Home FCA Handbook MIFIDPRU MIFIDPRU 5 MIFIDPRU 5.5 The concentration risk soft limit and exposure value excess
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MIFIDPRU 5.5 The concentration risk soft limit and exposure value excess

The concentration risk soft limit

01/12/2021R
  1. (1)

    The concentration risk soft limit for EVs to an individual client or group of connected clients is 25% of a firm’s own funds, subject to (2) and (3).

  2. (2)

    Where an individual client is a MIFIDPRU-eligible institution, the concentration risk soft limit for that client is the higher of:

    1. (a)

      25% of the firm’s own funds; or

    2. (b)

      £150 million or 100% of the firm’s own funds, whichever is the lower.

  3. (3)

    Where a group of connected clients includes one or more MIFIDPRU-eligible institutions, the concentration risk soft limit for the group is the higher of:

    1. (a)

      (a) 25% of the firm’s own funds; or

    2. (b)

      £150 million or 100% of the firm’s own funds, whichever is the lower, provided that for the sum of exposure values with regard to all connected clients that are not MIFIDPRU-eligible institutions, the concentration risk soft limit remains at 25% of the firm’s own funds.

01/12/2021G

The Handbook definition of MIFIDPRU-eligible institution includes private or public undertakings, including the branches of such undertakings, provided that those undertakings, if they were established in the UK, would be UK credit institutions or MIFIDPRU investment firms, and provided that those undertakings have been authorised in a third country that applies prudential supervisory and regulatory requirements comparable to those applied in the UK.

The exposure value excess (EVE)

01/12/2021R
  1. (1)

    A firm that exceeds the concentration risk soft limit for a client or group of connected clients must calculate the exposure value excess (EVE).

  2. (2)

    A firm must calculate the EVE for an individual client or group of connected clients using the following formula:

    1. EVE = EV – L

    where:

    L = the concentration risk soft limit specified in MIFIDPRU 5.5.1R.