Individual guidance
This page sets out some practical information for firms about individual guidance given in relation to the Handbook provisions that are repealed and replaced by Handbook text implementing the CRD. It also contains some information about transitional provisions.
GENPRU and BIPRU replace IPRU(Bank), IPRU(BSoc) and IPRU(Inv) text for firms within the scope of the CRD. The replacement text in BIPRU and GENPRU is, in the majority of cases, substantially different from the text it replaces. Firms should therefore consider the extent to which they can continue to place reliance on individual guidance issued in respect of IPRU Handbook provisions.
This page does not deal with individual guidance relating to regulatory reporting issues.
The GENPRU and BIPRU provisions referred to in this page are contained the following documents:
Types of individual guidance
We have given two distinct types of individual guidance on IPRU material:
- interpretive guidance: individual guidance given to a firm about how it should interpret a particular IPRU provision in the particular circumstances that applied to the firm when the guidance was given; and
- concessions: individual guidance that disapplies, or tends to reduce the burden of, complying with guidance in the IPRUs. We have typically given concessions in relation to guidance in IPRU(Bank) and IPRU(BSoc).
Concessions will not carry forward into the new regime, unless they are covered by an explicit transitional rule.
IPRU provisions that continue beyond 1 January 2007
Some IPRU material will continue to apply to firms after our implementation of the CRD. In particular:
- firms that use the IRB or AMA approaches will calculate the capital floors under IPRU (see BIPRU TP2);
- calculations under IPRU put a floor on the modified operational risk requirement that is available to certain investment firms by waiver (see BIPRU TP12);
- the scope of the transitional concentration risk regime for intra-group exposures is partly defined by IPRU provisions (see BIPRU TP17 and TP18); and
- for banks and building societies, parts of IPRU will continue to provide general guidance on liquidity (see GENPRU 1.2.21G).
Firms that are using IPRU provisions as outlined above may continue to rely on related individual guidance provided that the circumstances that applied when the original guidance was given continue to apply.
Individual guidance carried forward by transitional rules
In some specific areas we will carry forward the effect of some types of individual guidance by using transitional rules. The main areas, as set out in FS 05/1, are:
- the definition and composition of capital– see GENPRU TP8
- the concentration risk regime for intra-group exposures – see BIPRU TP17, TP18 and TP19; and
- banks' individual capital ratios and building societies' threshold ratios - GENPRU TP9 preserves these throughout 2007 and until we give those firms individual capital guidance under the new regime.
Other interpretive individual guidance
SUP 9.4 sets out the general position on reliance on individual guidance: 'Individual guidance is usually given in relation to a set of particular circumstances which exist when the guidance is given. If the circumstances later change, for example, because of a change in the circumstances of the person or a change in the underlying rule or other requirement, and the premises upon which individual guidance was given no longer apply, the guidance will cease to be effective.'
So, as we explained in FS 05/1, IPRU individual guidance that is not explicitly covered by a transitional rule will not carry forward into the new regime unless:
- it is an interpretation of a provision that is substantially unchanged; and
- the particular circumstances relating to the original request for individual guidance still apply.
In our view, all (or most) of the rules in the following areas have changed substantially or are entirely new:
| GENPRU | Adequacy of financial resources (1.2) |
| Valuation (1.3) | |
| Calculation of capital resources requirements (2.1) | |
| BIPRU | Definition of the trading book (1.2) |
| Advanced approaches, other than for market risk (1.3) (4) (6, relevant parts) (7, relevant parts) | |
| Adequacy of financial resources (2.2) | |
| Solo consolidation (2.1) | |
| Credit risk mitigation (5) | |
| Operational risk (6) | |
| Group risk (8) | |
| Securitisation (9) | |
| Disclosure (11) |
In other areas, firms that wish to continue to rely on interpretive individual guidance given on IPRU material should check that it meets the criteria at the beginning of this section. In deciding if a particular provision is substantially unchanged, firms should consider the surrounding context of both the IPRU provision and its 'counterpart' in the new regime. So, for example, any IPRU individual guidance that is inconsistent with general guidance in GENPRU or BIPRU will cease to be effective.
If a firm has genuine doubts about whether or not a particular piece of individual guidance meets the criteria to be carried forward into the new regime, the firm may wish to raise the issue with its normal FSA contacts. In due course, we may also wish to review the IPRU individual guidance on which firms continue to rely in particular areas.
Fresh individual guidance on GENPRU/BIPRU rules
Firms should consider carefully any request made to FSA for fresh individual guidance on the new regime. We will only give individual guidance if there is uncertainty after a firm has considered the new rules and guidance. Our aim is to target individual guidance at a relatively small number of significant areas. In all cases we will expect firms to explain why any relevant GENPRU/BIPRU general guidance is not sufficient for their circumstances.
Firms may request individual guidance using their normal FSA contacts, as set out in the Supervision manual. Before applying for individual guidance, firms should bear in mind the comments we have already made, including our comment in FS 05/1 that we will be unable to make issuing fresh individual guidance a priority during the initial period of the new regime.
Notifications
Notifications required under transitional provisions
Some of the transitional rules require firms to notify us that they need to use them. A firm intending to apply the TPs on the exemption of intra-group exposures from large exposure limits need to give the FSA one month's prior notice (see BIPRU TP17.18R-17.22R for banks and investment firms and BIPRU TP 18.10R for building societies).
A commodities firm that wishes to apply the transitional large exposures regime must notify the FSA of its strategy for managing, controlling and limiting concentration risk and of any breaches of internal concentration risk limits (see BIPRU TP 16.7R and 16.8R).