Telephone 020 3813 2890 for a free no obligation chat about your regulatory requirements with one of our compliance consultants.
Registered in England and Wales as limited company number 07626537 - Registered Office 120 Pall Mall, London, SW1Y 5EA
Here to help with Regulation and Compliance
FCA issues ICAAP pointers for IFPRU Firms
29th September 2016
Dear CEO letter to IFPRU Firms
The Financial Conduct Authority recently issued a “Dear CEO” letter to IFPRU investment firms. This was in relation to the Internal Capital Adequacy Assessment Process (ICAAP) and the FCA’s supervisory review and evaluation process (SREP). The letter is particularly useful for firms since it provides details of the regulator’s expectations with regards to completed ICAAP documents and help with preparing for the regulator’s review.
Prudential requirements for IFPRU firms are laid out in the Capital Requirements Regulations (CRR) and provisions in the IFPRU sourcebook (that derive from the Capital Requirements directive).
Per these requirements, IFPRU firms are required to carry out an ICAAP and have in place appropriate policies, processes, systems and controls to manage risk and hold adequate resources to meet the overall financial adequacy rule (found in IFPRU 2.2.1R).
As the FCA stress in their ‘Dear CEO’ letter, the ICAAP should be a ‘risk management tool’ that a firm or group uses to inform their business decisions. Thus it should ‘not be treated as a purely compliance exercise.’
A Firm’s ICAAP must be reviewed and documented at least annually. The Firm’s ICAAP Document must also be available for inspection when the regulator undertakes their Supervisory Review and Evaluation Process, thus this document is incredibly important.
Whilst a firm’s ICAAP should be reported to a firm’s governing body, it falls under the responsibility of that governing body and, as the regulator emphasizes, should form ‘an integral part of the firm/group’s management process and decision making culture.’
Firms are reminded that there should be sufficient detail contained within the ICAAP document for those that read it to ‘gain a comprehensive understanding of the firm/group’s ICAAP.’
In essence, a Firm’s ICAAP document should have/cover the following aspects:
Firms should now ensure that they have incorporated these points into their ICAAP documents ready for the regulator’s SREP reviews. Firms should note that reviews will be performed by the regulator alongside other comparable business models to ensure that there is a consistent approach across the sector and that data from their firm’s regulatory reports, such as COREP will also be used.
Once the regulator has undertaken their SREPs, they will then look to publish and share both good practice and common errors for firms’ to learn from going forwards.
Should your firm require ICAAP support services such as assistance in examining your ICAAP to ensure it is appropriately assessed for your current business plan and activities or require assistance in documenting this review, our experienced ICAAP Consultants can help so please get in touch.
Please contact our Compliance Support Team for a free no obligation discussion of your regulatory requirements and how our regulatory & compliance consultants can help your business move forward compliantly.
Call by Telephone:
(020) 3813 2890
Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.
Call by Telephone:
(020) 3813 2890
ICAAP Support Services
Should your firm require ICAAP support services such as assistance in examining your ICAAP to ensure it is appropriately assessed for your current business plan and activities or require assistance in documenting this review, our experienced ICAAP Consultants can help.
Comment from the FCA:
“You should ensure that the ICAAP is the responsibility of, and reported to, the firm’s governing body, and forms an integral part of the firm/group’s management process and decision-making culture”
FCA, Dear CEO letter, 22Sep16