Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to every firm except:

1. (1) [deleted.]
2. (2) [deleted.]
3. (3) an insurer that is not a UK Solvency II firm.

1.2

This Part does not apply to a firm with respect to a financial conglomerate of which it is a member if the interest of the financial conglomerate in that firm is no more than a participation.

1.3

The rules in 3.2, 4.2 and Chapter 7 do not apply with respect to a third country financial conglomerate.

1.4

In this Part, the following definitions shall apply:

ancillary insurance services undertaking

in relation to any undertaking in a consolidation group, an undertaking complying with the following conditions:

1. (1) its principal activity consists of:
1. (a) owning or managing property;
2. (b) managing data-processing services;
3. (c) providing health and care services; or
4. (d) any other similar activity;
2. (2) the activity in (1) is ancillary to the principal activity of one or more insurance undertakings; and
3. (3) those insurance undertakings are also members of that consolidation group.

applicable sectoral consolidation rules

means in respect of a financial sector the PRA’s sectoral rules about capital adequacy and solvency on a consolidated basis applicable to that financial sector under the table in paragraph 8 of Annex 2 of this Part (Application of sectoral consolidation rules).

applicable sectoral rules

means in respect of a financial sector, applicable sectoral consolidation rules for that financial sector and the PRA’s sectoral rules about capital adequacy and solvency for:

1. (1) the banking and investment services sector as set out in paragraph 6.2 of Annex 2 to this Part; or
2. (2) the insurance sector as set out in paragraph 6.4 of Annex 2 to this Part;

which of those sets of rules apply for the purpose of a particular calculation depends on the nature of that calculation.

banking and investment services sector

means the investment services sector and the banking sector taken together.

banking sector

means a sector composed of one or more of the following entities:

1. (1) a credit institution;
2. (2) a financial institution; and
3. (3) an ancillary services undertaking that is not an ancillary insurance services undertaking.

conglomerate capital resources

in relation to a financial conglomerate with respect to which 3.3 applies capital resources as defined in whichever of paragraphs 1.1 of Part 1 or 2.1 of Part 2 of Annex 2 applies with respect to that financial conglomerate.

conglomerate capital resources requirement

in relation to a financial conglomerate with respect to which 3.3 applies the capital resources requirement defined in whichever of paragraphs 1.3 or 2.4 of Annex 2 applies with respect to that financial conglomerate.

consolidation group

means:

1. (1) a conventional group; or
2. (2) undertakings linked by a common management relationship or an Article 18(6) relationship.

If a parent undertaking or subsidiary undertaking in a conventional group (the first person) has a consolidation common management relationship or an Article 18(6) relationship with another person (the second person), the second person, and any subsidiary undertaking of the second person, is also a member of the same consolidation group.

conventional group

means a group of undertakings that consists of a parent undertaking and

any person that is either:

1. (1) a subsidiary undertaking of that parent undertaking; or
2. (2) an undertaking in which that parent undertaking or a subsidiary undertaking of that parent undertaking holds a participation.

CRR investment services sector

means a sector composed of one or more of the following entities:

1. (1) a designated investment firm; and
2. (2) a financial institution.

delegated acts

means Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).

electronic money institution

means, in accordance with regulation 2(1) of the Electronic Money Regulations, an authorised electronic money institution or a small electronic money institution.

financial conglomerate notification

means a notification issued in respect of a financial conglomerate that has been identified as a financial conglomerate as contemplated by regulation 2 of the Financial Conglomerates Regulations.

financial sector

means one of the banking and investment services sector or the insurance sector.

Financial Services Register

means a public record, as required by section 347 of FSMA (The public record), regulation 4 of the Payment Services Regulations (SI 2009/209) and, regulation 4 of the Electronic Money Regulations.

insurance sector

means a sector composed of one or more of the following entities:

1. (1) a UK Solvency II firm;
2. (2) third country insurance undertaking or a third country reinsurance undertaking;
3. (3) an insurance holding company; and
4. (4) in the relevant circumstances described in 5, an asset management company or an alternative investment fund manager.

investment services sector

means the MIFIDPRU investment services sector and the CRR investment services sector taken together.

MIFIDPRU

means the Prudential Sourcebook for MiFID Investment Firms module of the FCA Handbook.

MIFIDPRU investment firm

has the meaning given in the FCA Handbook.

