Prudential Regulation Authority Rulebook

3.1

This Chapter does not apply to a contract to the extent that it relates to, or is for the purposes of the making of an investment in, or is in connection with the making of an investment in, a building which is to be occupied by the firm and used by the firm for the conduct of its business.

3.2

Subject to 3.1, this Chapter applies to an obligation:

1. (1) under a contract relating to investments of the kind mentioned in item B under the heading "Assets" in Part I of Schedule 2 to Accounts Regulations (whether such contract constitutes an asset or liability of the firm);
2. (2) undertaken for the purposes of, or in connection with the making of, investments of the kind mentioned in (1); or
3. (3) under a contract providing for the purchase, sale or exchange of currency.

3.3

A firm which has or may have (following the exercise of any right by the firm or any other party) an obligation referred to in 3.2, to deliver assets or make a payment must:

1. (1) at all times identify the assets held by it which it considers to be the most suitable to cover such obligation; and
2. (2) make prudent provision for the effect on the amount of its excess assets of all reasonably foreseeable adverse variations between the value of the assets identified and the value of the assets which it is or may be obliged to deliver or the amount of the payment which it is or may be obliged to make.

3.4

For the purposes of 3.3, the ‘amount of its excess assets’ is the difference between the aggregate value of its assets (other than linked assets to the extent that they are held to match property-linked liabilities) determined in accordance with Friendly Society – Asset Valuation and the amount of its liabilities (other than property-linked liabilities or liabilities for which provision is made in accordance with this Chapter).