UK FCA publishes final rules on definition of capital for FCA investment firms

The UK Financial Conduct Authority (FCA) has published policy statement PS25/14, accompanied by a press release, setting out final rules to simplify and consolidate the definition of regulatory capital, also known as "own funds", for FCA investment firms under chapter MIFIDPRU 3 of its Handbook. The FCA will delete and replace the existing rules in MIFIDPRU 3 in their entirety. Following feedback to its April consultation, the FCA is removing all cross-references to the UK Capital Requirements Regulation from MIFIDPRU 3 and is establishing a standalone framework for regulatory capital tailored specifically to investment firms. The changes do not alter overall levels of regulatory capital firms must hold or require firms to alter their capital structures, but instead they clarify what qualifies as own funds, reduce unnecessary complexity of requirements and remove banking-specific provisions that are not relevant to investment firms. The new rules, set out in the "Definition Of Capital For Investment Firms Instrument 2025" in the Annex to PS25/14, will apply to all entities subject to MIFIDPRU, including MIFIDPRU investment firms, UK parent entities and parent undertakings subject to the Group Capital Test. For mixed groups containing FCA investment firms and PRA-regulated entities, the rules apply to the FCA investment firm on a solo basis. The new rules will come into force on 1 April 2026.

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