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Capital Requirements Directive (CRD). This sets out the... start learning
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the prudential (capital) rules for financial firms. It applies to banks, building societies and most investment firms. The aim is to ensure that firms hold adequate financial resources and have adequate controls to prudently manage the business
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Principle 4 of the FCA's Principles for Businesses establishes that: start learning
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‘a firm must maintain adequate financial resources’ Financial resources include both capital resources and liquidity resources, so that the firm can meet its liabilities as they fall due.
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Capital Adequacy Requirements. The standards for investment firms are set out in three modules of the FCA Handbook: 3 start learning
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The General Prudential Sourcebook. | The Prudential Sourcebook for UK MiFID Investment Firms. | Interim Prudential Sourcebook for Investment Businesses. GENPRU - high-level standards for firms which are subject to Capital Requirements Directive. | MIFIDPRU - prudential requirements for UK-regulated firms. | Capital adequacy rules for investment firms.
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The Capital Requirements Directive (CRD) and the Capital Requirements Regulations (CRR) apply to __? start learning
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(banks/deposit taking institutions)
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CRD framework three pillars: Pillar 1 | Pillar 2 | Pillar 3 start learning
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Minimum capital requirements for credit & risk. | Firms decide if additional capital should be held to cover risks not covered in Pillar 1. | Disclosure of information about risks.
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Firms subject to CRD requirements must also comply with provisions relating to the quality of capital held. Capital is split into three tiers for this purpose: Capital Requirements Directive start learning
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Core Tier One capital. | Tier Two capital. | Tier Three capital For example: Permanent share capital, reserves, externally verified interim profits.| Long-term subordinated debt.| Short-term subordinated debt.
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With the exception of MiFID investment firms, firms that are not subject to the CRD requirements must adhere to the rules in the ‘IPRU-INV’ Sourcebook. Such firms include: 5 start learning
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Authorised professional firms,| securities and futures firms, | Lloyd’s underwriting agents,| service companies, | credit unions which provide junior ISA.
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start learning
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Parties commit to buy or sell standard quantity of an asset from another party on a specified date in the future, but at a price agreed today. As the price is agreed at the outset, the seller is protected from a fall in the price of the underlying asset.
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start learning
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The method by which firms authorised in one EU member state are, under MiFID II, permitted to carry on regulated financial services activities in another state without the need to become fully authorised in that other state.
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IPRU-INV. all firms must comply with two overarching requirements, Investment Firms Prudential Regime start learning
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Firms must at all times have available the amount and type of financial resources required by the regulator.| Firms must notify the relevant regulator immediately if the firm becomes aware that it is in breach of.
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The aim of the prudential regime (Investment Firms Prudential Regime (IFPR)) is to __? start learning
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is to simplify the requirements for FCA solo regulated MiFID investment firms by refocusing prudential requirements away from the risks that firms face.
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FCA investment firms are subject to__ 2 | IFPR outcomes identified by FCA start learning
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to consistent prudential requirements. | spend less time on complex capital requirement calculations
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A prudential regime that is aligned to the way that investment firms run their business by__ 2 | IFPR outcomes identified by FCA start learning
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taking into account the different business models of FCA investment firms. Prudential rules that are understandable (rules brought into a new single prudential sourcebook, MIFIDPRU).
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