Prudential Regulation Authority Rulebook

2.1

For the purposes of calculating own funds on an individual basis and a sub-consolidated basis, firms subject to supervision on a consolidated basis must deduct at least the relevant percentage of holdings of own funds instruments issued by financial sector entities included in the scope of consolidated supervision in accordance with Part Two of the CRR, except where the exception in 2.3 or 2.6 applies.

2.2

For the purposes of 2.1 the relevant percentage is as follows:

1. (1) 50% for the period from 1 January 2014 to 31 December 2014;
2. (2) 60% for the period from 1 January 2015 to 31 December 2015;
3. (3) 70% for the period from 1 January 2016 to 31 December 2016;
4. (4) 80% for the period from 1 January 2017 to 31 December 2017;
5. (5) 90% for the period from 1 January 2018 to 31 December 2018; and
6. (6) 100% for the period after 31 December 2018.

2.3

A firm must not apply the deduction in 2.1 to its holdings of own funds instruments issued by a venture capital investor that is included in the scope of consolidated supervision of the firm.

2.4

For the purposes of this Chapter, a venture capital investor is a financial institution, in relation to which:

1. (1) the sole purpose is to make venture capital investments and carry out unregulated activities in relation to the administration of venture capital investments; and
2. (2) none of its venture capital investments is in a credit institution or a financial institution, the principal activity of which is to perform any activity other than the acquisition of holdings in other undertakings (within the meaning of section 1161(1) of the Companies Act 2006).

2.5

For the purposes of this Chapter, a venture capital investment is a designated investment which, at the time the investment is made, is:

1. (1) in a new or developing company or venture; or
2. (2) in a management buy-out or buy-in; or
3. (3) made as a means of financing the investee company or venture and accompanied by a right of consultation, or rights to information, or board representation, or management rights; or
4. (4) acquired with a view to, or in order to, facilitate a transaction falling within (1) to (3).

2.6

For the purposes of this Chapter, a designated investment is a security or contractually-based investment specified in Articles 76 to 85 and 89 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

2.7

A firm must not apply the deduction in 2.1 to that percentage of its holdings of own funds instruments issued by a venture capital holding company included in the scope of consolidated supervision of the firm that represents the value of the venture capital holding company’s investment in venture capital investors.

2.8

For the purposes of this Chapter, a venture capital holding company is a financial institution, in respect of which:

1. (1) it is a financial institution solely by reason of its principal activity being the acquiring of holdings;
2. (2) it holds shares (in the meaning of section 76 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001) in a venture capital investor; and
3. (3) the proportion of the value of the venture capital holding company attributable to investment in Venture Capital Investors and the proportion of the value of the venture capital holding company attributable to other investments can be identified and valued on a regular basis.