Chapter BKLM361000
| Published date | 16 April 2016 |
| Record Number | BKLM361000 |
| Court | HM Revenue & Customs |
For the purposes of the bank levy, ‘high quality liquid assets’ means assets which would be within Section BIPRU 12.7.2(1) to (4) of the FCA Handbook (web)(link is external).
In particular, the scope of what can be included as a high quality liquid asset is set out by the FCA definition at BIPRU 12.7.2R5 and these are essentially:
- high quality debt securities issued by a government or central bank
- securities issued by a designated multilateral development bank
- reserves in the form of sight deposits with a central bank of the kind specified in BIPRU 12.7.5R and BIPRU 12.7.6R, and
- in the case of a simplified ILAS BIPRU firm* only, investments in a designated money market fund.
- This is subject to any direction made by the FCA in relation to the entity that holds the assets or the relevant group of which they are a member under of FSMA00/S148 to modify the rules around what qualifies as a high quality liquid asset for the entity. Such a direction may, in respect of a particular entity or group, remove certain assets from the list and add certain other assets.
For the purposes of the bank levy, ‘high quality liquid assets’ means assets which would be treated as Level 1 liquid assets by the Prudential Regulation Authority (PRA).
From 1 October 2015 the PRA has adopted new European standards to determine the requirements for a bank’s liquid asset buffer and the type of assets which may be included within them.
A bank may only claim a high quality liquid assets deduction for the holding of assets that would meet the Level 1 criteria of the PRA. In the case of an entity operating in the UK through a permanent establishment this may mean that a calculation needs to be undertaken for bank levy purposes.
Details on what aspects of their regulatory reports a bank who operates in the UK through a permanent establishment may be able to use can be found in BKLM362000 Application for non-EEA banks.
The scope of what assets can be included as high quality liquid assets is set out by the Article 10(1) of Commission Regulation 2015/61(link is external).
This regulation outlines 3 categories of liquid assets, however for the purposes of the bank levy only the highest quality of asset designated Level 1 will qualify for the deduction.
These are essentially:
(a) coins and banknotes;
(b) the following exposures to central banks:
i. assets...
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