MIFIDPRU investment services sector

means a sector composed of one or more of the following entities:

1. (1) an investment firm other than a designated investment firm;
2. (2) a financial institution that is not an investment firm; and
3. (3) in accordance with rule 5, an asset management company or an alternative investment fund manager.

mixed financial holding company

has the meaning given in regulation 1(2) of the Financial Conglomerates Regulations.

most important financial sector

means the financial sector, being either the insurance sector or the banking and investment services sector, which has the largest average referred to in the box titled Threshold Test 2 in Annex 1; and so that the investment services sector and the banking sector are treated as one for the purpose of the definition of financial conglomerate and for the purposes of 1 to 5 of this Part.

overall financial sector

means a sector composed of one or more of the following types of entities:

1. (1) members of the financial sectors; and
2. (2) except where 1 to 5 and Annex 2 to this Part provide otherwise, a mixed financial holding company.

own funds requirements

has the meaning given by Article 92 of the CRR.

participation

has the meaning given in point (35) of Article 4(1) of the CRR.

PRA financial conglomerate notification

means a notification in respect of a financial conglomerate in accordance with Regulation 2 of the Financial Conglomerates Regulations issued by the PRA or by the UK Financial Services Authority and attributed to the PRA on 1 April 2013, identifying that financial conglomerate and its coordinator.

recognised third country credit institution

means a credit institution that satisfies the following conditions:

1. (1) its head office is outside the UK;
2. (2) it is authorised by a third country competent authority in the state or territory in which the credit institution's head office is located; and
3. (3) that third country competent authority applies prudential and supervisory requirements to that credit institution that are at least equivalent to those applied in the UK.

recognised third country investment firm

means an investment firm that falls within the meaning of “investment firm” given in point (2) of Article 4(1) of the CRR and which satisfies the following conditions:

1. (1) its head office is outside the UK;
2. (2) it is authorised by a third country competent authority in the state or territory in which the investment firm's head office is located; and
3. (3) that investment firm is subject to and complies with prudential rules of or administered by that third country competent authority that are at least as stringent as those laid down in whichever of the CRR or MIFIDPRU would apply if its head office was in the UK.

regulated entity

means one of the following:

1. (1) a credit institution;
2. (2) a UK Solvency II firm, a third country insurance undertaking, a third country reinsurance undertaking;
3. (3) an investment firm;
4. (4) an asset management company for the purposes described in 5; or
5. (5) an alternative investment fund manager for the purposes described in 5;

whether or not it is incorporated in, or has its head office in, the UK.

sectoral rules

means, in relation to a financial sector, the following rules and requirements relating to the prudential supervision of regulated entities within that financial sector:

1. (1) for the purpose of calculating solo capital resources and a solo capital resources requirement:
1. (a) to the extent provided for in paragraphs 6.4 to 6.6 of Annex 2, rules and requirements that are referred to in those paragraphs; or
2. (2) for all other purposes, rules and requirements of the PRA.
3. and so that:
4. (3) in relation to prudential rules about consolidated supervision for any financial sector, those requirements include ones relating to the form and extent of consolidation;
5. (4) in relation to any financial sector, those requirements include ones relating to the eligibility of different types of capital;
6. (5) in relation to any financial sector, those requirements include both ones applying on a solo basis and ones applying on a consolidated basis; and
7. (6) references to the PRA’s sectoral rules are to sectoral rules in the form of rules, and as applicable, the CRR, and delegated acts.

smallest financial sector

means the financial sector with the smallest average referred to in the box titled Threshold Test 2 in Annex 1, the investment services sector and the banking sector being treated as one in the circumstances set out in 1 to 5 of this Part.

solo capital resources

means capital resources that are or would be eligible as capital under the sectoral rules that apply for the purpose of calculating its solo capital resources requirement. Paragraph 7.1 of Annex 2 applies for the purpose of this definition in the same way as it does for the definition of solo capital resources requirement.

solo capital resources requirement

a capital resources requirement calculated on a solo basis as defined in paragraph 6.2 to 6.7 of Annex 2.

solvency deficit

in Annex 2 and in respect of a member of the overall financial sector, means the amount, if any, by which its solo capital resources fall short of its solo capital resources requirement.

third country competent authority

has the meaning given in regulation 7 of the Financial Conglomerates Regulations.

UCITS management company

means:

1. (1) except in relation to MiFID business, a firm which is either:
1. (a) a UCITS firm; or
2. (b) a UCITS investment firm.
2. (2) in relation to MiFID business, a management company as defined in the UCITS Directive.

[Note: point (28) of Article 4(1) of MiFID II]

UK regulated entity

means a regulated entity that is a UK firm.

1.5

Unless otherwise defined in this Part, any italicised expression used in this Part and in the CRR or the Solvency II Directive has the same meaning as in the CRR or the Solvency II Directive.