individual basis.

[Note: Art 108(1) of the CRD]

  • 01/01/2014

14.2A

If the ICAAP rules apply to a firm on an individual basis, the firm must comply with the ICAAP rules to the same extent and in the same manner as it is required to comply with the obligations laid down in Parts Two to Four and Part Seven of the CRR.

  • 30/03/2018

14.3

A firm which is a UK parent institution must comply with the ICAAP rules on a consolidated basis.
  • 31/12/2020

14.4

[Deleted.]
  • 29/12/2020

14.4A

A PRA approved parent holding company or a PRA designated parent holding company must comply with the ICAAP rules on the basis of its consolidated situation and a PRA designated intermediate holding company or a PRA designated institution responsible for meeting CRR requirements on a consolidated basis must comply with the ICAAP rules on the basis of the consolidated situation of its UK parent financial holding company or UK parent mixed financial holding company.

  • 31/12/2020

14.4B

A PRA designated institution controlled by a UK parent financial holding company or a UK parent mixed financial holding company must comply with the ICAAP rules on the basis of the consolidated situation of that holding company, if the PRA is responsible for supervision of the firm on a consolidated basis.

[Note: Art 108(2) of the CRD]

  • 31/12/2020

14.5

[Note: Art 108(4) of the CRD]

  • 29/12/2020

14.6

If the ICAAP rules apply to an Article 109 undertaking on a consolidated basis or on a sub-consolidated basis that person must carry out consolidation to the same extent and in the same manner as it is required to comply with the obligations laid down in the CRR on a consolidated basis or sub-consolidated basis.
  • 29/12/2020

14.7

For the purpose of the ICAAP rules as they apply on a consolidated basis or on a sub-consolidated basis:
  1. (1) the Article 109 undertaking must ensure that the consolidation group or sub-consolidation group has the processes, strategies and systems required by the overall Pillar 2 rule in 3.1;
  2. (2) the risks to which the overall Pillar 2 rule in 3.1 and the general stress test and scenario analysis rule refer are those risks as they apply to each member of the consolidation group;
  3. (3) the reference in the overall Pillar 2 rule in 3.1 to amounts and types of financial resources, own funds and internal capital (referred to in this rule as resources) must be read as being to the amounts and types that the Article 109 undertaking considers should be held by the members of the consolidation group or sub-consolidation group;
  4. (4) other references to resources must be read as being to resources of the members of the consolidation group or sub-consolidation group;
  5. (5) the reference in the overall Pillar 2 rule in 3.1 to the distribution of resources must be read as including a reference to the distribution between members of the consolidation group;
  6. (6) the reference in the overall Pillar 2 rule in 3.1 to the overall financial adequacy rule in 2.1 must be read as being to that rule as adjusted under 14.14-14.16 (level of application of the overall financial adequacy rule);
  7. (7) an Article 109 undertaking must be able to explain how it has aggregated the risks referred to in the overall Pillar 2 rule in 3.1 and the financial resources, own funds and internal capital required by each member of the consolidation group or sub-consolidation group; and
  8. (8) in particular, to the extent that the transferability of resources affects the assessment in (2), an Article 109 undertaking must be able to explain how it has satisfied itself that resources are transferable between members of the group in question in the stressed cases and the scenarios referred to in the general stress test and scenario analysis rule in 12.1.
  • 29/12/2020

14.8

An Article 109 undertaking must allocate the total amount of financial resources, own funds and internal capital identified as necessary under the overall Pillar 2 rule in 3.1 (as applied on a consolidated basis or on a sub-consolidated basis) between different parts of the consolidation group or sub-consolidation group.
  • 29/12/2020

14.9

The Article 109 undertaking must carry out the allocation in 14.8 in a way that adequately reflects the nature, level and distribution of the risks to which the consolidation group or sub-consolidation group is subject.
  • 29/12/2020

14.10

A Article 109 undertaking must also carry out the allocation in 14.8 in a way that:
  1. (a) takes into account the nature, level and distribution of the risks between all entities within the consolidated group or sub-consolidation group; and
  2. (b) ensures the amount allocated to each Article 109 undertaking adequately reflects the risks to which that Article 109 undertaking is exposed on an individual basis.
  • 29/12/2020

The risk control rules

14.11

The risk control rules apply to a firm on an individual basis whether or not they also apply to the firm on a consolidated basis or sub-consolidated basis.

[Note: Art 109(1) (part) of the CRD]

  • 01/01/2014

Level of application of the overall financial adequacy rule

14.12

Where a firm, a PRA approved parent holding company, a PRA designated parent holding company, a PRA designated intermediate holding company or a PRA designated institution is responsible for meeting CRR requirements on a consolidated basis, it must ensure that the risk management processes and internal control mechanisms at the level of the consolidation group of which it is a member meet the standards set out in the risk control rules on a consolidated basis.
  • 29/12/2020

14.12A

Where a firm, a PRA approved intermediate holding company, a PRA designated intermediate holding company, a PRA designated parent holding company or a PRA designated institution is responsible for meeting CRR requirements on a sub-consolidated basis, it must ensure that the risk management processes and internal control mechanisms at the level of the sub-consolidation group of which it is a member meet the standards set out in the risk control rules on a sub-consolidated basis.

  • 29/12/2020

14.13

Compliance with the obligations referred to in 14.12 and 14.12A must enable the consolidation group or sub-consolidation group to have arrangements, processes and mechanisms that are consistent and well integrated and that any data relevant to the purpose of supervision can be produced.

[Note: Art 109(2) (part) of the CRD]

  • 29/12/2020

14.14

The overall financial adequacy rule in 2.1 applies to a firm on an individual basis whether or not it also applies to the firm on a consolidated basis or sub-consolidated basis.
  • 01/01/2014

14.15

The overall financial adequacy rule in 2.1 applies to an Article 109 undertaking on a consolidated basis if the ICAAP rules apply to it on a consolidated basis and applies to an Article 109 undertaking on a sub-consolidated basis if the ICAAP rules apply to it on a sub-consolidated basis.
  • 29/12/2020

14.16

When the overall financial adequacy rule in 2.1 applies on a consolidated basis or sub-consolidated basis, the Article 109 undertaking must ensure that at all times its consolidation group or sub-consolidation group maintains overall financial resources, including own funds and liquidity resources, which are adequate, both as to amount and quality, to ensure that there is no significant risk that the liabilities of any members of its consolidation group or sub-consolidation group cannot be met as they fall due.
  • 29/12/2020