A guide to the ICARA

Series: Understanding and perparing for the UK investment firms prudential regime (IFPR)

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The Investment Firms Prudential Regime (IFPR) comes into force on 1st January 2022 and it introduces a new capital adequacy and risk assessment and supervisory review and evaluation process - the Internal Capital and Risk Assessment (ICARA).

Listen on demand to our one-hour webinar were we discuss the:

• Implementation and management processes.
• Documentation you need to produce.
• Key challenges and ways to overcome them.

At the end of the webinar you will understand how this affects your firm and you will have a 'step-by-step' implementation guide (whether you already undertake a ICAAP or are facing this type of process for the first time).

ACCESS WEBINAR ON DEMAND

Speakers

The webinar was hosted by three of our leading compliance experts, Kumar Ved, Harpartap Singh and Jonathan Aseervatham:

• Kumar Ved former Managing Director of consulting activities in the Banking, Payments, Capital Markets and Asset Management sectors.

• Harpartap Singh is a recognised regulatory capital and liquidity specialist and is responsible for the development and expansion of Cosegic's Prudential Services' offerings and client service delivery.

• Jonathan Aseervatham joined Cosegic on 20 September 2021 from Buzzacott. He will be a Director of our Prudential Services team with responsibility for delivery of our range of Prudential Services including ICARAs advice and consultancy. 

Background

IFPR will affect all FCA prudentially regulated MiFID investment firms, including principal brokers and matched principal brokers; investment managers; and adviser/arranger firms categorised as ‘exempt-CAD’. 

The new rules present major changes, requiring some firms to hold much more capital and introducing new obligations such as the ICARA. 3,600 firms will be affected and around one third will face a significant impact, including the requirement to implement new processes, policies and procedures (source: FCA CP21/7 published May 2021). 

IFPRU and BIPRU firms already must carry out their own assessments of the risks that they face and the amounts of capital that they deem sufficient to meet those risks, if they were to arise - it's called the Internal Capital Adequacy Assessment Process (ICAAP). ICAAPs are being replaced by the ICARA and all firms regulated under the IFPR will be required to have an ICARA. This means that some firms will face these processes for the first time, whilst others will need to adapt to meet the ICARA requirements.

Whilst the ICARA is similar in some respects to the current ICAAP, there are a number of material differences. Perhaps the most significant differences are the requirement for a wind down plan and that the ICARA should not be treated as a once-a-year exercise with mere senior management sign-off. Instead, it is expected that senior management lead and be fully involved in the ICARA process and that this forms part of ongoing governance and risk management processes.

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