Transitional Provisions and Schedules

Part

GENPRU General Prudential sourcebook

Chapter

Transitional Provisions and Schedules

Printed on: 06/07/2024

Rulebook at: 01/08/2011

Transitional Provisions and Schedules

GENPRU TP 1

Application of GENPRU TP 1 to GENPRU TP 6 and other general provisions for insurers

Application of GENPRU TP 1 to GENPRU TP 6

1.1

GENPRU TP 1 - GENPRU TP 6 apply to an insurer.

1.2

GENPRU TP 1 - GENPRU TP 6 apply to an insurer to whom the relevant GENPRU rule listed in GENPRU TP Table 3R, GENPRU TP 4.3R, GENPRU TP 5.2R or GENPRU TP 6.2R applies. An insurer to whom GENPRU does not apply is not subject to GENPRU TP.

Version of IPRU to be used

1.3

Any reference in GENPRU TP 1 - GENPRU TP 6 to IPRU (INS) or to IPRU (FSOC) is to the version in force on 30 December 2004.

31/12/2006

GENPRU TP 2

IPRU(INS) waivers

Duration of transitional

2.1

GENPRU TP 2 applies until the relevant GENPRU rule is revoked.

Continuing effect of waivers

2.2

A rule in GENPRU listed in the Table at GENPRU TP 3 is disapplied, or is modified in its application, to a firm:
(1) in order to produce the same effect, including any conditions, as a waiver had on the corresponding rule in IPRU (INS);
(2) for the same period as the waiver would have lasted, if shorter than the period in GENPRU TP 2.1R;
provided the conditions set out in GENPRU TP 2.3R are satisfied.

2.3

The conditions referred to in GENPRU TP 2.2R are:
(1) the rule is shown in the Table at GENPRU TP 3 as corresponding with the rule in IPRU (INS) in relation to which the waiver was granted to the firm;
(2) the waiver was current as respects the firm immediately before 31 December 2004; and
(3) there is no specific transitional rule relating to the waiver.

2.4

GENPRU TP 2.2R does not have effect if, and to the extent that, it would be inconsistent with any EU law obligation of the United Kingdom.

2.5

A firm which has the benefit of a waiver to which GENPRU TP 2.2R applies must:
(1) notify the FSA immediately if it becomes aware of any matter which is material to the relevance or appropriateness of the waiver;
(2) maintain a written record of the rule in GENPRU to which it considers the waiver applies; and
(3) make the record available to the FSA on request.

01/12/2009

GENPRU TP 3

Table: IPRU(INS) waivers

3.1

This table belongs to GENPRU TP 2.

Rules in GENPRU

Corresponding rules in IPRU (INS)

1.3.47R

4.2 (3)

2.1.13R

2.9 (3)

2.1.24R

2.9

2.1.25R

2.9

2.1.34R

2.4 (6)

2.2.107R

2.10 (7)

2.2.251R

4.14

4.5 (7)

31/12/2006

GENPRU TP 4

Capital instruments

Duration

4.1

GENPRU TP 4 applies until the relevant rule is revoked

Application

4.2

Subject to GENPRU TP 4.4R, GENPRU TP 4 applies to a firm which immediately before 31 December 2004 had the benefit of a waiver in relation to IPRU (INS) rule 2.10 or 5.2, or a written concession in relation to a pre-commencement provision listed in GENPRU TP 4.7R, in either case allowing the firm to exclude from the calculation of its liabilities obligations under a particular capital instrument issued by the firm.

Waivers

4.3

Subject to GENPRU TP 4.4R and to compliance with the conditions set out in GENPRU TP 4.6R, a firm will be treated as complying with GENPRU 2.2.271 R (3), GENPRU 2.2.177 R (2), GENPRU 2.2.177 R (3), GENPRU 2.2.180 R and GENPRU 2.2.181 R, in relation to the capital instrument to which the waiver or written concession referred to in GENPRU TP 4.2R related, so long as the firm is not obliged to pay any interest under the terms of the capital instrument in circumstances where the firm does not have capital resources equal to or in excess of its required margin of solvency under the Insurance Directives.

4.4

GENPRU TP 4.3R ceases to apply to a firm:

(1)

once the firm has redeemed the capital instrument; or

(2)

on or after any date upon which the firm has the option to redeem the capital instrument and may prudently do so.

4.5

Subject to compliance with the conditions set out in GENPRU TP 4.6R, a firm will be treated as complying with GENPRU 2.2.159 R (6), GENPRU 2.2.159 R (10), GENPRU 2.2.159 R (12), and GENPRU 2.2.163 R in relation to the capital instrument to which the waiver or written concession referred to in GENPRU TP 4.2R related.

4.6

The conditions referred to in GENPRU TP 4.3R and GENPRU TP 4.5R are:

(1)

the firm must notify the FSA immediately if it becomes aware of any matter which is material to the relevance or appropriateness of the waiver or written concession;

(2)

the firm must maintain a written record of the rule in GENPRU to which it considers the waiver or written concession applies; and

(3)

the firm must make the record available to the FSA on request.

4.7

The pre-commencement provisions referred to in GENPRU TP 4.2R are those contained in:

(1)

the Insurance Companies Act 1982 and relevant secondary legislation; and

(2)

the Friendly Societies Act 1992 and relevant secondary legislation.

31/12/2006

GENPRU TP 5

Calls for supplementary contributions

Duration

5.1

GENPRU TP 5 applies until the relevant rule is revoked

Application

5.2

GENPRU TP 5 applies to a firm which immediately before 31 December 2004 had the benefit of a waiver in relation to IPRU (INS) rule 2.10 (4).

