The FSA has published a letter it sent to the British Bankers Association on the Individual Capital Guidance (ICG) and rule 1.2.26 of the General Prudential sourcebook (GENPRU 1.2.26R).

In the letter the FSA states that its general expectation is that firms would hold capital above the level advised in the ICG at all times in order to be confident that they meet the FSA's rules requiring adequate financial resources.

However, the FSA also states that it recognises that occasionally there may be times when the capital resources of a firm may fluctuate around the level of its ICG whilst the firm restores its capital position above the level of the ICG. Whilst a firm should be clear that at all times it needs to continue to meet the requirement for adequate financial resources in GENPRU 1.2.26R it does not automatically follow that because a firm’s capital is less than its ICG it is in breach of the FSA's rules. The FSA states that this is consistent with the ICG being guidance and a failure to meet it does not mean that automatic regulatory action will follow, although there would be heightened supervisory attention.

View FSA letter to BBA on ICG and GENPRU 1.2.26R, (PDF 26.8KB), 20 March 2009