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;
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; and
3. (c) where the central bank claim is represented by reserves in an omnibus account, the conditions in A2 are met.

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.

A2

The conditions relating to an omnibus account referred to in A1(c) are as follows.

1. (a) There are effective legal, operational, risk management and governance arrangements relating to the omnibus account.
2. (b) The arrangements ensure that: 
   
   1. (i) a participant entity’s entitlement to funds in the omnibus account is discrete from any other participant entity’s entitlement;
   2. (ii) each participant entity always has access to details of such entitlement; and
   3. (iii) the funds in the omnibus account to which a participant entity is entitled are not available to any other participant entity or any other participant entity’s creditors.
3. (c) If a third-party holds the omnibus account on behalf of the participant entities, the arrangements ensure that the funds in the omnibus account are:
   1. (i) segregated from any other assets held by the third-party; and
   2. (ii) not available to any creditors of the third-party (except insofar as the central bank can debit charges from the omnibus account).
4. (d) If the central bank where the omnibus account is held can debit charges from the omnibus account, the arrangements ensure that:
   1. (i) each participant entity has access to details of the method of calculating its due portion of any charge levied by the central bank on the omnibus account;
   2. (ii) the method of apportionment is not unfair or unreasonable; and
   3. (iii) the central bank does not debit the funds in the omnibus account to which a participant entity is entitled with an amount greater than the total of:
      1. (1) the participant entity’s due portion of the charges in respect of the omnibus account; and
      2. (2) if the central bank can also deduct charges relating to any other account that the participant entity holds at the central bank, the amount of any such due charges.
5. (e) If the omnibus account is used for the purpose of settling obligations between participant entities through a payment system, the arrangements ensure that the participant entities’ balances in the payment system are always fully funded with funds held in the omnibus account.
6. (f) If the omnibus account is used as part of the operation of a payment system (whether for the purpose of settlement or otherwise), the payment system is subject to oversight, including through oversight of any operator of such payment system, by a regulatory body in the jurisdiction of the central bank, in accordance with the Principles for Financial Market Infrastructures.
7. (g) The requirements in Liquidity Coverage Ratio (CRR) Articles 7(2) and 8(2) are met in respect of the funds held by or on behalf of the firm in the omnibus account.

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.

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3.

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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.

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6.

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7.

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