Waivers

5.3

For the period specified in GENPRU TP 5.1R or the same period as the waiver would have lasted if shorter, subject to GENPRU TP 5.4R and to compliance with the conditions set out in GENPRU TP 5.5R, for the purposes of calculating its capital resources a firm may include the value of claims against its members by way of calls for supplementary contributions as core tier one capital to the same extent as it was permitted by the waiver to include the value of those claims in the calculation of its margin of solvency.

5.4

GENPRU TP 5.3R does not apply for the purposes of GENPRU 2.2.34 R (Guarantee fund) or SUP Appendix 2.4 (Capital resources below guarantee fund).

5.5

The conditions referred to in GENPRU TP 5.3R are:

(1)

the limits specified in the waiver on the extent to which the firm's claim against its members by way of call for supplementary contributions may be brought into account apply as if the reference (if any) in the waiver to the firm's required margin of solvency referred to its general insurance capital requirement and the reference (if any) in the waiver to the firm's margin of solvency referred to its capital resources; and

(2)

the firm must comply with any further conditions imposed by the waiver.

31/12/2006

GENPRU TP 6

Implicit items waivers

Duration

6.1

GENPRU TP 6 applies until the relevant rule is revoked

Application

6.2

GENPRU TP 6 applies to a firm which immediately before 31 December 2004 had the benefit of a waiver in relation to IPRU (INS) rule 2.10 (5) or IPRU (FSOC) rule 4.7 (3).

Waivers

6.3

For the period specified in GENPRU TP 6.1R or the same period as the waiver would have lasted if shorter, subject to GENPRU TP 6.4R and to compliance with the conditions set out in GENPRU TP 6.5R, for the purpose of calculating its capital resources a firm may include the value of implicit items at Stage B of the capital resources table applicable to the firm to the same extent to which it was permitted by the waiver to include the value of those implicit items in the calculation of its margin of solvency.

6.4

GENPRU TP 6.3R does not apply for the purposes of GENPRU 2.2.41 R (Limits on forms of capital apply separately to long-term insurance business and general insurance business).

6.5

The conditions referred to in GENPRU TP 6.3R are:

(1)

the limits specified in the waiver on the extent to which the value of implicit items may be brought into account apply as if the reference (if any) in the waiver to the firm's required margin of solvency referred to its minimum capital requirement and the reference (if any) in the waiver to the firm's margin of solvency referred to its capital resources; and

(2)

the firm must comply with any further conditions imposed by the waiver.

31/12/2006

GENPRU TP 7

Pillar 3 capital resources

Application

7.1

This section applies to a BIPRU firm.

Purpose

7.2

This section implements Article 154(4) of the Banking Consolidation Directive.

Duration

7.3

This section applies until 31 December 2012.

Transitional provision

7.4

A firm may elect not to apply GENPRU 2.2.239 R (2) to (4) (50:50 split between deductions from tier one capital and tier two capital) to material insurance holdings acquired before 20 July 2006. If a firm elects not to apply GENPRU 2.2.239 R (2) to (4), the firm must deduct such material insurance holdings from the total of tier one capital and tier two capital.

06/04/2007

GENPRU TP 8

Miscellaneous capital resources definitions for BIPRU firms

Application

8.1

This section applies to a BIPRU firm.

8.2

Any provision of this section that applies on a consolidated basis under GENPRU TP 8.3R applies to any firm to which BIPRU 8 (Group risk - consolidation) applies.

Consolidation

8.3

A provision of this section applies on a consolidated basis for the purpose of BIPRU 8 (Group risk - consolidation) to the extent that, and in the same way that, the provision in BIPRU to which it relates applies on a consolidated basis.

Specific issues of TONS and other securities

8.4

A bank may treat a security forming part of an issue of securities listed in GENPRU TP 8.5R as eligible for inclusion within stage B of the capital resources table (Perpetual non cumulative preference shares) if it would not otherwise be eligible if:

(1)

on 31 December 2006 the bank was subject to IPRU(BANK);

(2)

the bank issued it on or before 31 December 2006; and

(3)

as at 31 December 2006 the bank included it, and was entitled to include it, in the calculation of its capital resources under IPRU(BANK) as permanent share capital and tier one capital as referred to in chapter CA of IPRU(BANK).

8.5

The issues of securities referred to in GENPRU TP 8.4R are as follows:

(1)

Barclays £400mn 6% perpetual TONs;

(2)

Abbey National £175m 6.984% perpetual TOPIC;

(3)

Northern Rock £200m 7.053% perpetual TONs;

(4)

Barclays $1bn 6.86% perpetual TONs;

(5)

Lloyds TSB $1000m 6.90% perpetual capital securities; and

(6)

Abbey National $500m 7.375% T1MBS.

PIBS

8.6

A building society may treat a PIBS as eligible for inclusion within stage B of the capital resources table (Perpetual non-cumulative preference shares) if it would not otherwise be eligible if:

(1)

on 31 December 2006 the firm was subject to IPRU(BSOC);

(2)

the building society issued it before 18 November 2004; and

(3)

as at 31 December 2006 the building society included it, and was entitled to include it, in the calculation of its capital resources under IPRU(BSOC) as tier one capital as referred to in Annex 1A of chapter 1 of volume 1 of IPRU(BSOC).

