CP13/6 - CRD IV for Investment Firms - Financial Conduct Authority

FCA 2013/xx
4.3.12 G Where a firm seeks to demonstrate to the FCA that the effect of its noncompliance
with the requirements of Part Three, Title II Chapter 3 of the EU
CRR (Internal ratings based approach) is immaterial under article 146(b) of
the EU CRR (Measures to be taken where the requirements cease to be met),
the FCA will not be satisfied that this is the case unless a firm has taken into
account all instances it has not complied with the requirements of the IRB
approach and demonstrated that the overall effect of non-compliance is
immaterial.
Corporate governance
4.3.13 G (1) The FCA expects that it would not be satisfied that a committee could
be treated as a ‘designated committee’ for the purposes of article 189
of EU CRR (Corporate governance) if it did not contain at least one
member of the firm’s management body.
(2) Where the firm's rating systems are used on a unified basis under
article 20(6) of the EU CRR, the FCA considers that the governance
requirements in article 189 of the EU CRR can only be met if the
subsidiaries have delegated to the governing body or designated
committee of the EEA parent institution, EEA parent financial holding
company or EEA parent mixed financial holding company
responsibility for approval of the firm's rating systems.
[Note: see articles 189 and 20(6) of the EU CRR and article 3(1)(7) of CRD]
Permanent partial use: policy for identifying exposures
4.3.14 G In the event that a firm wishes to permanently apply the Standardised
Approach to certain exposures, the FCA would expect the firm to have a welldocumented
policy explaining the basis on which exposures are to be selected
for permanent exemption from the IRB approach. This policy should be
provided to the FCA when the firm applies for permission to use the IRB
approach. Where a firm also wishes to undertake sequential implementation,
the firm’s roll-out plan should provide for the continuing application of that
policy on a consistent basis over time.
Permanent partial use: exposures to sovereigns and institutions
4.3.15 G (1) The FCA can only permit the exemption of exposures to sovereigns
and institutions under article 150(1)(a) and (b) of the EU CRR if the
number of material counterparties is limited and it would be unduly
burdensome to implement a rating system for such counterparties.
(2) The FCA considers that the ‘limited number of material
counterparties’ test is unlikely to be met if for the UK group total
outstandings to ‘higher risk’ sovereigns and institutions exceed either
£1bn or 5% of total assets (other than for temporary fluctuations
above these levels). For these purposes, ‘higher risk’ sovereigns and
institutions are considered to be those that are unrated or carry ratings
of BBB+ (or equivalent) or lower. In determining whether to grant
this exemption the FCA will also consider whether a firm incurs
exposures to ‘higher risk’ counterparties which are below the levels
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