The Bank Recovery and Resolution (No. 2) Order 2014

Determination of minimum consolidated requirement

126.—(1) This article applies for the purpose of determining the minimum consolidated requirement.

(2) Where every group entity is set up in the United Kingdom, the Bank must determine the minimum consolidated requirement, and is solely responsible for the determination.

(3) Where a group entity is set up in another EEA State, the Bank must—

(a) make a provisional determination of the minimum consolidated requirement;

(b) give notice of the provisional determination to the resolution authority established in that EEA State; and

(c) endeavour within the college to determine the minimum consolidated requirement jointly with that resolution authority.

(4) The amount of each group institution’s total liabilities must include total liabilities under any derivative contracts held by the institution.

(5) An assessment of total liabilities under a derivative contract must take account of the rights of the parties to the contract to set off or net under a netting arrangement.

(6) A liability must be excluded from the amount of the group institution’s own funds or eligible liabilities if—

(a) the instrument that creates the liability is not issued or fully paid up;

(b) the liability is owed to, or secured or guaranteed by, the institution itself;

(c) the purchase of the instrument that creates the liability was funded directly or indirectly by the institution itself;

(d) the liability has a remaining maturity of less than one year;

(e) the liability arises from a derivative contract held by the institution;

(f) the liability arises from a deposit in respect of which the depositor’s rights, in any proceedings relating to the insolvency of the institution, would be preferred to the rights of other creditors; or

(g) the instrument that creates the liability is governed by the law of a third country and the Bank is not satisfied that a decision by the Bank to convert or write down the liability would be effective under that law.

(7) For the purpose of paragraph (6)(d), where the instrument that creates the liability confers on a party to the instrument a right to the repayment of a sum before maturity, the maturity date is the first date on which that party would become entitled to repayment if the right were exercised.

(8) The determination—

(a) must be based on an assessment of the criteria set out in Article 45.6 of the recovery and resolution directive; and

(b) must take account of any provision made in the group resolution plan for the separate resolution of a subsidiary set up in a third country.

(9) Where the Bank makes an assessment under paragraph (8)(a) with respect to a group institution authorised by the PRA or FCA, it must make the assessment in consultation with the appropriate regulator.