Preference shares

8.7

A bank or BIPRU investment firm may treat a preference share as eligible for inclusion within stage B of the capital resources table (Perpetual non-cumulative preference shares) if it would not otherwise be eligible if:

(1)

on 31 December 2006 the firm was subject to IPRU(BANK) or IPRU(INV);

(2)

the firm issued it on or before 31 December 2006;

(3)

as at 31 December 2006 the firm included it, and was entitled to include it, in the calculation of its capital resources under IPRU(BANK) or IPRU(INV) as capital of a type that corresponded to tier one capital resources;

(4)

it would have been eligible for inclusion within stage B of the capital resources table except for the fact that it does not meet GENPRU 2.2.64 R (4)(b) (Restrictions on mandatory coupons for tier one capital) or GENPRU 2.2.109 R (1) (Restrictions on mandatory coupons for perpetual non-cumulative preference shares) or both of those rules;

(5)

the only reason that it does not meet GENPRU 2.2.64 R (4)(b) or GENPRU 2.2.109 R (1) is because a mandatory cash coupon is payable;

(6)

the firm has the right not to pay the cash coupon if it is in breach of any of the main BIPRU firm Pillar 1 rules or to the extent that paying such coupon would result in a breach of any of those rules; and

(7)

any amount not paid under (6) does not accumulate.

Innovative tier one capital

8.8

A bank may treat an item of a capital instrument as eligible for inclusion within stage C of the capital resources table (Innovative tier one capital) if it would not otherwise be eligible if:

(1)

on 31 December 2006 the firm was subject to IPRU(BANK);

(2)

the bank issued it on or before 31 December 2006;

(3)

as at 31 December 2006 the bank included it, and was entitled to include it, in the calculation of its capital resources under IPRU(BANK) as innovative tier one capital as referred to in chapter CA of IPRU(BANK);

(4)

it would have been eligible for inclusion within stage C of the capital resources table except for the fact that it does not meet GENPRU 2.2.64 R (4)(b) (Restrictions on mandatory coupons for tier one capital);

(5)

the only reason that it does not meet GENPRU 2.2.64 R (4)(b) is because a mandatory cash coupon is payable;

(6)

the bank has the right not to pay the cash coupon if it is in breach of any of the main BIPRU firm Pillar 1 rules or to the extent that paying such coupon would result in a breach of any of those rules; and

(7)

any amount not paid under (6) does not accumulate.

Upper tier 2 instruments: Deferral of interest

8.9

A bank or BIPRU investment firm may treat a capital instrument as eligible for inclusion within stage G of the capital resources table (Upper tier two capital) if it would not otherwise be eligible if:

(1)

on 31 December 2006 the firm was subject to IPRU(BANK) or IPRU(INV);

(2)

the firm issued it on or before 31 December 2006;

(3)

(4)

it would have been eligible for inclusion within stage G of the capital resources table except for the fact that it does not meet GENPRU 2.2.177 R (2);

(5)

the only reason that it does not meet GENPRU 2.2.177 R (2) is because a mandatory cash coupon is payable; and

(6)

Lower tier 2 instruments: Additional events of default for building societies

8.10

A building society may treat a capital instrument as eligible for inclusion within stage H of the capital resources table (Lower tier two capital) if it would not otherwise be eligible if:

(1)

on 31 December 2006 the building society was subject to IPRU(BSOC);

(2)

the building society issued it on or before 31 December 2006;

(3)

as at 31 December 2006 the building society included it, and was entitled to include it, in the calculation of its capital resources under IPRU(BSOC) as Term Subordinated Debt falling within its Tier Two Capital (as referred to in Annex 1A of Chapter 1 and Chapter 2 of IPRU(BSOC));

(4)

it would have been eligible for inclusion within stage H of the capital resources table except for the fact that it does not meet GENPRU 2.2.159 R (2) (Events of default); and

(5)

the only reason that it does not meet GENPRU 2.2.159 R (2) is because it contains an event of default permitted by paragraph 2.8.10G(3) of Volume 1 of IPRU(BSOC) (cancellation of a society's registration under the Building Societies Act 1986 otherwise than under section 103(1)(a) of that Act).

Conversion ratio

8.11

GENPRU 2.2.138 R (2) (Tier one capital: Conversion ratio) does not apply to a capital instrument issued by a firm if:

(1)

on 31 December 2006 the firm was subject to IPRU(BANK), IPRU(BSOC) or IPRU(INV);

(2)

the firm issued it on or before 31 December 2006; and

(3)

as at 31 December 2006 the firm included it, and was entitled to include it, in the calculation of its capital resources under:

(a)

(in the case of a bank) IPRU (BANK) as innovative tier one capital as referred to in chapter CA of IPRU(BANK); or

(b)

(in the case of any other type of firm) IPRU(BSOC) or IPRU(INV) as capital of a type that corresponded to tier one capital.

Legal opinions

8.12

GENPRU 2.2.118 R (Legal opinions for innovative tier one capital) does not apply to a capital instrument issued by a firm if:

(1)

on 31 December 2006 the firm was subject to IPRU(BANK), IPRU(BSOC) or IPRU(INV);

(2)

the firm issued the capital instrument on or before 31 December 2006;

(3)

(in the case of a bank) as at 31 December 2006 the bank included the capital instrument, and was entitled to include it, in the calculation of its capital resources under IPRU(BANK) as innovative tier one capital as referred to in chapter CA of IPRU(BANK); and

(4)

(in any other case) the firm included the capital instrument, and was entitled to include it, in the calculation of its capital resources under IPRU(BSOC) or IPRU(INV) as capital of a type that corresponded to tier one capital.

