| (18) | Matters specifically related to solo consolidation |
Solo consolidation—
| (a) | may be allowed by the Registrar only in exceptional cases; |
| (b) | is deemed to serve as a substitute for solo or unconsolidated reporting, and as such no bank shall apply solo consolidation in respect of any subsidiary unless specific approval was obtained from the Registrar to apply such solo consolidation; |
| (c) | aims to include in the required information only those subsidiaries— |
| (i) | which are so closely related to the activities of the relevant reporting bank that the subsidiaries may in substance be deemed equivalent to operating divisions of the relevant bank; |
| (A) | the interest of the bank is no less than 75 per cent, that is, the bank has control over the relevant subsidiary and is in a position to pass a special resolution when necessary; |
| (B) | the bank has the right to appoint or remove a majority of the members of the board of directors of the relevant subsidiary; |
| (C) | the management of the subsidiary is subject to the effective direction of the bank; |
| (D) | robust internal controls are in place in order to ensure that the subsidiary's business is conducted in a prudent manner; |
| (E) | no legal or other restrictions exist that may prevent surplus capital from being paid to the parent bank; |
| (F) | the incurred risks mainly relate to the parent bank; |
| (iii) | that are mainly funded by the bank, that is, there are little or no competing claims from other creditors, or other liabilities can easily be repaid from the proceeds of assets held by the bank; |
| (d) | shall in the case of a bank that adopted— |
| (i) | the internal ratings-based approach for the measurement of the bank's exposure to credit risk; |
| (ii) | the internal models approach for the measurement of the bank's exposure to market risk; or |
| (iii) | the advanced measurement approach for the measurement of the bank's exposure to operational risk, |
be applied only in respect of subsidiaries that are subject to and included in the results of the relevant approach or model adopted by the relevant reporting bank;
| (e) | shall not be applied in respect of banks within a banking group, that is, in no case shall a bank be solo consolidated with any other bank. |
