Prudential Regulation Authority Rulebook

11F.1

A firm must conduct adequate due diligence prior to making a qualifying infrastructure investment or a qualifying infrastructure corporate investment, including all of the following:

1. (1) a documented assessment of how the infrastructure entity satisfies the criteria set out in Solvency Capital Requirement – Standard Formula 3D2 and 3D3, which has been subject to a validation process, carried out by persons that are free from influence from those persons responsible for the assessment of the criteria, and have no potential conflicts of interest with those persons; and
2. (2) a confirmation that any financial model for the cash-flows of the infrastructure entity has been subject to a validation process carried out by persons that are free from influence from those persons responsible for the development of the financial model and have no potential conflicts of interest with those persons.

11F.2

A firm with a qualifying infrastructure investment or a qualifying infrastructure corporate investment must regularly monitor and perform stress tests on the cash-flows and collateral values supporting the infrastructure entity. Any stress tests must be commensurate with the nature, scale and complexity of the risk inherent in the infrastructure project.

11F.3

A firm should ensure that the stress testing considers risks arising from non-infrastructure activities, but the revenues generated by such activities must not be taken into account when determining whether the infrastructure entity is able to meet its financial obligations.

11F.4

Where a firm holds material qualifying infrastructure investments or qualifying infrastructure corporate investments, it must, when establishing the written procedures referred to in 2.4(1) include provisions for an active monitoring of such investments during the construction phase, and for a maximisation of the amount covered from such investments in case of a work-out scenario.

11F.5

A firm with a qualifying infrastructure investment or a qualifying infrastructure corporate investment in bonds or loans must set up its asset-liability management to ensure that, on an ongoing basis, it is able to hold the investment to maturity.