8.13

The following rules:

(1)

GENPRU 2.2.159 R (12) (Legal opinions for tier two capital);

(2)

GENPRU 2.2.163 R (Legal opinions for tier two capital governed by a foreign law);

(3)

GENPRU 2.2.181 R (Legal opinions for upper tier two capital); and

(4)

GENPRU 2.2.244 R (Application of certain rules about tier two capital to tier three capital) so far as it applies the rules in (1) to (3);

do not apply to a capital instrument issued by a firm if:

(5)

on 31 December 2006 the firm was subject to IPRU(BANK), IPRU(BSOC) or IPRU(INV);

(6)

the firm issued the capital instrument on or before 31 December 2006; and

(7)

as at 31 December 2006 the firm included the capital instrument, and was entitled to include it, in the calculation of its capital resources under IPRU(BANK), IPRU(BSOC) or IPRU(INV) as capital of the type that corresponds to:

(a)

(where the firm disapplies the rule in (1) or (2)) tier two capital; or

(b)

(where the firm disapplies the rule in (3)) upper tier two capital; or

(c)

(where the firm disapplies the rule in (4)) tier three capital.

Version of IPRU

8.14

Any reference in this section to a type of capital in IPRU is to a type of capital in IPRU in the form IPRU was in on 31 December 2006.

Eligibility

8.15

If this section says that an item of capital is eligible for inclusion within a particular stage of the capital resources table this is still subject to the application of the capital resources gearing rules.

Waivers and concessions

8.16

A reference to a firm being entitled to include capital instruments in the calculation of its capital resources under IPRU at a particular level includes the firm being able to do this under a waiver or, in the case of IPRU(BANK) or IPRU(BSOC), a written approval by the FSA .

Combinations of provisions

8.17

A firm may combine the use of two or more of the provisions in this section.

06/04/2007

GENPRU TP 8A

Further miscellaneous capital resources definitions for BIPRU firms

Application and interpretation

8A.1

This section applies to a BIPRU firm. In this section a reference to 30 December 2010 means 23.59 on 30 December 2010.

Tier one capital

8A.2

Until 31 December 2040 a BIPRU firm may treat a capital instrument as eligible for inclusion as hybrid capital, if it would not otherwise be eligible, if:

(1)

on 30 December 2010 the BIPRU firm was subject to GENPRU; and

(2)

as at 30 December 2010 the BIPRU firm included it, and was entitled to include it, at stage B or C of the calculation in the capital resources table.

8A.3

If a BIPRU firm treats a capital instrument as eligible for inclusion as hybrid capital under GENPRU TP8A.2R, then the firm:

(1)

if it included the capital instrument as innovative tier one capital as at 30 December 2010, must treat the capital instrument as hybrid capital included at stage C of the calculation in the capital resources table;

(2)

except where it is a building society, must apply the limit in GENPRU 2.2.30AR (3) to the aggregate of the capital instruments treated under (1) and the hybrid capital that is eligible under GENPRU 2.2 for inclusion at stage C of the calculation in the capital resources table;

(3)

in the case of a building society, must not include hybrid capital at stage C of the calculation in the capital resources table under GENPRU 2.2, except as provided by (4), if the amount of PIBS with incentives to redeem treated under GENPRU TP8A.2R exceeds the limit in GENPRU 2.2.30AR (3);

(4)

in the case of a building society, may include hybrid capital at stage C of the calculation in the capital resources table, notwithstanding (3), if the firm issued it after 30 December 2010 and:

(a)

the capital instrument would otherwise be eligible for inclusion as hybrid capital at stage C of the calculation in the capital resources table under GENPRU 2.2; and

(b)

the firm issued it in order to replace a PIBS with an incentive to redeem that the firm treated as hybrid capital under GENPRU TP8A.2R;

(5)

must not include hybrid capital at stage B2 of the calculation in the capital resources table under GENPRU 2.2, except as provided by GENPRU TP8A.4R, if and to the extent that the aggregate of the following exceeds the limit in GENPRU 2.2.30AR (2)

(a)

capital instruments included at stage C in the capital resources table under (1) and GENPRU 2.2; and

(b)

capital instruments included at stage B of the calculation in the capital resources table as at 30 December 2010 and treated under GENPRU TP8A.2R;

(6)

if it includes hybrid capital at stage B2 of the calculation in the capital resources table under GENPRU 2.2, except as provided by GENPRU TP8A.4R, must include capital instruments treated under GENPRU TP8A.2R in the calculation of the limit in GENPRU 2.2.30AR (2);

(7)

must not include hybrid capital at stage B1 of the calculation in the capital resources table under GENPRU 2.2, except as provided by GENPRU TP8A.5R, if and to the extent that the aggregate of the following exceeds the limit in GENPRU 2.2.30AR (1):

(a)

capital instruments included at stage C in the capital resources table under (1) and GENPRU 2.2; and

(b)

capital instruments included at stage B of the calculation in the capital resources table as at 30 December 2010 and treated under GENPRU TP8A.2R; and

(8)

if it includes hybrid capital at stage B1 of the calculation in the capital resources table under GENPRU 2.2, except as provided by GENPRU TP8A.5R, must include capital instruments treated under GENPRU TP8A.2R in the calculation of the limit in GENPRU 2.2.30AR (1).

8A.4

A BIPRU firm may include hybrid capital at stage B2 of the calculation in the capital resources table, notwithstanding GENPRU TP8A.3R(5), if the firm issued it after 30 December 2010 and:

(1)

the capital instrument would otherwise be eligible for inclusion as hybrid capital at stage B2 of the calculation in the capital resources table under GENPRU 2.2; and

(2)

the firm issued it in order to replace another capital instrument that the firm treated as hybrid capital under GENPRU TP8A.2R.

