Until now, all investment firms have been subject to the same capital, liquidity and risk management rules as banks. The capital requirements regulation and directive (CRR/CRD4) are based on international standards intended for banks. Therefore, they do not fully take into account the specificities of investment firms.
On the basis of the text agreed, investment firms will be subject to the same key measures, in particular as regards capital holdings, reporting, corporate governance and remuneration, but the set of requirements they would need to apply would be differentiated according to their size, nature and complexity.
The largest firms ("class 1") would be subject to the full banking prudential regime and would be supervised as credit institutions:
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Investment firms that provides "bank-like" services, such as dealing on own account or underwriting financial instruments, and whose consolidated assets exceed EUR 15 billion would automatically be subject to CRR/CRD4;
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Investment firms engaged in "bank-like" activities with consolidated assets between EUR 5 and 15 billion could be requested to apply CRR/CRD4 by their supervisory authority, in particular if the firm's size or activities would involve risks to financial stability.
Smaller firms that are not considered systemic would enjoy a new bespoke regime with dedicated prudential requirements. These would, in general, be different from those applicable to banks, but competent authorities could allow to continue applying banking requirements to certain firms, on a case by case basis, to avoid disrupting their business models. Such an option will be framed with a safeguard preventing regulatory arbitrage, in particular through the application of lower capital requirements under CRR/CRD4 as compared to IFR in a disproportionate manner. The text also provides for a 5-year transitional period to give companies enough time to adapt to the new regime.
The agreement further strengthens the equivalence regime that would apply to third country investment firms. It sets out in greater detail some of the requirements for giving them access to the single market and grants additional powers to the Commission.
Press release
European Commission - Press release: Capital Markets Union: Agreement simplifies rules for investment firms to support open and vibrant capital market
AFME welcomes progress on Investment Firms Review
© European Council
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