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    EU Finalizes Directive and Prudential Rules for Investment Firms

    December 05, 2019

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms. The published Directive and the Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. Regulation 2019/2033 shall apply from June 26, 2021, with certain exceptions.

    Directive 2019/2034 lays down rules on the initial capital of investment firms and on the supervisory powers and tools for prudential supervision of investment firms by competent authorities. The Directive covers rules for the prudential supervision of investment firms by competent authorities in a manner that is consistent with the rules set out in Regulation 2019/2033. It specifies publication requirements for competent authorities in the field of prudential regulation and supervision of investment firms. Directive (EU) 2019/2034 on the prudential supervision of investment firms amends Capital Requirements Directives (CRD IV or Directive 2013/36/EU), Bank Recovery & Resolution Directive (BRRD or Directive 2014/59/EU), Markets in Financial Instruments Directive (MiFID II or Directive 2014/65/EU), Financial Conglomerates Directive (2002/87/EC), Undertakings for Collective Investment in Transferable Securities Directive (UCITS or Directive 2009/65/EC), and Alternative Investment Fund Managers Directive (AIFMD or Directive 2011/61/EU). 

    Regulation 2019/2033 on the prudential requirements of investment firms amends the Capital Requirements Regulation (CRR or Regulation 575/2013), Markets in Financial Instruments Regulation (MiFIR or Regulation 600/2014), Single Resolution Mechanism Regulation (SRMR or Regulation 806/2014), and Regulation 1093/2010. This regulation lays down uniform prudential requirements that apply to investment firms authorized and supervised under MiFID II and supervised for compliance with prudential requirements under Directive (EU) 2019/2034. The prudential requirements include the following:

    • Own funds requirements relating to quantifiable, uniform, and standardized elements of risk‐to‐firm, risk‐to‐client, and risk‐to‐market
    • Requirements limiting concentration risk
    • Liquidity requirements relating to quantifiable, uniform, and standardized elements of liquidity risk
    • Reporting requirements related to above mentioned points
    • Public disclosure requirements

     

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    Effective Date: December 25, 2019

    Keywords: Europe, EU, Banking, Securities, Investment Firms, Regulation 2019/2033, Directive 2019/2034, Reporting, Proportionality, Disclosures, Regulatory Capital, CRR/CRD

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