On November 3, 2016, the EBA published a discussion paper on the design for a new framework for applying prudential standards to non-bank investment firms that are not deemed to be systemically important. The EBA published a report in December 2015 in response to a Call for Advice from the European Commission on the suitability of certain aspects of the EU prudential regime for investment firms. In that report, the EBA recommended that it was necessary to distinguish between investment firms for which the requirements in the CRD and CRR are appropriate and investment firms for which those requirements are inappropriate. It recommended that a separate prudential regime should be established for these investment firms. The Commission issued a second CfA in June 2016, asking for advice on the criteria to identify the investment firms for which the CRD IV requirements are appropriate and which rules should apply to them. The EBA published an Opinion on the criteria aspect of the CfA on October 20, 2016.
The proposals in the discussion paper focus on investment firms that are subject to the current Markets in Financial Instruments Directive but are also relevant for UCITS management companies and alternative investment fund managers that are authorized to conduct certain MiFID investment services or activities. The EBA's view is that a harmonized set of requirements that are relevant to the nature of investment business and which covers the broad range of all types of investment firms is needed. The EBA is proposing a framework where the ongoing capital requirements are calculated based on capital factors attributable to the risks that investment firms pose to customers, market integrity and liquidity as well as the risks to which investment firms are exposed to.
The EBA is seeking views on the proposed framework, which is its preferred option, as well as on the possibility of applying CRD and CRR requirements to certain investment firms in a proportionate and targeted manner. Responses to the consultation are due by February 2, 2017. The EBA will publish its final report and Opinion in response to the Commission's CfA by June 30, 2017. The Discussion Paper is available at:
http://www.eba.europa.eu/documents/10180/1647446/Discussion+Paper+on+a+new+prudential+regime+for+Investment+Firms+%28EBA-DP-2016-02%29.pdf and the EBA's Opinion on the criteria for identifying investment firms at:
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