The Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014

13A Trading assets condition

(1) The trading assets condition is that at any particular time (“T”)— (a) in the case of a UK deposit-taker which is not a member of a group, the average value of the trading assets held by the UK deposit-taker in the calculation period does not exceed 10% of the average tier 1 capital of the UK deposit-taker in the calculation period, in each case as calculated in accordance with paragraph (2); (b) in the case of a UK deposit-taker which is a member of a group, the average sum of the value of the trading assets held by— (i) the UK deposit-taker, (ii) each CRR firm in the same group as the UK deposit-taker, (iii) each FCA investment firm in the same group as the UK deposit-taker, and (iv) a UK branch in the same group as the UK deposit-taker, in the calculation period does not exceed 10% of the average sum of the tier 1 capital of the UK deposit-taker, and each CRR firm and FCA investment firm in the group, in each case as calculated in accordance with paragraphs (3) and (4). (2) For the purpose of paragraph (1)(a), the average value of the trading assets or tier 1 capital of an entity is to be calculated as follows— (a) calculate the value of the trading assets or tier 1 capital at the end of each quarter in the calculation period to give quarterly totals, and (b) in each case, add those quarterly totals together and divide by the number of quarters in the calculation period to give the average value. (3) For the purpose of paragraph (1)(b), at the end of each quarter in the calculation period— (a) add together the total value of the trading assets held by— (i) the UK deposit-taker, (ii) any other CRR firm in the same group as the UK deposit-taker, so far as those assets are not included in the total in paragraph (i), (iii) any FCA investment firm in the same group as the UK deposit-taker, so far as those assets are not included in the total in paragraph (i) or (ii), and (iv) any UK branch in the same group as the UK deposit-taker, so far as those assets are not included in the total in paragraph (i), (ii) or (iii), (b) add together the total value of the tier 1 capital of— (i) the UK deposit-taker, (ii) any other CRR firm in the same group as the UK deposit-taker, so far as that capital is not included in the total in paragraph (i), and (iii) any FCA investment firm in the same group as the UK deposit-taker, so far as that capital is not included in the total in paragraph (i) or (ii), and (c) in each case, add the quarterly totals calculated under sub-paragraphs (a) and (b) together and divide by the number of quarters in the calculation period to give the average value. (4) Each calculation required by paragraph (3) is to be made— (a) on a consolidated basis in accordance with the prudential requirements regulation in the case of a UK deposit-taker or other CRR firm, where the CRR firm or any UK parent institution of the CRR firm is required to calculate tier 1 capital on a consolidated basis under the prudential requirements regulation; (b) on a consolidated basis in accordance with MIFIDPRU in the case of an FCA investment firm not included in any calculations made under sub-paragraph (a), where the FCA investment firm or any UK parent entity (as defined in the glossary to the FCA Handbook) of the FCA investment firm— (i) is required to calculate the tier 1 capital of the FCA investment firm on a consolidated basis under MIFIDPRU, or (ii) is permitted to use the group capital test provided for in MIFIDPRU 2.6; (c) on an individual basis in any other case. (5) For the purposes of this article— (a) trading assets are held by a branch if they are treated by the credit institution to which the branch belongs as being held by the branch; (b) the value of trading assets is their fair value, assessed in accordance with International Financial Reporting Standard 13 (fair value measurement) issued by the International Accounting Standards Board in May 2011, as amended from time to time; (c) tier 1 capital has the same meaning as in— (i) the prudential requirements regulation in relation to a CRR firm, and the value of the tier 1 capital is to be calculated in accordance with the prudential requirements regulation; (ii) MIFIDPRU in relation to an FCA investment firm, and the value of the tier 1 capital is to be calculated in accordance with MIFIDPRU; (d) the calculation period is— (i) in the case of a UK deposit-taker that has existed for three financial years or more, the period of three consecutive financial years of that UK deposit-taker which ends immediately before the start of the financial year in which T falls; (ii) in the case of any other UK deposit-taker, the period for which that UK deposit-taker has existed at T. (6) If a UK deposit-taker, CRR firm, FCA investment firm or UK branch holds trading assets or tier 1 capital in a currency other than sterling, the quarterly totals referred to in paragraphs (2) and (3) must be calculated by converting financial amounts representing such trading assets or tier 1 capital into sterling. (7) The conversion required by paragraph (6) must be made by reference to an appropriate spot rate of exchange as at the last day of the quarter to which a quarterly total relates. (8) In this article, a reference to a quarter is a reference to any complete quarter falling within a calculation period for the entity concerned. (9) In this article— “CRR firm” has the meaning given in article 4(1)(2A) of the prudential requirements regulation; “FCA Handbook” means the Handbook of Rules and Guidance published by the FCA containing rules made by the FCA under the 2000 Act; “FCA investment firm” has the meaning given in section 143A of the 2000 Act; “MIFIDPRU” means the Prudential Sourcebook for MIFID Investment firms in the FCA Handbook, as that Sourcebook has effect from time to time; “overseas deposit-taker” means a credit institution, as defined by article 4(1)(1) of the prudential requirements regulation, which is not a CRR firm; “trading assets” means financial assets which are held for trading, other than any hedging assets, and for these purposes— “financial assets” has the meaning given in paragraph 11 of International Accounting Standard 32 (financial instruments: presentation) as amended from time to time, “held for trading” has the meaning given in Appendix A to International Financial Reporting Standard 9 (financial instruments), issued by the International Accounting Standards Board in November 2009 as amended from time to time, “hedging assets” means assets where the sole or main purpose for the entity acquiring the asset is to limit the extent to which— that entity, or any other entity, whose trading assets are included in the calculation required by paragraph (3)(a)(i), (ii) or (iii), will be adversely affected by any of the factors specified in article 6(2) of the excluded activities and prohibitions order; “UK branch” means a place of business located in the United Kingdom that forms a legally dependant part of an overseas deposit-taker and conducts directly all or some of the operations inherent in its business, where the overseas deposit-taker is a member of the same group as the UK deposit-taker; “UK parent institution” has the meaning given in article 4(1)(28) of the prudential requirements regulation.