Analysis

New Investment Firms Regime

In June 2021 a new prudential regime for investment firms will come into effect. The prudential regime will now be more tailored for investment firms, and is a significant revision of the current prudential requirements for investment firms.

The new IFR/IFD prudential regime revises capital requirements, capital composition, liquidity requirements, reporting, disclosure, governance, remuneration and supervision of investment firms as set out in CRR/CRD and MiFID.

The aim of the new framework is to introduce more proportionate and risksensitive rules for investment firms. Under the new framework, the vast majority of investment firms in the EU will no longer be subject to rules that were originally designed for banks. The largest and most systemic investment firms, however, will remain subject to the same prudential regime as European banks (i.e. CRR and CRD).

The IFR/IFD prudential regime applies to all MiFID authorised investment firms and therefore captures all investment firms that carry out the following activities:

  • Reception and transmission of orders in relation to financial instruments;
  • Providing investment advice;
  • execution of client orders;
  • dealing on own account;
  • portfolio management;
  • underwriting financial instruments, and/or placing financial instruments on a firm commitment basis;
  • placing of financial instruments without a firm commitment basis;
  • Operating trading facilities - MTF/OTF.

Read more about the new framework here.

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