Prudential Regulation Authority Rulebook

1.

Indirect funding of capital instruments under Article 28(1)(b), Article 52(1)(c) and Article 63(c) of the CRR shall be deemed funding that is not direct.

2.

For the purposes of paragraph 1, direct funding shall refer to situations where an institution has granted a loan or other funding in any form to an investor that is used for the acquisition of ownership of its capital instruments.

3.

Direct funding shall also include funding granted for other purposes than acquisition of ownership of an institution’s capital instruments, to any person who has a qualifying holding in the credit institution, as referred to in Article 4(36) of the CRR, or who is deemed to be a related party within the meaning of the definitions in paragraph 9 of International Accounting Standard 24 on Related Party Disclosures as applied under UK-adopted international accounting standards, taking into account any additional guidance issued by the PRA, if the institution is not able to demonstrate all of the following:

1. (a) the transaction is realised at similar conditions as other transactions with third parties;
2. (b) the person or the related party does not have to rely on the distributions or on the sale of the capital instruments held to support the payment of interest and the repayment of the funding.

[Note: This rule corresponds to Article 8 of Part 2 of Regulation (EU) No 241/2014 as it applied immediately before revocation by the PRA.]