Perspective 5 | Investment Firm Transparency


Perspective 5 | Investment Firm Transparency

An article series with five different perspectives

Supervisory and public reporting are important duties for investment firms. How to be a transparent investment firm under the new IFD/IFR prudential framework? In this article, we highlight the key aspects of the regulatory reporting and disclosure requirements for investment firms that apply from June 26, 2021 onwards.


As previously introduced in our other articles, IFD/IFR establishes a new prudential framework for Investment Firms. Together with this new prudential framework comes a new reporting framework that corresponds with the new requirements. Investment firms are categorized in three different classes. Class 1 being the large, systemic firms that remain subject to the CRD V/CRR2 regime. Class 2 firms are the non-systemic firms – the “default” category. Finally, there are exemptions in place for some small and non-interconnected firms (class 3 firms).

Which reporting requirements apply to me?

Class 2 investment firms need to quarterly report to the competent authority (e.g. DNB in the Netherlands). Small and non-interconnected firms (class 3 firms) can report on an annual basis. Class 3 firms do not have to report on concentration risk. As DNB has indicated not to grant the liquidity exemption in the Netherlands, class 3 firms do have to report on liquidity.

What is new?

Some of the content of the reports will be different compared to CRR reports – it will have to comply with the new regulatory requirements (such as the K-factors). However, the new reporting formats are build upon existing templates as much as possible to minimize changes needed. The new format will apply instead of the banking template as previously used under the CRR. This format will be more proportionate and tailored to the Investment Firms’ business characteristics. Interesting to note is that EBA has made efforts to create consistency between the supervisory reporting and disclosure requirements, specifically regarding own funds templates.

Which data do I need to report?

The regulatory report(s) need to consist of the following information (based on the EBA draft ITS):

The EBA will develop a data point model (DPM), a data dictionary, to support harmonized implementation.


Next to reporting, some information should be made publicly available in order to provide transparency to investors and the wider markets.

Do I fall under the new disclosure requirements?

The disclosure requirements under IFR only apply to class 2 firms. Small and non‐interconnected investment firms (class 3 firms) are therefore not subject to public disclosure requirements, except when they issue Additional Tier 1 instruments. This is to provide transparency to the investors in those instruments.

What is new?

The IFR disclosure requirements are similar to the Pillar III disclosure requirements under the CRR, but has a broader scope. New are the ESG risk and K-factor disclosures. The EBA has furthermore standardized the formats and definitions for the disclosure requirements and supervisory reporting (see the picture below). This means for example that the disclosure template for own funds as mentioned above is designed based on the regulatory reporting template for own funds. However, additional information should be added (such as balance-sheet cross-references and qualitative explanations).

What and when should I disclose?

In short, investment firms should disclose the levels of own funds, own funds requirements, governance arrangements (including risk management), remuneration policies and practices, investment policy and ESG risks. Disclosures take place on the same date that the annual financial statements are published, except for ESG risks which can be published once at the start and then once every two years. Investment firms may determine the appropriate medium and location, but preferably in one medium or location.

The EBA package consists of three fixed templates developed in accordance with the CRR and keep in mind the principle of proportionality (based on the EBA draft ITS):

Next steps

Investment firms should review their current reporting and disclosure landscape. This means, next to reviewing policies, procedures and templates, adjusting the data and system landscape to ensure proper (disclosure) reports are generated. The specific content to be reported will also change, for example with regard to calculating own funds and K-factors. K-factors must be saved in a way they can be retrieved for later reporting and should be consistent with other reporting and disclosure sections. As the regulatory framework enters into force at June 26, 2021, timely implementation is crucial. Investment firms should prepare their company for all aspects of the new prudential framework. In this respect we also refer to our other articles in the IFD/IFR series.

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