Prudential Regulation Authority Rulebook

9.1

This Chapter does not apply to any rights (other than debts due) in respect of:

1. (1) investments in an affiliated company;
2. (2) securities or beneficial interests in a limited partnership;
3. (3) units or other beneficial interests in a collective investment scheme;
4. (4) a derivative, except as provided under 9.8 or 9.9; or
5. (5) a contract or asset which has the effect of a derivative except as provided under 9.8 or 9.9 or under 16.4 or 9.6.

9.2

The value of any debt due, or to become due, to a firm, other than a debt to which 7, 9.3, 9.4, 9.5, 9.7 or 14 applies, must be:

1. (1) in the case of a debt which is due, or will become due, within twelve months of the relevant date (including any debt which would become due within that period if the firm were to exercise any right to which it is entitled to require payment of the same), the amount which can reasonably be expected to be recovered in respect of that debt; and
2. (2) in the case of any other debt, the amount which would reasonably be paid by way of consideration for an immediate assignment of the debt; and

in either case due account being taken of the terms and conditions for payment of the debt and, where the debt is secured, the nature and quality of the security.

9.3

Any debt due, or to become due, to a firm under a letter of credit must be left out of account for the purposes of this Part.

9.4

In the case of long-term insurance business carried on by a firm, the value of any debt due, or to become due, to the firm which is secured on a policy of insurance issued by the firm and which (together with any other debt secured on that policy) does not exceed the amount payable on a surrender of that policy at the relevant date must be the amount of that debt.

9.5

Subject to 9.6, the value of any rights of the firm under a contract of reinsurance to which it is a party must be the amount which can reasonably be expected to be recovered in respect of those rights.

9.6

9.5 does not apply to:

1. (1) rights under a contract of reinsurance in respect of long-term insurance business except to the extent that debts are due under such contracts; or
2. (2) debts to which 7 applies which are due or are to become due.

9.7

Any debt due, or to become due, to a firm:

1. (1) from an intermediary in respect of money advanced on account of commission to which that intermediary is not absolutely entitled at the relevant date; or
2. (2) which is a debt owed in respect of premiums (due account being taken of rebates, refunds and commissions payable) which is recorded in the firm’s accounting records as due and payable and has been outstanding for more than three months,

must be left out of account for the purposes of this Part.

9.8

The value of any right to recover assets transferred by way of initial margin in respect of a derivative or a contract or asset having the effect of a derivative must be determined:

1. (1) where the initial margin was a payment in cash, as if there were a debt owed to the firm for that amount; and
2. (2) where the initial margin took the form of a transfer of securities, as if there were a debt owed to the firm of an amount equal to the value of such securities as determined in accordance with this Part.

9.9

The value of any rights arising under a derivative or under a contract or asset having the effect of a derivative, must be the value of any right to recover assets transferred by way of initial margin together with the value of any other unconditional right to receive a specified amount.