8A.5

A BIPRU firm may include hybrid capital at stage B1 of the calculation in the capital resources table, notwithstanding GENPRU TP8A.3R(7), if the firm issued it after 30 December 2010 and:

(1)

the capital instrument would otherwise be eligible for inclusion as hybrid capital at stage B1 of the calculation in the capital resources table under GENPRU 2.2; and

(2)

the firm issued it in order to replace another capital instrument that the firm treated as hybrid capital under GENPRU TP8A.2R.

8A.6

In relation to the tier one capital resources of a BIPRU firm, calculated at stage F of the calculation in the capital resources table (Total tier one capital after deductions):

(1)

from 31 December 2020 until 30 December 2030:

(a)

no more than 20% may be accounted for by items treated under GENPRU TP8A.2R as tier one capital; and

(b)

in the case of a building society, any PIBS with an incentive to redeem treated under GENPRU TP8A.2R is to be treated as hybrid capital included at stage C of the calculation in the capital resources table and as subject to the limit in GENPRU 2.2.30AR (3); and

(2)

from 31 December 2030 until 30 December 2040, no more than 10% may be accounted for by items treated under GENPRU TP8A.2R as tier one capital.

8A.7

BIPRU firms which do not comply by 31 December 2010 with the limits set out in GENPRU 2.2.29 R to GENPRU 2.2.30AR (3) must develop strategies and processes on the necessary measures to resolve this situation before the dates set out in GENPRU TP8A.6R.

31/12/2010

GENPRU TP 8B

Miscellaneous capital resources definitions for BIPRU firms: Core tier one capital

Application

8B.1

This section applies to a BIPRU firm.

Core tier one capital

8B.2

A provision in this section applies on a consolidated basis for the purposes of BIPRU 8 (Group risk - consolidation) to a UK consolidation group to the extent that, and in the same manner that, the provision in GENPRU to which it relates applies on a consolidated basis.

8B.3

The Royal Bank of Scotland plc may treat a share falling within GENPRU TP 8B.4R as eligible for inclusion within stage A of the capital resources table (Core tier one capital) if it would not otherwise be eligible provided that:

(1)

the share:

(a)

had been issued on or before 30 December 2010; or

(b)

if issued after that date, is issued pursuant to a contractual obligation requiring its issue entered into on or before 30 December 2010;

(2)

as at 30 December 2010 The Royal Bank of Scotland plc was entitled (or would have been entitled, had the share then been issued) to include it in the calculation of its capital resources under GENPRU as permanent share capital and, in the case of a share which had been issued as at that date, did so include it; and

(3)

the share is held by or on behalf of the Government of the United Kingdom.

8B.4

The shares referred to in GENPRU TP 8B.3R are as follows:

(1)

The Royal Bank of Scotland Group plc Series 1 Class B Shares of 1p each; and

(2)

The Royal Bank of Scotland Group plc Series 1 Dividend Access Share of 1p;

either as separate instruments or considered together as connected instruments

Voting rights

8B.5

A BIPRU firm may treat an ordinary share that has different voting rights to other ordinary shares issued by the firm as eligible for inclusion within stage A of the capital resources table (Core tier one capital) without making a notification of issue or change in voting rights to the FSA under GENPRU 2.2.83B R if:

(1)

on 30 December 2010 the firm was subject to GENPRU;

(2)

the firm issued the ordinary share on or before 30 December 2010 and the shareholders were bound by the differences in voting rights on or before 30 December 2010; and

(3)

as at 30 December 2010 the firm included the ordinary share, and was entitled to include it, in the calculation of capital resources under GENPRU as permanent share capital;

provided that by 30 June 2011 the firm provides the FSA with full details of the ordinary shares, their terms of issue and the differences in voting rights applicable to those ordinary shares.

31/12/2010

GENPRU TP 9

Individual capital guidance for BIPRU firms

Application

9.1

This section applies to a BIPRU firm that is a bank or building society for which the FSA has given:

(1)

(in the case of a building society) a threshold ratio under IPRU(BSOC); or

(2)

(in the case of a bank) an individual capital ratio under IPRU(BANK);

that was in effect on 31 December 2006 but to which the FSA has not yet given individual capital guidance.

Duration

9.2

This section applies to a firm until it receives individual capital guidance.

9.3

GENPRU TP 9.4G - GENPRU TP 9.6G only apply until 31 December 2007. Thereafter (if they do not already apply) GENPRU TP 9.7G - GENPRU TP 9.10G apply.

Pre 2007 capital requirements

9.4

GENPRU TP 9.5G - GENPRU TP 9.6G apply if, and for as long as, a firm applies the treatment in BIPRU TP 3 (Pre CRD capital requirements applying on a solo basis during 2007) to all its exposures.

9.5

If GENPRU TP 9.4G applies, any threshold ratio or individual capital ratio remains in force. However compliance with such ratios should be measured by reference to capital resources.

9.6

Where necessary, a firm should apply the adjustment set out in section 4.1.3 of chapter CO of IPRU(BANK) (CAD banks) as it stood on 31 December 2006 to its trading book capital requirements.

BIPRU capital requirements

9.7

GENPRU TP 9.8G - GENPRU TP 9.10G apply to a firm if GENPRU TP 9.5G - GENPRU TP 9.6G do not apply.

9.8

Any threshold ratio or individual capital ratio remains in force adjusted as follows:

(1)

the firm should work out the percentage of its capital resources requirement as at the date in GENPRU TP 9.10G represented by the absolute amount in GENPRU TP 9.9G; and

(2)

the firm should hold capital resources of an amount at least equal to the percentage specified in (1) of its capital resources requirement from time to time.

