BKLM315600 - Chargeable assets and liabilities: adjustments: general

Paragraphs 15M to 15N of Schedule 19

The starting point for determining UK-based equity and liabilities of an entity or sub-group (see BKLM315130) depends on whether the entity or sub-group is:

  • a UK resident entity, other than a designated FPE entity (see BKLM315400);
  • a UK sub-group whose members are UK resident, and none are a designated FPE entity (see BKLM315500);
  • a UK sub-group with at least one member that is non-UK resident or a designated FPE entity (see BKLM315500);
  • a designated FPE entity (see BKLM315700) ; or
  • where an entity-by-entity election has been made in relation to a sub-group (see BKLM315500).

The meaning of a “chargeable UK sub-group or entity” therefore includes each of the above cases.

The following steps should be followed to determine the amount of chargeable equity and liabilities from the total equity and liabilities arising in the entity’s or sub-group’s financial statements:

Step 1

Ignore excluded equity and liabilities (see BKLM330000).

Step 2

Adjust the remaining equity and liabilities for amounts relating to equity and liabilities issued within groups and for any liabilities that may be netted under netting arrangements (see BKLM315610).

Step 3

Adjust the amount determined after step 2, but not below nil, in respect of any loss absorbing instruments issued by overseas subsidiaries (see BKLM315620) of the chargeable UK sub-group or entity.

Step 4

Reduce the remaining equity and liabilities (but not below nil) by the amount of the entity’s or sub-group’s relevant high quality liquid assets (see BKLM360000), other than:

  • any asset that comprised part of a netting adjustment at step 2;
  • any asset which is taken into account in determining the reduction at step 3; or
  • where the Bank Levy is charged on a group that has a member that is a relevant foreign bank (see BKLM245000), any asset which comprises part of a netting adjustment for the purpose of determining the chargeable equity and liabilities of that relevant foreign bank (see BKLM379000).

In addition, reduce the amount determined after step 3 (but not below nil) by the amount of any financial assets in respect of an advance of cash collateralised by high quality liquid assets, that satisfy the conditions in paragraph 15Z (see BLKM315630).

Where adjustments under steps 3 or 4 are used to reduce short term liabilities, the amount of the adjustment is reduced by 50%.