PRU 4.15.18

An Authorised Person may exclude an Exposure from the Concentration Risk limits set out in Rules 4.15.5 to 4.15.7 if the Authorised Person's Parent;

(a) is set to increase, on the basis of a legally binding agreement, the Authorised Person's Capital Resources, promptly and on demand, by:
(i) an amount that is sufficient to reverse completely the effect of any loss the Authorised Person may sustain in connection with that Exposure; or
(ii) the amount required to ensure that the Authorised Person complies with its Capital Requirement set out in Chapter 3; or
(b) guarantees the Exposure to a Counterparty or to a group of Closely Related Counterparties which are not Connected to the Authorised Person only if the following conditions are met:
(i) the guarantee is to be provided by the Authorised Person's Parent, or regulated member of its Group;
(ii) the criteria for guarantees must be in line with the CRM requirements as set out in Section 4.13;
(iii) the entity providing the guarantee must be a bank regulated to standards acceptable to the Regulator;
(iv) the total amount of guarantees provided to the Authorised Person must be less than 10% of the Capital Resources of the entity providing the guarantee;
(v) the Parent must be rated as a Credit Quality Grade of 1 or 2 by a recognised credit rating agency;
(vi) the Authorised Person must provide confirmation from the Home State Regulator of the entity providing the guarantee that it is satisfied that the entity providing the guarantee has sufficient resources to provide such guarantees and has no objection to the provision of such guarantees;
(vii) the Authorised Person should provide an annual confirmation that there are no changes to the enforceability of such guarantees; and
(viii) the Authorised Person must notify the Regulator when such guarantees represent 200%, 400% and 600% of Capital Resources. The overall Large Exposure limit of 800% will apply.