[X1PART TWO U.K. [F1OWN FUNDS AND ELIGIBLE LIABILITIES]

TITLE III U.K. QUALIFYING HOLDINGS OUTSIDE THE FINANCIAL SECTOR

Article 89 U.K. Risk weighting and prohibition of qualifying holdings outside the financial sector

1 . A qualifying holding, the amount of which exceeds 15 % of the eligible capital of the institution, in an undertaking which is not one of the following shall be subject to the provisions laid down in paragraph 3:

( a ) a financial sector entity;

( b ) an undertaking, that is not a financial sector entity, carrying on activities which the competent authority considers to be any of the following:

(i)

a direct extension of banking;

(ii)

ancillary to banking;

(iii)

leasing, factoring, the management of unit trusts, the management of data processing services or any other similar activity.

2 . The total amount of the qualifying holdings of an institution in undertakings other than those referred to in points (a) and (b) of paragraph 1 that exceeds 60 % of its eligible capital shall be subject to the provisions laid down in paragraph 3.

3 . Competent authorities shall apply the requirements laid down in point (a) or (b) to qualifying holdings of institutions referred to in paragraphs 1 and 2:

( a ) for the purpose of calculating the capital requirement in accordance with Part Three, institutions shall apply a risk weight of 1 250  % to the greater of the following:

(i)

the amount of qualifying holdings referred to in paragraph 1 in excess of 15 % of eligible capital;

(ii)

the total amount of qualifying holdings referred to in paragraph 2 that exceed 60 % of the eligible capital of the institution;

( b ) the competent authorities shall prohibit institutions from having qualifying holdings referred to in paragraphs 1 and 2 the amount of which exceeds the percentages of eligible capital laid down in those paragraphs.

Competent authorities shall publish their choice of (a) or (b).

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