Richard Nuttall: Enigma! Decoding the upcoming capital adequacy requirements Richard Nuttall: Enigma! Decoding the upcoming capital adequacy requirements

24 Feb 2017 Richard Nuttall

Although new changes to the capital adequacy rules do not take effect until 30 June, Richard Nuttall strongly recommends firms review their financial position at the earliest time possible in case action is needed

It is important all investment firms have a clear understanding of the upcoming changes to the prudential requirements of the Financial Conduct Authority and the effect this can have on the business.

The ‘new' capital adequacy requirements heading our way were outlined in PS15/28: Capital resources requirements for personal investment firms (PIFs): feedback on CP15/17 and final rules.

The changes mean capital resource requirements will be as follows:

  • 5% of investment income plus 2.5% of any non-investment insurance and mortgage income; or
  • A minimum of £20,000 (from 30 June 2017) if the above calculation is lower.

It is worth noting that a basic capital adequacy calculator is available on the FCA's website to assist firms in calculating their capital adequacy requirement.

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