CP12_31 removing the simplified ILAS BIPRU firm automatic scalar increase


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The Latest Consultation Paper (CP12/31) from the FSA regarding changes to the ILAS BIPRU firm automatic scalar increase.

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CP12_31 removing the simplified ILAS BIPRU firm automatic scalar increase

  1. 1. CP 12/31 Removing the simplified ILASBIPRU firm automatic scalar increase and other minor changes to BIPRU 12 A CEI Compliance FSA Consultation Papers Summary
  2. 2. What Is It All About?This will be of interest to all BIPRU firms.BackgroundOn reassessment, in the contemporary economic climatethe costs of the FSA liquidity regime have been higherthan originally thought on introduction in 2009. TheBank of England has also recently made additionalcontingent liquidity available. The FSA now wants toconsider amending the BIPRU 12 regime to account forits assessment of the economic costs and the availabilityof this additional liquidity insurance by recalibrating allindividual firms’ liquid assets buffer requirements.
  3. 3. What Is It All About?No specific rule change is necessary to achieve thisposition for standard ILAS BIPRU firms because of theguidance status of their quantitative liquidityrequirements and the FSA’s firm intention not toincrease, across the industry, the calibration of individualfirms liquidity guidance.Despite that intention, simplified ILAS BIPRU firms aresubject to a specific calculation in determining theirliquidity requirements, the calibration of which isspecified in the transitional rules in BIPRU TP29. Toachieve a similar outcome for those firms requires a ruleamendment.
  4. 4. What Is It All About?Specifically BIPRU TP29 applies to all simplified ILASBIPRU firms between 1/12/2009 and 31/12/2015. Thisestablishes a transitional period during which simplifiedILAS BIPRU firms are required to increase their liquidassets buffers. Simplified ILAS BIPRU firms are currentlyrequired to hold 50% of simplified buffer requirements.The increase to 70% simplified buffer requirement is dueon 1/7/2013 and to 100% on 1/1/2016.The FSA are therefore proposing to amend the simplifiedbuffer requirement and delete BIPRU TP29 to recognisethese different circumstances. This is also intended toensure that the calibration of the simplified bufferrequirements remain consistent with the liquidityrequirements of the standard ILAS firms.
  5. 5. What Is It All About?This move is also in line with the recommendation of theinterim Financial Policy Committee (FPC) , whichrecommended at its meeting of 6/2012 that “the FSAconsiders whether adjustments to micro-prudentialliquidity guidance are appropriate, taking some accountof this additional liquidity insurance”.
  6. 6. So What Does It Say?In CP12/31 the FSA propose amending BIPRU TP29 Liquidassets buffer scalar: simplified ILAS BIPRU firms – toremove the automatic increase which is due to come intoeffect on 1/7/2013 and all subsequent scheduledincreases.The effect of this will be that simplified ILAS BIPRU firmswill need to continue to maintain a Liquid Assets Buffer(LAB) that is not less than 50% of the simplified bufferrequirement. Furthermore, to delete BIPRU TP29 fromthe Handbook and amend the simplified bufferrequirement in “BIPRU 12.6.9R” to require a LAB of atleast equal to 50% of the current calculation.
  7. 7. So What Does It Say?In the FSA Handbook BIPRU 12.7 sets out criteria forassets that can be included in the LAB.At present, high quality debt securities issued by agovernment or central bank and reserves in the form ofsight deposits with a central bank are subject to certainrestrictions in terms of the credit quality of thegovernment or central bank and the currencydenomination of the assets.CP12/31 proposes to add a new rule to BIPRU 12.7 sothat similar credit quality and currency requirementsapply to securities issued by a designated multilateraldevelopment bank.
  8. 8. So What Does It Say?A minor amendment is also proposed to correct a smallnumber of drafting errors in the FSA Handbook SUP 16Annex 25 Guidance notes for data items in SUP 16 Annex24R.Given the need to implement the proposed change to theliquid assets buffer scalar for simplified ILAS BIPRU firmsbefore the automatic increase takes effect on 1/7/2013,and the relatively minor nature of the other proposals,the consultation period for feedback on these proposalsis (only) one month.Next stepsComments are requested by 8 December 2012.
  9. 9. What Is This Presentation This is a regulatory summary service provided by CEI Compliance Limited, The UK’s Fastest Growing Regulatory Consultancy We can only advise on the salient points in this summary and if you want further details then we would suggest you access the full document from the FSA Website at www.fsa.govuk
  10. 10. Isnt Bigger, Better?Generally, No.Its usually just more expensiveFortunately, there are more positive alternatives tousing a niche consultancy compared to the Accentures,McKinseys or the big accountancy firms like Deloitte, E&Yetc.We not only consider that size doesn’t matter, but largesize can actually be a disadvantage in meeting yourneeds.
  11. 11. Dealing with a nicheconsultancyYou are always dealing with the principal when you aredealing with my firm. This means that I am the relationshipmanager and there is no junior partner to whom responsibilitywill be transferred. There is no decreased accountability, no"hand-off" to a less-informed colleague. If your interests are atstake continually, shouldn’t you reasonably expect mycontinual involvement?We can usually provide resources on a "just in time"basis. That is, our projects do not have to cover excessiveoverhead, such as multiple offices, large administrativebackup, recruiting, partner perks, etc. We are organized toefficiently provide everything that you, as the buyer needs, butnothing more than that which means that you are paying forvalue and results and only minimum overhead.
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  13. 13. Dealing with a nicheconsultancySince we handle fewer concurrent projects than larger firms,our attention is focused on the job at hand. This means thatyou don’t have to "compete" with another dozen or so of ourclients, which may be larger, paying more or are more time-demanding. We structure our work so that every clientreceives maximum attention.Your investment is controlled. There is no "meterrunning". We work for a fixed, value-based, project fee.Large firms can’t afford to do that as readily because of all thepeople involved and their own insistence on measuring theirsuccess by billable hours. We measure our success by clientobjectives reached, not in “time units”.
  14. 14. Dealing with a nicheconsultancyThe expertise that larger firms use is often white-labellingfor them by a pool of consultants available in themarketplace at any one time. We select our consultantsfrom practising subject matter experts whichmeans that you obtain the same or better expertise forless money, because;Inevitably, we are less expensive. There areeconomies to using someone who can base their fees oneach situation and not on a pre-determined service scaleor need for reaching a practice quota. This means quitesimply better value to you.
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  16. 16. Questions? More Information? CEI Compliance Limited Call 0800 689 9 689 Email info@ceicompliance.co.uk