(10) Matters specifically related to the calculation of the consolidated amount of qualifying capital and reserve funds
When a bank or controlling company calculates its consolidated amount of qualifying capital and reserve funds as envisaged in section 70A of the Act, the bank or controlling company—
| (a) | shall include in its consolidated amount of qualifying capital and reserve funds any relevant amount related to a minority interest held in shares or other relevant qualifying instruments in accordance with the relevant requirements specified in regulation 38(14) of these Regulations; |
[Regulation 36(1)(a) substituted by regulation 18(b) of Notice No. 297, GG 40002, dated 20 May 2016]
| (b) | as a minimum, shall in the case of— |
| (i) | any majority owned or controlled financial entity or activity; or |
| (ii) | any significant minority owned or controlled financial entity or activity, |
which financial entity or activity in the case of a majority owned or controlled financial entity is not fully consolidated, or in the case of a significant minority owned or controlled financial entity is not pro-rata consolidated—
| (A) | deduct from its consolidated capital and reserve funds— |
| (i) | any equity or other regulatory capital instrument invested in the said majority owned or controlled entity, or significant minority owned or controlled entity, |
| (ii) | any relevant capital shortfall relating to the said majority owned or controlled financial entity, |
provided that the relevant deduction against capital and reserve funds shall be made in accordance with the relevant requirements specified in regulation 38(5) of these Regulations or such requirements as may be directed in writing by the Registrar; and
| (B) | remove from its balance sheet any relevant assets and liabilities or commitments, and any third-party investments in respect of the said majority owned or controlled entity, or significant minority owned or controlled entity. |
(c) as a minimum, shall in the case of—
| (i) | any reciprocal crossholding of capital held between the said bank or controlling company and any other relevant entity deduct from its consolidated amount of capital and reserve funds the relevant amount relating to such crossholding of capital in accordance with the relevant requirements specified in regulation 38(5) of these Regulations; |
| (ii) | any equity or other regulatory capital instruments held in any— |
| (A) | subsidiary that conducts insurance business; or |
| (B) | insurance entity in respect of which the said bank or controlling company holds a significant minority interest, |
deduct from its consolidated amount of capital and reserve funds the said amount relating to such investment in accordance with the relevant requirements specified in regulation 38(5) of these Regulations, and the said bank or controlling company shall subsequently remove from its balance sheet any relevant assets, liabilities or third party investments relating to such insurance subsidiary or entity;
[Regulation 36(1)(c)(ii) substituted by regulation 18(c) of Notice No. 297, GG 40002, dated 20 May 2016]
(iii) any significant investment in—
| (A) | a majority owned or controlled commercial entity; or |
| (B) | a commercial entity in respect of which the said bank or controlling company holds a significant minority interest, |
which individual significant investment exceeds 15 per cent of the sum of the issued common equity tier 1 capital and reserve funds, additional tier 1 capital and reserve funds and tier 2 capital and reserve funds of the reporting bank or controlling company, as reported in items 41, 65 and 78 of the form BA 700, and the aggregate amount of which investments exceeds 60 per cent of the sum of the issued common equity tier 1 capital and reserve funds, additional tier 1 capital and reserve funds and tier 2 capital and reserve funds of the reporting bank or controlling company, as reported in items 41, 65 and 78 of the form BA 700, risk weight the relevant exposure amount above and below the specified threshold level in accordance with the relevant requirements specified in regulation 23(6)(j) or 31(6), as the case may be;
| (d) | shall in no case include in its consolidated amount of capital and reserve funds any surplus capital held by an insurance entity in respect of which the said bank or controlling company holds a significant minority interest; |
| (e) | shall deduct from its consolidated amount of capital and reserve funds any capital shortfall relating to any majority owned or controlled insurance entity; |
| (f) | shall deduct from its consolidated common equity tier 1 capital and reserve funds any remaining goodwill relating to— |
| (i) | any relevant entity subject to the deduction method or approach; or |
| (ii) | any relevant majority owned or controlled entity; |
[Regulation 36(10)(f) substituted by regulation 18(d) of Notice No. 297, GG 40002, dated 20 May 2016]
| (g) | shall in all cases apply and adhere to any relevant limit or ratio specified in regulation 38(9) in respect of capital and reserve funds, that is, any limit or ratio specified in regulation 38(9) shall mutatis mutandis apply to the consolidated amount of capital and reserve funds of a bank or controlling company. |
