The Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014
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Change 1
14 Prohibitions: financial institution exposures
(1) A ring-fenced body is prohibited from incurring a financial institution exposure unless at least one of the exemptions set out in paragraphs (2) to (6) or in articles 15 to 19C applies, and, for the avoidance of doubt, provided that one of these exemptions applies in relation to a particular exposure, it is irrelevant whether the conditions for any other exemption are satisfied by that exposure. (2) A ring-fenced body may incur a financial institution exposure if the sole or main purpose of the transaction giving rise to the exposure (by itself or in combination with other transactions) is to limit the extent to which— (a) the ring-fenced body, (b) any subsidiary undertaking of the ring-fenced body, (ba) another ring-fenced body within the same group as the ring-fenced body, (bb) a related undertaking within the same group as the ring-fenced body, (bc) any undertaking in which the ring-fenced body has a participating interest, (c) any sponsored structured finance vehicle of the ring-fenced body, (d) any conduit vehicle of the ring-fenced body, or (e) any combination of the undertakings referred to in sub-paragraphs (a), (b), (ba), (bb), (c) and (d), will be adversely affected by any of the factors specified in paragraph (3). (3) The specified factors are— (a) changes in interest rates, exchange rates or commodity prices; (b) changes in any index of retail prices or of residential or commercial property prices; (c) changes in any index of the price of shares; (d) default risk; (e) longevity risk; (f) mortality risk. (3A) A ring-fenced body may incur a financial institution exposure if the purpose of the transaction giving rise to the exposure is to allow the ring-fenced body to hold liquid assets in order to meet the general requirement set out in Article 412 of the Liquidity (CRR) Part of the PRA Rulebook, and other applicable requirements in relation to liquid assets set out in that Part of the PRA Rulebook published by the PRA containing rules made by that Authority under the Act, as it applies to CRR firms, and as amended from time to time. (4) A ring-fenced body may incur a financial institution exposure where the relevant financial institution concerned is a member of the same group as the ring-fenced body, provided that— (a) the exposure concerned is not prohibited under rules made by the FCA or the PRA under the Act; and (b) the exposure arises as a result of— (i) a commercial transaction conducted on arm's length terms, ... (ii) a holding of shares or other securities issued by a subsidiary undertaking of the ring-fenced body. (iii) the relevant financial institution entering into any guarantee, bond, contract of indemnity or otherwise giving security or becoming responsible for any pension liability of the ring-fenced body, or (iv) a shared liability arrangement within the meaning of regulation 1 of the Financial Services and Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015 provided that either— (aa) the shared liability arrangement is permitted by virtue of regulation 2(8) or (9) of those Regulations, or (bb) the exposure ceases to be incurred on or after the specified date referred to in regulation 2(10) of those Regulations. (5) A ring-fenced body may incur a financial institution exposure in the course of buying, selling or subscribing for investments for the purposes of a transaction falling within paragraph (2). (6) A ring-fenced body may incur a financial institution exposure where— (a) the exposure concerned is a payment exposure, and (b) the ring-fenced body has complied with any rules made or requirements imposed by the FCA or the PRA under the Act in relation to payment exposures. (7) A ring-fenced body may incur a financial institution exposure where— (a) the relevant financial institution is an SME investment undertaking within the meaning of article 7A, and (b) the transaction giving rise to the financial institution exposure satisfies the conditions in article 7A. (8) A ring-fenced body may incur a financial institution exposure where the exposure arises as a result of the ring-fenced body dealing in investments as principal as permitted under article 6(8) or (9).
14 Prohibitions: financial institution exposures
(1) A ring-fenced body is prohibited from incurring a financial institution exposure unless at least one of the exemptions set out in paragraphs (2) to (6) or in articles 15 to 19C applies, and, for the avoidance of doubt, provided that one of these exemptions applies in relation to a particular exposure, it is irrelevant whether the conditions for any other exemption are satisfied by that exposure. (2) A ring-fenced body may incur a financial institution exposure if the sole or main purpose of the transaction giving rise to the exposure (by itself or in combination with other transactions) is to limit the extent to which— (a) the ring-fenced body, (b) any subsidiary undertaking of the ring-fenced body, (ba) another ring-fenced body within the same group as the ring-fenced body, (bb) a related undertaking within the same group as the ring-fenced body, (bc) any undertaking in which the ring-fenced body has a participating interest, (c) any sponsored structured finance vehicle of the ring-fenced body, (d) any conduit vehicle of the ring-fenced body, or (e) any combination of the undertakings referred to in sub-paragraphs (a), (b), (ba), (bb), (c) and (d), will be adversely affected by any of the factors specified in paragraph (3). (3) The specified factors are— (a) changes in interest rates, exchange rates or commodity prices; (b) changes in any index of retail prices or of residential or commercial property prices; (c) changes in any index of the price of shares; (d) default risk; (e) longevity risk; (f) mortality risk. (3A) A ring-fenced body may incur a financial institution exposure if the purpose of the transaction giving rise to the exposure is to allow the ring-fenced body to hold liquid assets in order to meet the general requirement set out in Article 412 of the Liquidity (CRR) Part of the PRA Rulebook, and other applicable requirements in relation to liquid assets set out in that Part of the PRA Rulebook published by the PRA containing rules made by that Authority under the Act, as it applies to CRR firms, and as amended from time to time. (4) A ring-fenced body may incur a financial institution exposure where the relevant financial institution concerned is a member of the same group as the ring-fenced body, provided that— (a) the exposure concerned is not prohibited under rules made by the FCA or the PRA under the Act; and (b) the exposure arises as a result of— (i) a commercial transaction conducted on arm's length terms, ... (ii) a holding of shares or other securities issued by a subsidiary undertaking of the ring-fenced body. (iii) the relevant financial institution entering into any guarantee, bond, contract of indemnity or otherwise giving security or becoming responsible for any pension liability of the ring-fenced body, or (iv) a shared liability arrangement within the meaning of regulation 1 of the Financial Services and Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015 provided that either— (aa) the shared liability arrangement is permitted by virtue of regulation 2(8) or (9) of those Regulations, or (bb) the exposure ceases to be incurred on or after the specified date referred to in regulation 2(10) of those Regulations. (5) A ring-fenced body may incur a financial institution exposure in the course of buying, selling or subscribing for investments for the purposes of a transaction falling within paragraph (2). (6) A ring-fenced body may incur a financial institution exposure where— (a) the exposure concerned is a payment exposure, and (b) the ring-fenced body has complied with any rules made or requirements imposed by the FCA or the PRA under the Act in relation to payment exposures. (7) A ring-fenced body may incur a financial institution exposure where— (a) the relevant financial institution is an SME investment undertaking within the meaning of article 7A, and (b) the transaction giving rise to the financial institution exposure satisfies the conditions in article 7A. (8) A ring-fenced body may incur a financial institution exposure where the exposure arises as a result of the ring-fenced body dealing in investments as principal as permitted under article 6(8) or (9).
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