• CET1 Deductions - investments in CET1 Capital instruments of Relevant Entities

    • PRU 3.10.14

      For the purposes of Rule 3.10.7(f), (g) and (h), the amount of holdings of CET1 Capital instruments and other capital instruments of Relevant Entities to be deducted, must be calculated, subject to Rule 3.10.15, on the basis of the gross long positions.

    • PRU 3.10.15

      For the purposes of Rule 3.10.7(g) and (h), an Authorised Person must make the deductions in accordance with the following:

      (a) the holdings in the Trading Book of the capital instruments of Relevant Entities must be calculated on the basis of the net long position in the same underlying Exposure provided the maturity of the short position matches the maturity of the long position or has a residual maturity of at least one year; and
      (b) the amount to be deducted for indirect holdings in the Trading Book of the capital instruments of Relevant Entities that take the form of holdings of index Securities must be determined by calculating the underlying Exposure to the capital instruments of the Relevant Entities in the indices.

    • PRU 3.10.16

      (1) For the purposes of Rule 3.10.7(g), the amount to be deducted is calculated by multiplying the amount referred to in (a) by the factor derived from the calculation referred to in (b):
      (a) the aggregate amount by which the direct, indirect and synthetic holdings by the Authorised Person of the CET1, AT1 and T2 Capital instruments of Relevant Entities, in which the Authorised Person does not have a significant investment, exceeds 10% of the CET1 items of the Authorised Person calculated after applying the following to CET1 items:
      (i) all of the adjustments referred to in Rules 3.10.5 and 3.10.6;
      (ii) the deductions referred to in Rules 3.10.7(a) to (f) and (h) to (j), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences; and
      (iii) the deductions referred to in Rules 3.10.14 and 3.10.15;
      (b) the amount of direct and indirect holdings by the Authorised Person of the CET1 Capital instruments of Relevant Entities divided by the aggregate amount of direct and indirect holdings by the Authorised Person of the CET1, AT1 and T2 Capital instruments issued by those Relevant Entities.
      (2) An Authorised Person must exclude Underwriting positions held for five working days or fewer from the amount referred to in (1)(a) and from the calculation of the factor referred to in (1)(b).
      (3) The amount to be deducted pursuant to (1) must be apportioned across each CET1 Capital instrument held. An Authorised Person must determine the portion of holdings of CET1 Capital instruments that is to be deducted pursuant to (1) by dividing the amount specified in (a) by the amount specified in (b):
      (a) the amount of holdings required to be deducted pursuant to (1)(a);
      (b) the aggregate amount of direct and indirect holdings by the Authorised Person of all the capital instruments of Relevant Entities in which the Authorised Person does not have a significant investment.

    • PRU 3.10.17

      (1) The amount of holdings referred to in Rule 3.10.7(g) that is equal to or less than 10% of the CET1 items of the Authorised Person after applying the provisions laid down in Rule 3.10.16(1)(a) must not be deducted and must be subject to the applicable risk weights in accordance with Chapter 4.
      (2) An Authorised Person must determine the portion of holdings of all the capital instruments that is risk weighted by dividing the amount specified in (a) by the amount specified in (b):
      (a) the amount of holdings required to be risk weighted pursuant to Rule 3.10.17(1);
      (b) the aggregate amount of direct and indirect holdings by the Authorised Person of all the capital instruments of Relevant Entities in which the Authorised Person does not have a significant investment.

    • PRU 3.10.18

      For the purposes of Rule 3.10.7(h), the amount to be deducted from CET1 elements must exclude Underwriting positions held for five working days or fewer and must be determined in accordance with Rules 3.10.14 and 3.10.15.