Solo supervision gains support

The requirement to calculate and hold capital resources at solo subsidiary and associate firm as well as at group level received broad support from industry in its responses to DP07/5. Economic capital models were not favoured as a substitute for regulatory capital computations at solo level, which, it was pointed out, are also used by the ratings agencies. Suggestions for improvements to the existing approach include permitting limited recognition of the value of investment in a subsidiary to assist in capital allocation. Before any deduction, respondents would like the regulator to consider the risk of the entity in the context of the group. Exclusion of intra-group exposures from capital requirements was judged helpful.