Prudential Regulation Authority Rulebook

8.1

This Chapter does not apply to a pure reinsurer.

8.2

1. (1) For the purposes of Insurance Company – Capital Resources 13, a stock lending transaction (including a repo transaction) is approved if:
1. (a) the firm is the lender;
2. (b) the assets lent by the firm are admissible assets;
3. (c) the counterparty is an authorised person, an approved counterparty, a person registered as a broker-dealer with the Securities and Exchange Commission of the United States of America or a bank, or a branch of a bank, supervised, and authorised to deal in investments as principal, with respect to OTC derivatives by at least one of the following federal banking supervisory authorities of the United States of America:
1. (i) the Office of the Comptroller of the Currency;
2. (ii) the Federal Deposit Insurance Corporation; and
3. (iii) the Board of Governors of the Federal Reserve System; and
4. (d) adequate and sufficiently immediate collateral is obtained to secure the obligation of the counterparty.
2. (2) 8.2(1)(d) does not apply to a stock lending transaction made through Euroclear Bank SA/NV's Securities Lending and Borrowing Programme.

8.3

For the purposes of 8.2(1)(d), collateral is adequate only if it:

1. (1) is transferred to the firm or its agent or, in the case of a letter of credit, meets the conditions described in 8.4;
2. (2) is:
1. (a) at the time of the transfer and on a continuing basis; or
2. (b) (in the case of a letter of credit) at the time of issue and on a continuing basis;
3. at least equal in value to the value of the securities transferred, or consideration provided, by the firm; and
3. (3) is of adequate quality.

8.4

The conditions referred to in 8.3(1) are that the letter of credit is:

1. (1) direct, explicit, unconditional and irrevocable; and
2. (2) issued by an undertaking which is:
1. (a) not an affiliated company of the counterparty; and
2. (b) either an approved credit institution or a bank, or a branch of a bank, whether chartered by the federal government of the United States of America or a US state, that is supervised and examined by at least one of the following US federal banking supervisory authorities:
1. (i) the Office of the Comptroller of the Currency;
2. (ii) the Federal Deposit Insurance Corporation; and
3. (iii) the Board of Governors of the Federal Reserve System.

8.5

For the purposes of 8.3(2), where the validity of the collateral or the firm's interest in the collateral is about to expire or has expired, collateral will only be adequate on a continuing basis if sufficient collateral will again be transferred or issued at the latest by the close of business on the day of expiry.

8.6

For the purposes of 8.2(1)(c), collateral is sufficiently immediate only if:

1. (1) it is transferred or, in the case of a letter of credit, issued before, or at the same time as, the transfer of the securities by the firm; or
2. (2) it will be transferred or, in the case of a letter of credit, issued, at latest, by the close of business on the day of the transfer.