9.9

The absolute amount referred to in GENPRU TP 9.8G is:

(1)

(if GENPRU TP 9.7G - GENPRU TP 9.10G apply to the firm on 1 January 2007) the amount of capital resources it had to hold under IPRU on 31 December 2006 in order to meet the ratio referred to in GENPRU TP 9.1G; and

(2)

(in any other case) the amount of capital resources it had to hold immediately prior to the date in GENPRU TP 9.10G in order to meet the ratio referred to in GENPRU TP 9.1G.

9.10

The date referred to in GENPRU TP 9.8G and GENPRU TP 9.9G is:

(1)

(if GENPRU TP 9.9G(1) applies) 1 January 2007; and

(2)

(if GENPRU TP 9.9G(2) applies) the date on which GENPRU TP 9.7G - GENPRU TP 9.10G first apply to the firm.

9.11

The following illustrates how GENPRU TP 9.8G - GENPRU TP 9.10G work. This example relates to a bank to which GENPRU TP 9.7G - GENPRU TP 9.10G apply from 1 January 2007. The example is as follows (all figures in £millions):

(1)

as at 31 December 2006:

(a)

the bank has risk-weighted assets of £1250;

(b)

its Pillar 1 capital resources requirement was £100 (8% of £1250);

(c)

its individual capital ratio was 10%; and

(d)

its capital resources requirement expressed as an absolute amount and including the individual capital ratio is £125;

(2)

on 1 January 2007 its capital resources requirement is £80;

(3)

the result is that the new individual capital ratio is 156.25% (£125m/£80m); and

(4)

its capital resources requirement expressed as an absolute amount and including the individual capital ratio remains at £125 despite the fall in the Pillar 1 charge.

9.12

Continuing the example, say that the bank's capital resources requirement falls to £70 on 31 July 2007. Its capital resources requirement, expressed as an amount and including the individual capital ratio, now falls to £109.375.

Adjustments

9.13

No adjustment should be made to take into account differences between the calculation of capital resources under IPRU and of capital resources.

Consolidation

9.14

This section also applies to threshold ratios and individual capital ratios that apply on a consolidated basis.

01/01/2007

GENPRU TP 10

Assets of former underwriting members

Application

10.1

GENPRU TP 10 applies to the Society.

Duration

10.2

GENPRU TP 10 applies until the Society is no longer required to identify or value assets of individual members that became former underwriting members before 1 January 2003.

Valuation and identification of assets

10.3

For the purposes of GENPRU 1 and GENPRU 2, the Society must identify and value the assets of individual members that became former underwriting members before 1 January 2003 in accordance with the requirements for the identification and valuation of assets contained in the "Conditions and Requirements Relating to Solvency and Reporting" which were approved by the FSA, exercising the powers of HM Treasury under section 83 of the Insurance Companies Act 1982, and which were applicable immediately before commencement.

31/12/2006

GENPRU TP 11

PRU waivers

Application

11.1

GENPRU TP 11 applies to an insurer to whom a GENPRU rule listed in the Table in GENPRU TP 12 applies.

Version of PRU to be used

11.2

A reference in GENPRU TP 11 to PRU is to the version in force on 30 December 2006.

Duration of transitional

11.3

GENPRU TP 11 applies until the relevant GENPRU rule is revoked.

Continuing effect of waivers

11.4

A rule in GENPRU listed in the Table at GENPRU TP 12 is disapplied, or is modified in its application, to a firm:

(1)

in order to produce the same effect, including any conditions, as a waiver had on the corresponding rule in PRU;

(2)

for the same period as the waiver would have lasted, if shorter than the period in GENPRU TP 11.3R;

provided the conditions set out in GENPRU TP 11.5R are satisfied.

11.5

The conditions referred to in GENPRU TP 11.4R are:

(1)

the rule is shown in the Table at GENPRU TP 12 as corresponding with the rule in PRU in relation to which the waiver was granted to the firm;

(2)

the waiver was current as respects the firm immediately before 31 December 2006; and

(3)

there is no specific transitional rule relating to the waiver.

11.6

GENPRU TP 11.4 does not have effect if, and to the extent that, it would be inconsistent with any EU law obligation of the United Kingdom.

11.7

A firm which has the benefit of a waiver to which GENPRU TP 11.4R applies must:

(1)

notify the FSA immediately if it becomes aware of any matter which is material to the relevance or appropriateness of the waiver;

(2)

maintain a written record of the rule in GENPRU to which it considers the waiver applies; and

(3)

make the record available to the FSA on request.

01/12/2009

GENPRU TP 12

Table: PRU waivers

12.1

This table belongs to GENPRU TP 11.

Rules in GENPRU

Corresponding rules in PRU

1.2.1R(2)

1.2.1R

1.2.2R(1)

1.2.3R(3)

1.2.2R(2)

1.2.3R(5)

1.2.6R

1.3.4R

1.3.5R

2.1

2.1.3R

2.1.13R

2.1.9R

2.1.17R

2.1.14R

2.1.24R

2.1.21R

2.1.25R

2.1.22R

2.1.29R

2.1.25R

2.1.30R

2.1.26R

2.1.30R

2.1.27R

2.1.34R

2.1.30R

2.1.38R

2.1.34R

2.2

2 Ann 1R

2.2.14R

2.2.32R

2.2.16R

2.2.33R

2.2.17R

2.2.34R

2.2.18R

2.2.118R

2.2.58R

2.2.64R(2)

2.2.40R

2.2.159R(7)

2.2.108R(7)

2.2.159R(8)

2.2.108R(8)

2.2.159R(9)

2.2.108R(9)

2.2.159R(10)

2.2.108R(10)

2.2.159R(12)

2.2.108R(11)

2.2.181R

2.2.105R

2.2.255R

2.2.89R

31/12/2006

GENPRU TP 13

EEA pure reinsurers

Application

13.1

GENPRU TP 13 applies to a pure reinsurer:

(1)

realistic value of liabilities whose head office is in an EEA State other than the United Kingdom; and

(2)

which is not an incoming Treaty firm.

