The existence of solo requirements should normally prevent deficits at solo level in firms of the group. In cases where one entity of the group has a solo deficit, supervisors should consider whether excess capital in other firms of the group can cover such solo deficit. In the following example this excess capital is needed to cover notional deficits in an unregulated entity.

Parent

Capital	100
Capital requirement	75
Participation	25 (historic cost)

Subsidiary 1 (50% participation)

Capital	60
- equity	50
- reserves	10
Capital requirement	10
SOLO SURPLUS	50

Group

	Pro rata aggregation	Full aggregation
Capital parent	100	100
Capital subsidiary	30 (50% of 60)	60
Capital requirement
- parent	-75	-75
- subsidiary	-5 (50% of 10)	-10
Participation	-25 (book value)	-25
GROUP SURPLUS	25	50

The surplus at group level stems exclusively from the partly-owned subsidiary. However, in the event that the parent also had a participation in an undercapitalised unregulated entity, the group position would be as follows:

Unregulated Subsidiary 2 (100% participation)

Capital	20
- equity	10
- reserves	10
Notional capital requirement	-50
Notional solo deficit	-30

Group

	Pro rata aggregation	Full aggregation
Capital	150	180
- parent	100	100
- subsidiary 1	30 (50% of 60)	60
- subsidiary 2	20 (100% of 20)	20
Capital requirements	-130	-135
- parent	-75	-75
- subsidiary 1	-5	-10
- subsidiary 2	-50	-50
Participation 1	-25	-25
Participation 2	-10	-10
GROUP SURPLUS	-15	10

Under the full integration approach, the surplus in subsidiary 1 is regarded as available to the group as a whole and it thus more than compensates for the deficit in subsidiary 2. The pro-rata approach on the other hand, only takes account of that part of the surplus in subsidiary 1 which is attributable to the parent and, as shown, this is not sufficient to offset the deficit in subsidiary 2 and the parent would either have to reduce its own risks, to increase its own capital or to renounce to the acquisition of the second firm.