5.7 Non-insurance risk charges

• L1-143. The ICS capital requirement includes a risk charge for non-insurance entities, to be added to the capital requirement calculated as described in sections 5.1 to 5.6. The calculation of the non- insurance risk charges is specified in the Level 2 text.
• L2-336. For financial non-insurance entities with a sectoral capital requirement, the capital requirement is as follows:
  • a. For consolidated banking entities, the capital requirement is calculated in accordance with the Basel regime.
  • b. For consolidated non-banking entities, it is equal to the following:
    • i. The maximum of the sectoral capital requirement and 15% of three-year average gross income . ; or
    • ii. At the group wide supervisor’s request, the maximum of the sectoral capital requirement and the Operational Risk Capital Requirement as calculated under the Basel regime calculation for operational risk.30 If additional, material risks of the entity are not appropriately captured by either operational risk-type charge, the group wide supervisor may require an additional risk charge to cover these risks.
    • If neither i. nor ii. appropriately captures additional material risks to the overall group, the group wide supervisor imposes an additional capital charge to i. or ii. to cover these risks.
  • c. For banking entities reported as an equity method investment, it is equal to the sectoral charge in proportion of voting rights or capital ownership.
  • d. For non-banking entities reported as an equity method investment it is equal to the following, in proportion of voting rights or capital ownership:
    • i. The maximum of the sectoral capital requirement and 15% of three-year average gross income; or
    • ii. At the group wide supervisor’s request, the maximum of the sectoral capital requirement and the Operational Risk Capital Requirement as calculated under the Basel regime calculation for operational risk   .
    • If neither i. nor ii. appropriately captures additional material risks to the overall group, the group wide supervisor imposes an additional capital charge to i. or ii. to cover these risks.
  • e. For both banking and non-banking entities reported as a market value investment it is equal to the equity charge on the investment as described in section 5.3.4.
• L2-337. For financial non-insurance entities without a sectoral capital requirement, the capital requirement is as follows:
  • a. For consolidated banking entities, it is equal to 4% of the exposure as determined by the leverage ratio as calculated under the Basel regime.
  • b. For consolidated non-banking entities, it is equal to the following:
    • i. 15% of three-year average gross income; or
    • ii. At the group wide supervisor’s request, the Operational Risk Capital Requirement as calculated under the Basel regime calculation for operational risk   .
    • If neither i. nor ii. appropriately captures additional material risks to the overall group, the group wide supervisor imposes an additional capital charge to i. or ii. to cover these risks.
  • c. For banking entities reported as an equity method investment it is equal to the sectoral leverage ratio in proportion of voting rights or capital ownership.
  • d. For non-banking entities reported as an equity method investment it is equal to the following, in proportion of voting rights or capital ownership:
    • i. 15% of three-year average gross income; or
    • ii. At the group wide supervisor’s request, the Operational Risk Capital Requirement as calculated under the Basel regime calculation for operational risk   .
    • If neither i. nor ii. appropriately captures additional material risks to the overall group, the group wide supervisor imposes an additional capital charge to i. or ii. to cover these risks.
  • e. For both banking and non-banking entities reported as a market value investment it is equal to the equity charge on the investment as described in section 5.3.4.
• L2-338. For non-financial entities, the capital requirement is equal to the equity risk charge as described in paragraph L2-226, a) to d), applied to the net asset value if consolidated, equity method or market value investment. For net asset values or equity method investments with a negative value, the equity risk charge is calculated based on the absolute value of the investment and does not exceed the maximum potential loss. If an equity risk charge does not appropriately capture all material risks to the overall group, the group wide supervisor imposes an additional capital charge to cover these risks.