The Latest Consultation Paper (CP12/31) from the FSA regarding changes to the ILAS BIPRU firm automatic scalar increase.

1. CP 12/31 Removing the simplified ILAS
BIPRU firm automatic scalar increase and
other minor changes to BIPRU 12
A CEI Compliance FSA Consultation Papers Summary

2. What Is It All About?
This will be of interest to all BIPRU firms.
Background
On reassessment, in the contemporary economic climate
the costs of the FSA liquidity regime have been higher
than originally thought on introduction in 2009. The
Bank of England has also recently made additional
contingent liquidity available. The FSA now wants to
consider amending the BIPRU 12 regime to account for
its assessment of the economic costs and the availability
of this additional liquidity insurance by recalibrating all
individual firms’ liquid assets buffer requirements.

3. What Is It All About?
No specific rule change is necessary to achieve this
position for standard ILAS BIPRU firms because of the
guidance status of their quantitative liquidity
requirements and the FSA’s firm intention not to
increase, across the industry, the calibration of individual
firms liquidity guidance.
Despite that intention, simplified ILAS BIPRU firms are
subject to a specific calculation in determining their
liquidity requirements, the calibration of which is
specified in the transitional rules in BIPRU TP29. To
achieve a similar outcome for those firms requires a rule
amendment.

4. What Is It All About?
Specifically BIPRU TP29 applies to all simplified ILAS
BIPRU firms between 1/12/2009 and 31/12/2015. This
establishes a transitional period during which simplified
ILAS BIPRU firms are required to increase their liquid
assets buffers. Simplified ILAS BIPRU firms are currently
required to hold 50% of simplified buffer requirements.
The increase to 70% simplified buffer requirement is due
on 1/7/2013 and to 100% on 1/1/2016.
The FSA are therefore proposing to amend the simplified
buffer requirement and delete BIPRU TP29 to recognise
these different circumstances. This is also intended to
ensure that the calibration of the simplified buffer
requirements remain consistent with the liquidity
requirements of the standard ILAS firms.

5. What Is It All About?
This move is also in line with the recommendation of the
interim Financial Policy Committee (FPC) , which
recommended at its meeting of 6/2012 that “the FSA
considers whether adjustments to micro-prudential
liquidity guidance are appropriate, taking some account
of this additional liquidity insurance”.

6. So What Does It Say?
In CP12/31 the FSA propose amending BIPRU TP29 Liquid
assets buffer scalar: simplified ILAS BIPRU firms – to
remove the automatic increase which is due to come into
effect on 1/7/2013 and all subsequent scheduled
increases.
The effect of this will be that simplified ILAS BIPRU firms
will need to continue to maintain a Liquid Assets Buffer
(LAB) that is not less than 50% of the simplified buffer
requirement. Furthermore, to delete BIPRU TP29 from
the Handbook and amend the simplified buffer
requirement in “BIPRU 12.6.9R” to require a LAB of at
least equal to 50% of the current calculation.

7. So What Does It Say?
In the FSA Handbook BIPRU 12.7 sets out criteria for
assets that can be included in the LAB.
At present, high quality debt securities issued by a
government or central bank and reserves in the form of
sight deposits with a central bank are subject to certain
restrictions in terms of the credit quality of the
government or central bank and the currency
denomination of the assets.
CP12/31 proposes to add a new rule to BIPRU 12.7 so
that similar credit quality and currency requirements
apply to securities issued by a designated multilateral
development bank.

8. So What Does It Say?
A minor amendment is also proposed to correct a small
number of drafting errors in the FSA Handbook SUP 16
Annex 25 Guidance notes for data items in SUP 16 Annex
24R.
Given the need to implement the proposed change to the
liquid assets buffer scalar for simplified ILAS BIPRU firms
before the automatic increase takes effect on 1/7/2013,
and the relatively minor nature of the other proposals,
the consultation period for feedback on these proposals
is (only) one month.
Next steps
Comments are requested by 8 December 2012.

9. What Is This Presentation
This is a regulatory summary service
provided by CEI Compliance Limited, The
UK’s Fastest Growing Regulatory
Consultancy
We can only advise on the salient points in
this summary and if you want further
details then we would suggest you access
the full document from the FSA Website at
www.fsa.govuk

10. Isnt Bigger, Better?
Generally, No.
Its usually just more expensive
Fortunately, there are more positive alternatives to
using a niche consultancy compared to the Accentures,
McKinseys or the big accountancy firms like Deloitte, E&Y
etc.
We not only consider that size doesn’t matter, but large
size can actually be a disadvantage in meeting your
needs.

11. Dealing with a niche
consultancy
You are always dealing with the principal when you are
dealing with my firm. This means that I am the relationship
manager and there is no junior partner to whom responsibility
will be transferred. There is no decreased accountability, no
"hand-off" to a less-informed colleague. If your interests are at
stake continually, shouldn’t you reasonably expect my
continual involvement?
We can usually provide resources on a "just in time"
basis. That is, our projects do not have to cover excessive
overhead, such as multiple offices, large administrative
backup, recruiting, partner perks, etc. We are organized to
efficiently provide everything that you, as the buyer needs, but
nothing more than that which means that you are paying for
value and results and only minimum overhead.

12. Dealing with a niche
consultancy
There is more likelihood of your privacy and
confidentiality being observed with fewer people
working on the project. We (and/or the few people we
might also involve) are constant which means that there
isn’t the need to sift through dozens of differing
perceptions.
We’re faster. We can respond to requests quickly, and
return all calls within four hours which means to you
that there is no need to worry about a bureaucracy,
delays and unknown people on the other end of the
phone.

13. Dealing with a niche
consultancy
Since we handle fewer concurrent projects than larger firms,
our attention is focused on the job at hand. This means that
you don’t have to "compete" with another dozen or so of our
clients, which may be larger, paying more or are more time-
demanding. We structure our work so that every client
receives maximum attention.
Your investment is controlled. There is no "meter
running". We work for a fixed, value-based, project fee.
Large firms can’t afford to do that as readily because of all the
people involved and their own insistence on measuring their
success by billable hours. We measure our success by client
objectives reached, not in “time units”.

14. Dealing with a niche
consultancy
The expertise that larger firms use is often white-labelling
for them by a pool of consultants available in the
marketplace at any one time. We select our consultants
from practising subject matter experts which
means that you obtain the same or better expertise for
less money, because;
Inevitably, we are less expensive. There are
economies to using someone who can base their fees on
each situation and not on a pre-determined service scale
or need for reaching a practice quota. This means quite
simply better value to you.

15. And, additionally
The benefits of dealing with the “Compliance
Doctor” and CEI Compliance is;
A firm with experienced and qualified former
advisers;
A firm that can apply changes and needs in a
common sense way that is practical and
effective;
A firm that is considered and respected as
independent and reliable by the FSA;
A firm that provides you with unfettered access
to the principle immediately and on demand;

16. Questions? More Information?
CEI Compliance Limited
Call
0800 689 9 689
Email
info@ceicompliance.co.uk