On Thursday the 18 September 2025, The Broker Club of London, with special thanks to the Eight Club in Moorgate, had the privilege of hosting an informal breakfast, show and tell, from Monte Carlo Plus on Capital Liquidity Management. The talk was presented by Dr Mustafa Cavus of Monte Carlo Plus, with Nick Applebee, Principal Consultant at Planixs, providing as a liquidity interlocutor and CEO of The Broker Club, Gavin Williamson, providing an introduction. This article is a summary of the proceedings.
By GreySpark’s Declan Sharp, Analyst Consultant and Rachel Lindstrom, Head of Capital Markets Intelligence practice
Regulatory Context & Problems Space
The Investment Firm Prudential Regime and its corresponding rules in the UK’s Financial Conduct Authority (FCA) handbook under MIFIDPRU presents requirements for investment firms around accounting, compliance, risk, stress testing and reporting. Failure to meet the FCA’s regulations means firms could be subject to further raft of requirements and penalties. Similarly, failure to meet capital requirements provides avenues for the Bank of England to impose greater capital requirements on a firm. As a quick summary, the problem space is briefly defined below:
Pillar 1 of the Investment Firms Prudential Regime (IFPR) is based on the Own Funds Requirement (OFR) for a firm. For Small and Non-interconnected Firms (SNI), the OFR is whichever is the higher amount; the Permanent Minimum Requirement (PMR) and Fixed Overhead Requirement (FOR). For non-SNI firms, the OFR is whichever is higher of the PMR, FOR or the K-Factor (as per the K-Factor Requirement (KFR)). The latter is the sum of calculated fund requirements relative to different types of potential material risks of harm.
Pillar 2 requires firms to meet Overall Financial Adequacy Rule (OFAR). To do so, a firm must satisfy the Own Funds Threshold Requirement (OFTR) and the Liquid Assets Threshold Requirement (LATR). OFAR is assessed by the outcome and reporting of investment firms conducting an Integrated Capital and Risk Assessment (ICARA) quarterly.
As part of the ICARA process, an investment firm must:
- Define its business model and
- Define its risk appetite and acceptable risk;
- Identify risks where the firm’s activities could conflict with client
or market interests, and ensure these are mitigated; - Forecast how much capital and liquidity will be needed to stay safe and compliant; and
- Stress test to prove resilience under severe but plausible scenarios.
Therefore, the FCA expects firms to:
- Have robust data, accounting and compliance systems;
- Assess risks regularly, proportionally and looking forward across the economic cycle;
- Understand its business model, strategy and emerging risks;
- Identify, prevent and mitigate potential harm to clients and markets;
- Maintain sufficient resources to continue operations and allow for orderly wind-down, if necessary; and furthermore
- Under Pillar 3 of the IFPR, firms must disclose and report on various assessments it has made under the IFPR.
Firms may struggle with capital management and disclosures because:
- Risk management is undervalued or infrequent;
- Small firms often lack resources or expertise;
- Counterparty exposure is difficult to measure;
- Key staff turnover can disrupt processes;
- Completing the above processes may cost significantly in terms of time and resources; and
- Staff may still make errors.
Leveraging Automation to Optimise Capital and Compliance
These requirements generate significant data and put additional accounting and compliance pressure on investment firms. Monte Carlo Plus highlighted that many respondents to their own research said it would take them two weeks every quarter to complete the ICARA process. Many of the tasks are still performed manually, requiring data to be located, normalized, and loaded into different systems. As a result, some firms choose to overstate their capital requirements, believing this will reassure regulators. In practice, however, it can have the opposite effect, since regulators may interpret the overcompensation as evidence that the firm lacks confidence in its ability to manage capital requirements accurately. The need for automation is, therefore, pressing. Monte Carlo Plus has developed a platform, Capital Management Plus that can:
- Reduce ICARA processing time from weeks to days;
- Ensure integrity and accuracy of liquidity and capital reporting;
- Identify excess capital, which can be put to better use;
- Consolidate capital requirements to clarify their impact on a
firm’s overall business model; and - Help create disclosure and reporting documents to speed up the process.
The key benefits of utilising an automated solution are that firms can:
- Better understand and optimise their business model;
- Automate complex accounting and regulatory requirements;
- Deploy excess capital efficiently;
- Inhibit regulatory and disclosure mistakes; and
- Inhibit further capital requirement penalties.
The Strategic Advantage of Ready-Made Solutions
Of course, many people reading this will be wondering how difficult it could be to ‘build-not-buy’. Many of these processes and calculations will be able to be done by internal finance and compliance teams already, but automation will speed up process completion.
Instead, automation will allow potential headcount to decrease and finance and technology resources to be deployed productively elsewhere. A ready-made automated solution means that firms can eliminate workarounds and manual processes, yet do not have to eat up those liberated resources to construct an automated platform themselves. Further advantages of utilising such a solution is that experts in the regulatory process and technology are constantly working on this automated solution.
