Capital Requirements & ICARA Implementation For Investment Firms – Consulting and Advisory
BIZENIUS expert consultants has been working hard to ensure that our clients are adequately prepared for the implementation of the new prudential regime (IFPR) that will come into force on 1 January 2022. We want to ensure that our clients will be able to meet the new IFPR requirements, ranging from holding additional liquid assets, increased regulatory capital, and the new governance, remuneration and reporting requirements before the expected date of implementation.
Challenges Faced When Implementing An ICARA
The Internal Capital Adequacy and Risk Assessment (“ICARA”) was designed under the Investment Firm Prudential Regime (IFPR) to supplement FCA-regulated entities’ own funds requirements and allow the identification, monitoring and mitigation of all material potential harms that could result from the ongoing activity of the regulated firm. The new capital adequacy assessment, ICARA, requires regulated firms to identify and monitor potential harms from both their market and clients, by analysing the appropriateness of their internal systems and realistic risk-appetite.
In fact, if compared with the previous ICAAP, ICARA requires an increased amount of effort and input from senior management, accounting, legal, and in particular, those in charge of the firm’s regulatory compliance. That increased coordination often poses major challenges to the relevant teams involved in the completion of the assessment, which might trigger the application of it. Regulated firms hence need to be consistent and have sufficient knowledge to implement the new rules introduced under ICARA.
The team at BIZENIUS is on hand to provide support with the ICARA process implementation.
- An assessment of the new initial capital requirement and classification system;
- Analysis of your firm’s new overall capital and liquidity requirements;
- An assessment of whether adequate own funds are in place to cover the new capital requirements; and
- A summary of the governance arrangements needed to comply with the new prudential requirements.
- Review of your firm’s consolidation requirement based on the new prudential regime (i.e. Group Capital Test’)
- Practical implementation and embedding into management processes
- How to document your processes and findings
- Integration of risk and harm analysis through to your recovery actions and capital / liquidity assessment
- Interaction between the wind down plan and the ICARA
- Common issues and ways to overcome them
- Implementation and management processes
- Key challenges and ways to overcome them
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