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The FCA has now published the last element of its new prudential regime which will come into effect for UK investment firms from New Year’s Day. There are a number of other deadlines and milestones to keep in mind – not least the questionnaire which should have now been submitted.
The third of the FCA’s IFPR policy statements was published on 26th November: PS21/17 and, along with the rules from the first two, are now part of the final guidance.
The policy statement was brief compared to the previous ones and set out finalised guidance in the following areas:
Firms’ disclosure requirements – Firms with a 31 December 2021 year end will not have to follow IFPR disclosure requirements until 2023 so will still need to publish a Pillar 3 statement in 2022.
Information for depositories – The statement confirmed these cannot be SNI firms (those categorised as ‘small and non-interconnected’)
Resolution plans – Full scope investment firms will no longer need to have resolution plans
Notification requirements – Firms will need to make notifications in Connect. There are some key dates firms will need to consider
- Any firm that has not been subject to CRR capital rules will need to complete a capital notification form by 1 January so they can include capital instruments in own funds calculations for IFPR
- Firms who have had submitted these forms for CRR will need to submit another form by 1 February
- Any firm who wants to apply the Group capital test from 1 January will need to submit their application by 1 February
- Any non SNI firm will need to begin collecting data relevant to the activities they undertake for K-factors by no later than 1 December 2021.
We have had feedback from some clients who operate a matched principal trading model that K-factors for concentration risk are resulting in large capital requirements. We recommend that if you operate this business model and have not modelled your K-capital requirements you do so as soon as possible so you can demonstrate you will not be in breach on your overall financial adequacy threshold conditions on 1 January.
Firms have now had to submit information for their new FCA returns by answering questions in an IFPR questionnaire. One of the questions was when firms want to submit their first ICARA questionnaire return. FCA have provided some technical training sessions for firms on this area. Some firms were surprised to hear that FCA expect most questionnaires to be sent in the later half of 2022 or early 2023. The ICARA reference date still needs to be 2022. If you want to change your questionnaire to amend any information, there is still an opportunity to do so.
Even with the extended deadline there is still a lot for firms to do on the ICARA so we suggest you don’t leave it too late and start to align your risk management processes so they meet the requirements set out in the ICARA.
Our specialist prudential team are working with a variety of investment firms to help them get ready for IFPR across a variety of areas including:
- consolidation analysis
- capital modelling
- ICARA training
- board training.
We now also have a flexible ICARA template to help firms meet the regulators’ requirements. Get in touch to find out more.
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