K-Factor (MIFIDPRU)

FCA investment firm prudential capital requirements calculator with assessment storage, document uploads, and export.

Overview

The K-Factor module implements the MIFIDPRU capital requirements framework — the FCA's prudential regime for UK investment firms effective January 2022.

It provides:

• Multi-section assessment form covering all 9 K-factors across three risk categories
• SNI eligibility check — automatic Small and Non-Interconnected firm classification
• Pass/fail diagnostics — proportionality analysis flagging concentration risk
• Assessment persistence — save, list, and revisit past assessments
• Document uploads — attach supporting files (PDF, Excel, CSV) to assessments via Supabase
• Export — download assessments as styled Excel or PDF reports

Access the calculator at /kfactor.

The 9 K-Factors

MIFIDPRU 4 defines nine K-factors organized into three risk categories:

Risk to Customers (RtC)

Risk to Market (RtM)

Risk to Firm (RtF)

The total K-factor requirement is the sum of all individual K-factor capital charges. The firm's Own Funds Requirement (OFR) is the maximum of the Permanent Minimum Requirement, Fixed Overheads Requirement, and the K-factor total.

SNI Classification

A firm qualifies as Small and Non-Interconnected (SNI) under MIFIDPRU 1.2 if it meets all of the following thresholds:

SNI firms benefit from a simplified prudential regime with reduced reporting obligations.

The calculator automatically evaluates SNI eligibility based on the values entered and displays a pass/fail indicator for each threshold.

Pass/Fail Diagnostics

Each K-factor is evaluated against proportionality thresholds to flag concentration risk — where a single K-factor dominates the total requirement:

• PASS — K-factor is below warning threshold
• WARNING — K-factor exceeds warning threshold but below fail
• FAIL — K-factor exceeds fail threshold (concentration risk)
• N/A — K-factor is zero or not applicable

Assessment Form

The calculator is organized into four tabbed sections:

1. Firm Details

Basic identification fields:

• Firm Name — legal entity name
• FRN — FCA firm reference number
• Reporting Date — assessment period
• SNI Status — dropdown: SNI / Non-SNI / Unsure

2. Risk to Customers

Input fields for K-AUM, K-ASA, K-CMH, and K-COH. Each field shows its regulatory coefficient and computes the capital requirement in real time as values are entered.

3. Risk to Market

Input fields for K-DTF, K-CMG, and K-NPR. K-NPR is a direct input (pre-calculated by the firm).

4. Risk to Firm

Input fields for K-TCD and K-CON. Both are direct inputs (pre-calculated by the firm).

All currency inputs are formatted in GBP. Each field displays a description, the applicable MIFIDPRU regulation reference, and the computed K-factor contribution alongside the input.

Results View

After submission, the results view displays:

• Total K-Factor Requirement — sum of all K-factor capital charges (£)
• K-Factor Breakdown — each K-factor with its computed value, percentage of total, and pass/fail status
• SNI Eligibility — pass/fail against each SNI threshold
• Export Buttons — download as Excel or PDF
• Document Upload — attach supporting files to the saved assessment

Document Uploads

Assessments support file attachments stored in Supabase:

Export

Assessments can be exported in two formats:

Excel (.xlsx)

Three worksheets with Bloomberg Terminal styling:

1. K-Factor Summary — K-factor, description, category, regulation, requirement, status
2. Firm Details — firm name, FRN, reporting date, SNI status
3. Input Data — all raw field values

PDF

Single-page report containing:

• Header with firm name, FRN, and reporting date
• SNI classification status
• Total K-factor requirement (highlighted)
• Component breakdown table with pass/fail indicators
• Regulatory disclaimer and generation timestamp

Export filename: kfactor_assessment_YYYYMMDDHHMM.{xlsx,pdf}

API Routes

POST /api/kfactor — Save Assessment

Saves a completed assessment to the database. Requires authentication.

Payload:

{
  firmName: string
  frn?: string
  reportingDate?: string
  sniStatus?: string
  inputValues: Record<string, string>       // raw form inputs
  kfactorResults: Record<string, number>    // computed K-factors
  totalRequirement: number
  passFailResults?: Record<string, PassFailResult>
}

GET /api/kfactor — List Assessments

Returns the authenticated user's saved assessments, ordered newest first.

POST /api/kfactor/upload — Upload Document

Multipart form upload. Fields: file, assessmentId, docType, notes (optional).

GET /api/kfactor/upload — List Documents

Returns documents for a given assessmentId query parameter.

POST /api/kfactor/export — Export Assessment

Generates and returns an Excel or PDF file. Accepts format: "xlsx" | "pdf" in the request body alongside the full assessment data.

