The Capital Requirements Directive (‘CRD’) implemented the Basel capital adequacy framework (‘Basel II’), and applies to certain investment firms, banks and building societies.
The CRD comprises three key components or ‘pillars’ as follows:
- Pillar 1: Minimum capital requirements
- Pillar 2: Supervisory review
- Pillar 3: Market discipline/disclosure requirements
The aim of Pillar 3 is to improve market discipline by requiring firms to publish certain details of their risks, capital and risk management. Institutions are required to certify to the Financial Conduct Authority (FCA) on an annual basis that they have complied with the new disclosure requirements.
IFG Group plc (IFG) completed the purchase of the James Hay group of companies in March 2010; this included James Hay Wrap Managers Ltd (JHWM). From this date, JHWM became responsible for complying with the minimum capital requirement provisions under Pillar 1 of the CRD and completing and maintaining an Internal Capital Adequacy Assessment Process (ICAAP) under Pillar 2 of the CRD. As defined by the FCA’s ‘Prudential Sourcebook for Investment Firms’ (‘IFPRU’), JHWM is an IFPRU £125K firm.
IFG is assessed under a Group Consolidation process which includes JHWM and its holding company, James Hay Holdings Limited. The regulated consolidation group is subject to Consolidated Supervision and the disclosures are therefore made on a consolidated basis and not by the individual firms.