Consolidation

Key Insights

  • Firms should conduct an assessment of their group structure, even if a previous assessment has led to the conclusion that a consolidation group does not exist.

  • For groups where the structure may change on a regular basis, it is important to establish robust processes whereby these changes are made known, so the assessment can be revised with the IFPR rules in mind. 

  • The group consolidation determination is particularly key for groups which are sufficiently simple as the group capital test will offer a respite from the ongoing consolidated supervision burden. This will, however, require an application to be lodged with the FCA.

Under the IFPR, new consolidation rules are intended to ensure that group corporate structures are supervised by the FCA in a way that is commensurate to the risk that they face and pose.

This is clearly necessary where a corporate group structure contains more than one entity conducting investment firm business, but could also apply to simpler structures containing one or more holding companies. 

An FCA investment firm group comprises a UK parent undertaking and its relevant subsidiaries, where at least one entity is an FCA investment firm.

Wheelhouse Advisors has assessed each firm to ascertain whether the group consolidation rules apply and subsequently whether the group capital test applies.

The Findings

  • 33% of the firms assessed will need to apply the group consolidation rules. In our assessment, these firms were Exempt-CAD and BIPRU firms.
  • 5% of the assessed firms do need to apply group consolidation rules, but we have ascertained it unlikely that they would be eligible to apply the group capital test.

Consolidation impact

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