Architecture

Components

Database Models

KFactorAssessment — stores completed assessments with input values, computed results, and pass/fail diagnostics. Indexed on [userId, createdAt] and [firmName].

KFactorDocument — stores document metadata with Supabase storage path. Cascade-deletes when the parent assessment is removed.

Page Route

The K-Factor page at /kfactor renders the assessment form with a tab bar switching between the K-Factor Survey and the K-TCD Calculator.

K-TCD Calculator

The K-TCD Calculator computes the trading counterparty default capital requirement under IFR Articles 25–32. It accepts positions via CSV upload, manual entry, or the built-in sample portfolio, and produces per-netting-set and total K-TCD figures. Access the calculator at /kfactor (K-TCD tab).

K-TCD Formula

The top-level formula is:

K-TCD = alpha × EV × RF × CVA

where each component is defined as follows:

Duration sub-formula (IFR Article 29)

For interest-rate and credit asset classes, duration is a maturity-weighted discount factor:

Duration = (1 − exp(−0.05 × M)) / 0.05

where M is the residual maturity in years. For all other asset classes, Duration = 1.

Delta sub-formula

For option positions, delta is computed via the Black-Scholes cumulative normal distribution:

• Call: Φ(d₁) where d₁ = (ln(S/K) + 0.5 × σ² × T) / (σ × √T)
• Put: Φ(d₁) − 1

For non-option positions, Delta = 1.

IFR Table 3: Supervisory Factors

Supervisory factors scale PFE by asset class risk. Source: IFR Article 29.

IFR Table 4: Collateral Haircuts

Supervisory haircuts reduce the collateral value (C) recognized in the EV calculation. Source: IFR Article 31.

Currency mismatch add-on: An additional 8% haircut applies when the collateral currency differs from the transaction currency (IFR Article 31). This add-on is applied on top of the base haircut above.

Netting Sets

Positions are grouped into netting sets by (Client ID, Netting Class). EV is computed at the netting set level — individual position exposures cannot be evaluated in isolation because offsetting positions within the same netting agreement reduce the total replacement cost and PFE.

Aggregation steps for each netting set:

1. Sum all RC values across positions in the set
2. Sum all PFE values across positions in the set
3. Sum all collateral-adjusted values (C) across positions in the set
4. Compute EV = max(0, total RC + total PFE − total C)
5. Apply RF and CVA from the first position's counterparty type and transaction type
6. K-TCD for the netting set = 1.2 × EV × RF × CVA

Total K-TCD is the sum of K-TCD across all netting sets.

CSV Upload Format

Upload positions as a CSV file with the following columns. The first row must be a header row matching these column names exactly (case-insensitive).

Example rows:

Client,Netting Class,Asset Class,Description,Notional,Currency,Maturity Date,Trade Date,Counterparty Type,CMV,Side,Collateral Amount,Collateral Type,Collateral Currency,Is Option,Option Type,Strike,Underlying Price,IV,Option Expiry
Alpha Capital,A,interest-rate,US Treasury 10Y bond derivative,20000000,USD,2035-04-08,2026-04-08,institution,500000,buy,15000000,cash,USD,,,,,
Beta Trading,C,equity-single,AAPL equity total return swap,5000000,USD,2027-04-08,2026-04-08,other,200000,buy,1000000,equity,USD,,,,,
Alpha Capital,A,foreign-exchange,EUR/USD FX call option,10000000,EUR,2026-07-08,2026-04-08,institution,150000,buy,2000000,govt-bond-1to5y,USD,true,call,1.12,1.10,0.08,2026-07-08

The file must not exceed 500 rows. Rows with missing required fields are rejected with a per-row error message.

Sample Portfolio

The built-in sample portfolio contains 21 positions across 3 clients and all 7 IFR asset classes. It can be loaded with one click from the K-TCD Calculator tab — no file upload required.

Alpha Capital (institution, RF 1.6%) — 6 positions in netting classes A and B

Beta Trading (other, RF 8%) — 8 positions in netting classes C and D

Gamma Fund (mixed counterparty types) — 7 positions in netting classes E and F

Regulatory References

• MIFIDPRU — Investment Firms Prudential Regulation
• IFPR 2022 — Investment Firms Prudential Regime
• IFR Article 25–32 — K-TCD calculation methodology (supervisory factors, exposure value, collateral haircuts)
• Own Funds Requirement (OFR) — MAX(PMR, FOR, K-factor total)
• CASS — Client Assets Sourcebook (client money segregation rules)