FCA Handbook - MIFIDPRU 3.7A Composition of capital for parent undertakings subject to the group capital test

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MIFIDPRU 3.7A Composition of capital for parent undertakings subject to the group capital test

This section applies to a parent undertaking in accordance with MIFIDPRU 3.1A.2R.

A parent undertaking must, at all times, have own funds instruments that satisfy the following conditions:
1. (1) the parent undertaking's common equity tier 1 capital must be at least equal to:
  1. (a) the sum of the book value of the parent undertaking's holdings of the common equity tier 1 capital of the relevant financial undertakings under MIFIDPRU 2.6.5R; plus
  2. (b) the total amount of all the parent undertaking's contingent liabilities in favour of the relevant financial undertakings under MIFIDPRU 2.6.5R;
2. (2) the sum of common equity tier 1 capital and additional tier 1 capital of the parent undertaking must be at least equal to the sum of:
  1. (a) the amounts in (1)(a) and (1)(b); plus
  2. (b) the sum of the book value of the parent undertaking's holdings in the additional tier 1 capital of the relevant financial undertakings under MIFIDPRU 2.6.5R; and
3. (3) the sum of the parent undertaking's own funds instruments must be at least equal to the total requirement under MIFIDPRU 2.6.5R.

As explained in MIFIDPRU 2.6.6G, the group capital test effectively applies to each intermediate parent undertaking, as well as to the ultimate parent undertaking of the investment firm group.

(1) This rule applies where a responsible UK parent applies the approach in MIFIDPRU 2.6.7R(2)(a) in relation to an undertaking established in a third country.
(2) Where this rule applies, a responsible UK parent must comply with MIFIDPRU 3.3A.3R or MIFIDPRU 3.6A.8R in relation to any issuance of own funds instruments by the undertaking established in a third country.