A year on from the implementation of the Investment Firm Prudential Regime (IFPR), MIFIDPRU investment firms should already be in the process of updating their Internal Capital Adequacy and Risk Assessments (ICARAs) in advance of their upcoming MIF007 return deadline.
The first iteration of the ICARA document was a starting point, however, the Financial Conduct Authority (FCA) has higher expectations this time around. The FCA expects firms to incorporate the findings in the recent guidance “IFPR implementation observations.” In addition, material changes to the firm’s business model, size, scale, and complexity need to be incorporated. Firms should go above and beyond the minimum requirements set by the FCA. In particular, the focus should be on setting their overall own funds and liquidity requirements by appropriately quantifying their residual risk of harm by carrying out stress testing and wind-down planning.
The ICARA is an ongoing process and should be under continual review throughout the year and integrated into a firm's risk management processes. It should document the firm’s approach to the management of risk, capital and liquidity, and their approach to mitigating the harms they pose - whether that be through specific mitigating actions/controls as well as assessing the need to hold additional capital and liquidity against those harms.
If your firm requires any help or guidance or would like to discuss your ICARA requirements with one of our prudential specialists, then please do get in touch with us.
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