Duration of transitional

13.2

GENPRU TP 13 has effect in relation to a firm until 10 December 2008 or, if earlier, the date on which it becomes:

(1)

an incoming EEA firm by reason of having exercised its right to carry on the regulated activity of effecting or carrying out contracts of insurance in the United Kingdom in accordance with Schedule 3 to the Act (EEA Passport Rights); or

(2)

an incoming Treaty firm by reason of having exercised its right to carry on the regulated activity of effecting or carrying out contracts of insurance in the United Kingdom in accordance with Schedule 4 to the Act (Treaty Rights).

Capital resources and discounting of technical provisions

13.3

GENPRU 2.2.107 R does not apply to a firm.

31/12/2006

GENPRU TP 14

Continued use of IPRU expenditure requirements by BIPRU investment firms

Application

14.1

This section applies to a BIPRU investment firm.

Transitional rule

14.2

If a firm:

(1)

is subject to the fixed overheads requirement; and

(2)

was on 31 December 2006 subject to one of the expenditure based requirements under IPRU listed in the table in GENPRU TP 14.3R;

the firm may treat that expenditure based requirement as being its fixed overheads requirement.

14.3

Table: Continuing IPRU expenditure requirements This table belongs to GENPRU TP 14.2R

IPRU expenditure requirement

Remarks

Expenditure based requirement under Chapter 5 of IPRU(INV)

If the firm is subject to an expenditure based requirement of 6/52 of its annual audited expenditure, the firm must, for the purposes of this section, use the requirement of one quarter of its annual audited expenditure under rule 5.2.3(4)(c)(i)

The capital requirement of 13/52 of annual audited expenditure under rule 7.2.3R(1) of Chapter 7 of IPRU(INV)

The expenditure requirement under rule 10-73(1)(b) of Chapter 10 of IPRU(INV)

Financial Resources Test 2 for Category A firms under section 13.5 of Chapter 13 of IPRU(INV) (Expenditure-based requirement)

A firm must, for the purposes of this section, calculate its requirement as 13/52 of its relevant annual expenditure even if the fraction that applies to it under Chapter 13 would otherwise be 4/52 or 8/52.

Note (1): A reference to annual expenditure covers expenditure based on a forecast, pro-rated expenditure based on a period shorter than twelve months or any other expenditure figures for which the IPRU rules in this table provide.

Note (2): Any waiver that a firm has in relation to the rules in IPRU in this table has effect for the purposes of this section. Any condition, limitation or requirement to which such a waiver is subject also continues to apply.

Duration

14.4

A firm must stop applying this section at the date when, under the IPRU expenditure requirements that apply to it as described in GENPRU TP 14.3R, it would have had to start using figures for the period following the one on which the expenditure requirements to which it was subject on 31 December 2006 were based.

14.5

Say for example that a firm's accounting reference date is 31 December. As at 31 December 2006 the firm's IPRU expenditure requirement was based on its annual accounts for the year ended 31 December 2005. Its annual accounts for the year ending 31 December 2006 are completed on 15 March 2007. From 1 January 2007 to 14 March 2007 the firm may treat its IPRU expenditure requirements as being its fixed overheads requirement. On 15 March 2007 the firm should switch to calculating its fixed overheads requirement under GENPRU 2.1 (Calculation of capital resources requirement).

Capital resources

14.6

The expenditure requirement under IPRU is measured against the firm's capital resources as calculated under GENPRU 2.2 (Capital resources) and not capital resources calculated under IPRU.

01/01/2007

GENPRU TP 15

Admissible assets

Application

15.1

GENPRU TP 15 applies to an insurer which is not a pure reinsurer.

Duration of transitional

15.2

GENPRU TP 15 applies until 30 December 2007.

GENPRU 2 Annex 7R

15.3

(1)

In determining whether its assets are admissible assets, instead of applying GENPRU 2 Annex 7 R, a firm may elect to treat as an admissible asset an asset that would have been an admissible asset for the purposes of the Integrated Prudential Sourcebook (PRU) as it was in force on 30 December 2006.

(2)

(1) does not apply when determining whether a derivative or quasi-derivative is an approved derivative or approved quasi-derivative.

(3)

If a firm applies (1) to any of its assets, it must do so for all of its assets except derivatives and quasi-derivatives.

31/12/2006

GENPRU Sch 1

Record keeping requirements

31/12/2006

1 The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements.

2 It is not a complete statement of those requirements and should not be relied on as if it were.

3 Table

Handbook reference

Subject of Record

Contents of record

When record must be made

Retention Period

GENPRU 1.2.60 R - GENPRU 1.2.61 R

Firm's assessment of its financial resources

(1) The major sources of risk the firm has identified
(2) How the firm intends to deal with those risks
(3) Details of the stress and scenario analyses carried out and the resulting financial resources estimated to be required

Not specified

At least three years

GENPRU 1.3.22 R

Valuation models for marking to model

Secure copy of firm's own valuation model

When model is in use

Not specified

31/12/2006

GENPRU Sch 2

Notification and reporting requirements

31/12/2006

1 The aim of the guidance in the following table is to give the reader a quick overall view of the relevant notification requirements.

