4

Liquidity (CRR) Article 428F: Interdependent assets and liabilities

4.1

The PRA will generally not grant permissions under this Article in cases where the firm applies on the basis of a liquidity consolidation group unless the entities that hold the asset and record the liability respective are either:

  1. (i) both defined as ‘ring-fenced bodies’ or the subsidiaries or parents of ring-fenced bodies under FSMA, s142A; or
  2. (ii) both not defined as ‘ring-fenced bodies’ or the subsidiaries of ring-fenced bodies under FSMA.

4.2

When assessing firms’ applications under this Article, the PRA will consider whether the proposed treatment might give rise to perverse incentives or unintended consequences which would be contrary to the PRA’s statutory objectives. The PRA expects firms to provide particular assurances that this test is satisfied where the asset and/or liability in question is a derivative.