Waivers: Liquidity modifications

The starting point of the liquidity regime is that a UK-incorporated subsidiary or UK branch of a foreign bank must be self-sufficient for liquidity purposes.

IFPR

Before considering the information on this page, please note that on 1 January 2022 a new prudential regime for UK investment firms authorised under MIFID (the Investment Firm Prudential Regime (IFPR)) will come into force.

This means: 

  • the majority of existing waivers and modifications to prudential rules in the FCA handbook will no longer apply
  • the majority of existing CRR permissions will no longer apply to FCA investment firms
  • the new rules contain transitional provisions that give some existing waivers and permissions status under the new regime − firms should consider the transitional provisions in the IFPR rules for more details
  • firms will need to consider applying for permissions, or rule waivers and modifications, of rules in the new sourcebook (MIFIDPRU)

Find out more about IFPR.

BIPRU 12

BIPRU 12 will apply in whole to the UK subsidiary or the UK branch.

In some cases it may not be appropriate for us to supervise the liquidity of a UK branch or subsidiary in isolation from its head office or parent. There will be situations whereby the nature and structure of the group make it more prudent to consider the liquidity position of the whole group, rather than the position of the solo UK subsidiary or branch. We also recognise that some branches and subsidiaries will pose a greater risk to our statutory objectives than others.

BIPRU 12.3 and 12.4 (unless waived by a whole-firm modification in the case of a branch) always apply on a solo basis, where solo refers to the BIPRU legal entity or the BIPRU branch. Group or whole-firm functions can be used to operate group wide systems and controls provided these group wide systems and controls ensure that the governing body of each of the solo entity or branch are still able to demonstrate compliance on a solo basis with 12.3 and 12.4. The use of group wide or whole-firm systems and controls, in this manner does not require a modification.

We will accept applications from groups, (UK subsidiaries) and branches for Intra-group Liquidity Modifications (subsidiaries) and Whole-firm Liquidity Modifications (branches).

The possibility of applying for such modifications will interest UK branches of EEA and non-EEA firms and UK incorporated subsidiaries subject to BIPRU 12.

A group seeking an Intra-group Liquidity Modification and a Whole-firm Liquidity Modification should apply for both at the same time. However, as the two types of modifications are likely to require different arguments under the FSMA s138 statutory tests, please use two separate application forms.

Under BIPRU 12.6, firms operating a relatively simple business model will be eligible for the Simplified ILAS Waiver. For firms in this category, the simplified ILAS approach prescribes: (a) the method of calculating its liquidity buffer, through the simplified buffer requirement of BIPRU 12.6.9R, and (b) the Individual Liquidity Systems Assessment (ILSA) which must be carried out according to BIPRU 12.6.21R.

This waiver is available by a Waiver by Consent process for firms who are eligible. If you wish to take advantage of this, you should first consult your FSA supervisor and then email us notifying us of your intention to apply for the waiver together with all your supporting documentation.

The following links provide additional information on the process and requirements for applying for Liquidity Modifications and the expected timescales:

If you have specific questions about liquidity modifications, please contact your usual supervisory contact.

Page updates

27/07/2021: Information added Investment Firms Prudential Regime (IFPR)