February 26, 2019

EC welcomed the political agreement reached by the European Parliament and member states on more proportionate and effective prudential rules for investment firms, under the EU Capital Markets Union. The revised legislation will ensure more proportionate rules and better supervision for all investment firms on capital, liquidity, and other risk management requirements.

The revised legislation should also ensure a level-playing field between large and systemic financial institutions: investment firms that conduct bank-like activities and pose similar risks as banks will be subject to the same rules and supervision as banks. Moreover, simpler and less risky firms will benefit from a fully revised rulebook more tailored to their business models. As part of the new framework, equivalence rules for the provision of investment services by third-country firms will also be strengthened and clarified. Further technical work will follow this political agreement so that the European Parliament and the Council can formally adopt the final texts under this legislature.

EC had, in December 2017, adopted a proposal for a regulation and a proposal for a directive to amend the current EU prudential rules for investment firms. The aim of the review is to introduce more proportionate and risk-sensitive rules for investment firms. The two proposed acts under this would amend the existing prudential framework for investment firms, as set out in the capital requirements directive and regulation (CRD IV/CRR) and in the markets in financial instruments directive and regulation (MiFID2/MiFIR). The December 2017 EC proposal on prudential rules for investment firms is part of the EC Action Plan to strengthen the Capital Markets Union. The rules support the goal of the Capital Markets Union to further promote the activities of firms helping investments flow from Europe's savers to Europe's businesses, with due regard for their risks.

 

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Keywords: Europe, EU, Banking, Securities, CRD IV, CRR, Proportionality, Investment Firms, Capital Markets Union, EC

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