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

CRD IV for Investment Firms
CP13/6
CRR
article
FCA
Handbook
reference –
if existing
discretion
Area of national discretion
Does the
FCA intend
to exercise
the relevant
discretion from
1 January 2014?
317(4) BIPRU
6.4.5R
to 6.4.9R
BIPRU
6.4.15R
323 BIPRU
6.5.26R
to BIPRU
6.5.30AG
325 BIPRU
8.7.25R
327(2) BIPRU
7.3.3R,
BIPRU
7.3.13R
This discretion relates to the calculation of the
Standardised Approach for operational risk. A firm may
request to adjust their operational risk calculation as
due to a merger, an acquisition or a disposal of entities
or activities, a simple three year average of the relevant
indicator is not an unbiased calculation. The FCA must
consider such a request, and if approved, inform the
EBA of this decision. Further, the FCA is able to require
the firm to modify its calculation in such circumstances.
The FCA shall permit institutions to recognise the
impact of insurance (subject to conditions) where
the institution can demonstrate that a noticeable risk
mitigating effect is achieved.
Firms may calculate their net market risk requirements
on a consolidated basis by offsetting positions
between different undertakings within a group, subject
to certain conditions being met. FCA shall grant
permission if these conditions are met.
This provision prohibits netting convertible position
and offsetting underlying unless the FCA adopts an
approach dealing with likelihood of conversion or
requires firms to hold own funds to cover losses which
might result from conversion.
Yes
Yes
Yes
Yes
329(1),
352(1)
and
358(3)
329(1),
352(1)
and
358(3)
BIPRU
7.2.32
BIPRU
7.3.21R
BIPRU 7.9
Under these articles firms must use the delta of the
position underlying an option in order to calculate
market risk own fund requirements for options and
warrants. Firms must use the delta determined by the
exchange. Where the exchange does not make delta
available or in relation to OTC options, the delta shall
be that calculated by the firm itself using generally
accepted industry standard pricing models, subject to
the permission of the FCA.
Yes
331(1) BIPRU 7.9 G Firms who wish to use sensitivity models to calculate
interest rate sensitivity on derivative instruments must
seek explicit permission to do so from the FCA.
Firms which do not use models may offset their
positions provided that they meet the conditions
outlined in the article.
336 Firms are permitted to calculate estimates of PDs and
LGDs used as inputs in to the supervisory formula for
securitisation positions. These are to be derived from
the Incremental Risk Charge (IRC) model of a firm that
has permission to use a model to calculate the specific
risk of debt instruments.
Firms must notify the FCA that they operate such a model.
Yes
Yes
352(2) BIPRU
7.5.4(1)(c)R
Permission to hedge open currency positions by taking
an offsetting position.
Yes
Financial Conduct Authority July 2013
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