2 It is not a complete statement of those requirements and should not be relied on as if it were.

3 Table

Handbook reference

Matter to be notified

Contents of notification

Trigger events

Time allowed

GENPRU 1.5.19 R

Intention to change maximum amount of callable contribution

Fact of intention and details of the change

Intention to change the maximum amount

Adequate advance notice, normally not less than 6 months

GENPRU 2.1.11 R

Breach or expected breach of GENPRU 2.1.13 R or main BIPRU firm Pillar 1 rules

Fact of breach or expectation of breach

Breach or expectation of breach

Immediately

GENPRU 2.2.19 R

Intention to deduct illiquid assets rather than material holdings

Fact of intention

Intention to start or stop using method in column 2

One month prior to change of method

GENPRU 2.2.74 R

Intention to redeem tier one instrument included in tier one capital resources

Fact of intention and details of the firm's position after such redemption in order to show how it will meet the capital resources requirement, how it will have sufficient financial resources to meet the overall financial adequacy rule and, in the case of a BIPRU firm, how it will not otherwise suffer any undue effects to its financial or solvency conditions

Intention to redeem

At least one month prior to becoming committed to redeem

GENPRU 2.2.79G R

Intention to purchase a tier one instrument in accordance with GENPRU 2.2.79A R

Fact of intention and details of the firm's position after the purchase in order to show how, over an appropriate timescale, adequately stressed, and without planned recourse to the capital markets, it will meet its capital resources requirement and have sufficient financial resources to meet the overall financial adequacy rule

Intention to purchase

At least one month prior to becoming committed to purchase

GENPRU 2.2.83B R

Intention to include in stage A of the capital resources table different classes of the same share type that meet the conditions in GENPRU 2.2.83 R and GENPRU 2.2.83A R but have differences in voting rights.

Fact of intention.

Intention to include in stage A of the capital resources table classes of the same share type that have different voting rights.

At least one month before the shares are issued or (in the case of existing issued shares) the differences in voting rights take effect.

GENPRU 2.2.83F R

Intention by a building society to issue a capital instrument that includes a coupon limit in its terms of issuance in accordance with GENPRU 2.2.83E R.

Fact of intention.

Intention to issue a capital instrument that includes a coupon limit.

At least one month before the intended date of issue.

GENPRU 2.2.135 R

Intention to include an unusual transaction in capital under GENPRU 2.2.124 R

Fact of intention.

Intention to include in capital

At least one month prior to inclusion of that capital in capital resources

GENPRU 2.2.171 R

Proposal to amend a tier two instrument

Details of the proposed amendment

Proposal to amend

One month before amendment is due to take effect

GENPRU 2.2.174 R

Intention to repay (other than on contractual repayment date) tier two instrument

Fact of intention and details of the firm's position after such repayment in order to show how it will meet the capital resources requirement and how it will have sufficient financial resources to meet the overall financial adequacy rule

Intention to repay

Six Months (in the case of an insurer) or one Month (in the case of a BIPRU firm) prior to becoming committed to repayment

GENPRU 2.2.243 R

Intention to pay interest or principal on subordinated debt included in tier three capital resources if the firm's capital resources are less than 120% of its capital resources requirement

Fact of intention

Intention to pay

One month prior to any payment of interest or principal

GENPRU 2.2.245 R

Intention to repay (other than on contractual repayment date) tier three capital resources

Fact of intention and details of how the firm will meet its capital resources requirement after such repayment

Intention to repay

One month prior to repayment

31/12/2010

GENPRU Sch 3

Fees and other requirement payments

31/12/2006

There are no requirements for fees or other payments in GENPRU.

31/12/2006

GENPRU Sch 4

Powers exercised

31/12/2006

GENPRU Sch 4.1

The following powers and related provisions in the Act have been exercised by the FSA to make the rules in GENPRU:

Section 138 (General rule-making power); Section 149 (Evidential provisions); Section 150(2) (Actions for damages); Section 156 (General supplementary powers); and Section 316(1) (Direction by Authority)

31/12/2006

GENPRU Sch 4.2

The following power in the Act has been exercised by the FSA to give the guidance in GENPRU:

Section 157(1) (Guidance).

31/12/2006

GENPRU Sch 5

Rights of action for damages

31/12/2006

1. The table below sets out the rules in GENPRU contravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.

2. If a "Yes" appears in the column headed "For private person", the rule may be actionable by a private person under section 150 (or, in certain circumstances, his fiduciary or representative; see article 6(2) and (3)(c) of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256)). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right of action under section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given.

3. The column headed "For other person" indicates whether the rule may be actionable by a person other than a private person (or his fiduciary or representative) under article 6(2) and (3) of those Regulations. If so, an indication of the type of person by whom the rule may be actionable is given.

Chapter/Appendix

Section/Annex

Right of action under section 150

For private person

Removed

For other person

All rules in GENPRU

Yes - GENPRU 1.4.1 R

31/12/2006

GENPRU Sch 6

Rules that can be waived

31/12/2006

The rules in GENPRU may be waived by the FSA under section 148 of the Act (Modification or waiver of rules). However, if the rules incorporate requirements laid down in European directives, it will not be possible for the FSA to grant a waiver that would be incompatible with the United Kingdom's responsibilities under those directives. It therefore follows that if a rule in GENPRU contains provisions which derive partly from a directive, and partly not, the FSA will be able to consider a waiver of the latter requirements only, unless the directive provisions are optional rather than mandatory.

31/12/2006