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
14.3
A firm which is a parent institution in a Member State must comply with the ICAAP rules on a consolidated basis.
- 01/01/2014
14.4
A firm controlled by a parent financial holding company in a Member State or a parent mixed financial holding company in a Member State 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 under Article 111 of the CRD.
[Note: Art 108(2) and 108(3) of the CRD]
- 01/01/2014
14.5
A firm that is a subsidiary must apply the ICAAP rules on a sub-consolidated basis if the firm, or the parent undertaking where it is a financial holding company or mixed financial holding company, have an institution or financial institution or an asset management company as a subsidiaryin a third country or hold a participation in such an undertaking.
[Note: Art 108(4) of the CRD]
- 01/01/2014
14.6
If the ICAAP rules apply to a firm on a consolidated basis or on a sub-consolidated basis the firm must carry out consolidation to the extent and in the manner prescribed in Articles 18(1), 18(8), 19(1), 19(3), 23 and 24(1) of the CRR and Groups 2.1-2.3.
- 01/01/2014
14.7
For the purpose of the ICAAP rules as they apply on a consolidated basis or on a sub-consolidated basis:
- (1) the firm must ensure that the consolidation group has the processes, strategies and systems required by the overall Pillar 2 rule in 3.1;
- (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) 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 firm considers should be held by the members of the consolidation group;
- (4) other references to resources must be read as being to resources of the members of the consolidation group;
- (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) 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) a firm 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; and
- (8) in particular, to the extent that the transferability of resources affects the assessment in (2), a firm 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.
- 01/01/2014
14.8
A firm 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.
- 01/01/2014
14.9
The firm 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 is subject.
- 01/01/2014
14.10
A firm must also 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 each firm which is a member of the consolidated group on the following basis:
- (a) the amount allocated to each firm must be decided on the basis of the principles in 14.9; and
- (b) if the process in (a) were carried out for each group member, the total so allocated would equal 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.
- 01/01/2014
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 is a member of a consolidation group, the firm must ensure that the risk management processes and internal control mechanisms at the level of the consolidation group of which it is a member comply with the obligations set out in the risk control rules on a consolidated basis (or a sub-consolidated basis).
- 01/01/2014
14.13
Compliance with the obligations referred to in 14.12 must enable the 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]
- 01/01/2014
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 a firm on a consolidated basis if the ICAAP rules apply to it on a consolidated basis and applies to a firm on a sub-consolidated basis if the ICAAP rules apply to it on a sub-consolidated basis.
- 01/01/2014
14.16
When the overall financial adequacy rule in 2.1 applies on a consolidated basis or sub-consolidated basis, the firm must ensure that at all times its 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 cannot be met as they fall due.
- 01/01/2014