BKM402100 - Banking surcharge: definition of banking company: introduction
CTA10/S269B
The bank surcharge rules are relevant to ‘banking companies’; these are companies which carry out retail or investment bank activities or both. There is no simple way to define a bank as banking activity is extremely wide and can involve many different types of activity. This is especially true of investment banks and to overcome these difficulties a bank is defined by pointing to certain key factors such as regulatory permissions, the type of regulated entity and the activities that are undertaken.
In the UK regulatory permissions are given by the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). The PRA supervises banks, building societies and the largest investment firms and the FCA supervises all other investment firms.
A number of the definitions used in the legislation are taken from the handbooks that are maintained from time to time by the FCA and the PRA under the Financial Services and Management Act (FSMA) 2000. They are listed in the glossary to the FCA handbook.
These include the following terms:
- authorised corporate director
- contracts for differences
- commodity and emission allowance dealer
- dealing on own account
- discretionary investment manager
- financial instrument
- initial capital
- investment firm
- market value
- pension scheme
- permanet minimum capital requirement
- principal
- retail client
These terms, as defined in the handbooks, are also used throughout this guidance. Prior to 1 January 2022 the definitions used the terms ‘full scope IFPRU investment firm ‘and ‘IFPRU 730k firm’ which described the type of regulated entity and the activities that it could undertake.
These terms were removed from the FCA Handbook with the introduction of the Investment Firms Prudential Regime. From 1 January 2022 onwards, the legislation instead refers to an FCA investment firm that meets certain conditions. FCA investment firm is defined in FSMA 2000.