The Prudential Regulation Authority (PRA) intends to require banks to deduct from Common Equity Tier 1 significant investments in insurance companies above threshold allowances under its implementation of CRD IV/CRR. This will apply both to banking groups
with an investment in an insurance company and to solo banks with an investment in an insurance company. The rationale for this approach is that deduction of significant investments is necessary to prevent the multiple use of the same capital resources in
different parts of the financial system. The
deduction of significant investments made by a bank in an insurer helps to
ensure that both regulated entities are properly capitalised and limits the
risk of contagion.
Related Link:
http://www.bankofengland.co.uk/publications/Documents/news/2013/praannex.pdf