Capital requirements permissions application guidelines: CRD IV firms

Here are some useful guidelines for completing an application for specific permissions under the Capital Requirements Regulation (CRR). They are not intended to be exhaustive or guarantee that an application will be approved.

Liquidity subgroup applications

Our liquidity regime will continue to apply to FCA-authorised investment firms until the Liquidity Coverage Ratio (LCR) comes into force with the adoption of the Commissions delegated act in 2015.

Here is additional information on the process and requirements for applying for Liquidity Modifications under our liquidity regime and the expected timescales:

If you have any questions about Liquidity Modifications, please contact your usual supervisory contact.

Individual Consolidation method applications

We intend to exercise the discretion in CRR Article 9 in a similar manner to the previous solo consolidation regime. We will continue to apply a high level of scrutiny to these applications.

Individual consolidation is a method of allowing parent institutions to incorporate subsidiaries when calculating capital resources subject to certain conditions being met. Firms should read the specified CRR articles before applying for this CRR Permission.

To apply for permission to use this discretion, please include CRR Article 9 analysis as an appendix to your CRR Permission application form.

Inclusion of interim or year-end profits in Common Equity Tier 1 capital

Firms must obtain permission from us to include interim or year-end profits in Common Equity Tier 1 capital before they have taken a formal decision confirming the final profit or loss.

Firms must obtain that permission through the CRR permissions process. To help us review these applications, firms must complete and submit the Article 26(2) self-assessment form as additional supporting documentation in their CRR permissions application. 

Interest Rate Risk on Derivative Instruments

The Capital Requirement Directive (2013/36/EU)(CRD) and Capital Requirements Regulation (575/2013)(CRR) – jointly ‘CRD IV’, has adopted an approach that requires pricing models to be used to calculate the positions of derivatives and bonds with regard to changes in interest rates set out in CRR Article 339 (Table 2).

Firms must obtain permission from us if they intend to use their own sensitivity positions for the purposes of the standardised approach for derivatives and bonds. Firms will need to provide us with confirmation that they meet the minimum standards for each set of instruments for which a net weighted sensitivity position is computed. Firms will need to evidence the accuracy of both the sensitivities for each type of instrument and the calculation of the weighted net position.

Firms should read CRR Article 331 before applying for this CRR Permission.

The CRR Permission application form must be completed separately for each entity, or each set of instruments, for which a net sensitivity position is computed. Where positions differ only in the currency in which they are denominated these may be combined in one application form.

In addition to this, we also require that firms download and complete the following templates and submit this with their application:

CRR Article 331 template

CRR Article 331 - Interest rate inputs

Firms should submit the CRR Permission application form and respond to further queries in good time. We may ask for further information to help in assessing the application where required.

Issuances of Common Equity Tier 1 instruments

We will evaluate whether issuances of Common Equity Tier 1 instruments meet the criteria set out in Article 28 or, where applicable, Article 29. Firms shall classify capital instruments as CET1 instruments only after permission is granted by us.

Firms must obtain that permission through the CRR permissions process. To help us review these applications, firms must complete and submit the Article 26(3) self-assessment form as additional supporting documentation in their CRR permissions application. Please also provide:

  1. The total number of shares that has been issued or will be issued
  2. The nominal value per share