Prudential Regulation Authority Rulebook

A1

By way of derogation from Article 429(4) of this Chapter, a central bank claim of a firm shall be netted off against a liability, provided that:

1. (a) the central bank claim and liability are denominated in the same currency; and
2. (b) where applicable, the date of contractual maturity of the central bank claim is the same as, or is before, the date of contractual maturity of the liability.

For the purposes of point (b) of the first subparagraph, and in relation to liabilities which are not deposits, institutions shall take into account existing options in determining the residual maturity of the liability in a prudent manner. Institutions shall do so on the assumption that the counterparty will redeem call options at the earliest possible date.

For options exercisable at the discretion of the institution, the institution shall take into account reputational factors that may limit an institution's ability not to exercise the option, in particular market expectations that institutions should redeem certain liabilities before their maturity.

1.

By way of derogation from Article 429(4) of this Chapter, an institution may exclude any of the following exposures from its total exposure measure:

1. (a) the amounts deducted from Common Equity Tier 1 items in accordance with point (d) of Article 36(1) of Chapter 3 of the Own Funds and Eligible Liabilities (CRR) Part;
2. (b) any items, other than liabilities, deducted in the calculation of the capital measure referred to in Article 429(3) of this Chapter;
3. (c) exposures that are assigned a risk weight of 0% in accordance with Article 113(6) of the CRR provided that the PRA has also given permission to the institution under this rule.
4. The PRA may grant that permission only where all the conditions set out in points (a) to (e) of Article 113(6) of the CRR are met and where the PRA has given the approval laid down in Article 113(6) of the CRR.
5. [Note: This is a permission created under sections 144G and 192XC of FSMA to which Part 8 of the Capital Requirements Regulations applies.]
6. (d) [Note: Provision left blank]
7. (e) [Note: Provision left blank]
8. (f) [Note: Provision left blank]
9. (g) where the institution is a clearing member of a qualifying central counterparty, the trade exposures of that institution, provided that they are cleared with that qualifying central counterparty and meet the conditions set out in point (c) of Article 306(1) of Chapter 3 of the Counterparty Credit Risk (CRR) Part;
10. (h) where the institution is a higher-level client within a multi-level client structure, the trade exposures to the clearing member or to an entity that serves as a higher-level client to that institution, provided that the conditions set out in Article 305(2) of Chapter 3 of the Counterparty Credit Risk (CRR) Part are met and provided that the institution is not obligated to reimburse its client for any losses suffered in the event of default of either the clearing member or the qualifying central counterparty;
11. (i) fiduciary assets which meet all the following conditions:
1. (i) they are recognised on the institution's balance sheet;
2. (ii) they meet the criteria for non-recognition set out in International Financial Reporting Standard (IFRS) 9, as applied under UK-adopted international accounting standards;
3. (iii) they meet the criteria for non-consolidation set out in IFRS 10, as applied under UK-adopted international accounting standards, where applicable;
12. (j) exposures that meet all the following conditions:
1. (i) they are exposures to a public sector entity;
2. (ii) they are treated in accordance with Article 116(4) of the CRR;
3. (iii) they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (i) for the purpose of funding general interest investments;
13. provided that the PRA has also granted permission under this rule.
14. [Note: This is a permission created under sections 144G and 192XC of FSMA to which Part 8 of the Capital Requirements Regulations applies.]
15. (k) the excess collateral deposited at tri-party agents that has not been lent out;
16. (l) where under the applicable accounting framework an institution recognises the variation margin paid in cash to its counterparty as a receivable asset, the receivable asset, provided that the conditions set out in points (a) to (e) of Article 429c(3) of this Chapter are met;
17. (m) the securitised exposures from traditional securitisations that meet the conditions for significant risk transfer set out in Article 244(2) of the CRR;
18. (n) [Note: Provision left blank]
19. (o) [Note: Provision left blank]
20. (p) [Note: Provision left blank]
21. (q) loans made by the firm pursuant to:
1. (i) the Bounce Back Loan scheme announced by Her Majesty’s Government on 27 April 2020; or
2. (ii) schemes supporting lending to small and medium-sized businesses which are located in an EEA State in the course of the Coronavirus pandemic, provided that such loans were created before 1 January 2022, do not exceed €60,000 per loan and are subject to a 100% guarantee provided by an EEA State or central bank of an EEA State or the European Central Bank.

For the purposes of point (m) of the first subparagraph, institutions shall include any retained exposure in the total exposure measure.

2.

[Note: Provision left blank]

3.

[Note: Provision left blank]

4.

Institutions shall not exclude the trade exposures referred to in points (g) and (h) of paragraph 1 of this Article, where the condition set out in the third subparagraph of Article 429(5) of this Chapter is not met.

5.

[Note: Provision left blank]

6.

[Note: Provision left blank]

7.

[Note: Provision left blank]