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Part II Prudential Regulation, 4 Group Prudential Regulation

From: The Law of Financial Services Groups

Charles H R Morris

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved.date: 20 September 2021

Prudential regulation — Regulators

This chapter addresses how prudential regulation requirements apply on a group basis. Capital adequacy requirements form the core of most prudential regulatory regimes. In essence, each prudential regime seeks to apply the relevant capital requirements to the group as a whole, whilst solving problems such as excessive leverage and double or multiple gearing. The imposition of such group requirements, in effect, raises the bar for capital requirements across the group: meaning that lightly capitalized group entities are, on a group basis, capitalized on the same basis as their more highly regulated trigger entity affiliates. There are various different approaches to applying capital adequacy requirements on a group basis. In very general terms, such approaches include variations of a consolidation approach or a deduction and aggregation approach, or a combination of both. Each approach seeks to assess capital requirements on the basis of the group as a whole and to ensure that such requirements are met with group capital resources.

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