FCA Seeks Views on New Prudential Regime for UK Investment Firms
FCA published a discussion paper on the prudential regime for investment firms in UK. The discussion paper sets out the technical details of, and initial views of FCA on, the Investment Firm Directive (IFD) and the Investment Firm Regulation (IFR). In December 2019, the Official Journal of the European Union published IFD and IFR, with which the investment firms and competent authorities in EU member states will be required to comply from June 2021. As UK has exited the EU, FCA will not implement the IFD and IFR. The government will instead introduce a framework for a new prudential regime for investment firms in UK. FCA is seeking views on how best to implement this new regime. The comment period for this discussion paper ends on September 25, 2020. FCA will consider the feedback and publish a consultation paper later in 2020.
The discussion paper is relevant for all solo-regulated investment firms that are authorized under the Markets in Financial Instruments Directive (MiFID). It will also be of interest to Collective Portfolio Management Investment Firms and to investment firms authorized by PRA. The approach that has been followed in the discussion paper is to set out, coherently and logically, the requirements the IFD/IFR places on EU firms and competent authorities. Where relevant, FCA has also set out in each chapter its initial views on the intention and implication of the regime and interpretation of it. This is particularly the case where the regime makes a material change to the status quo, or where the EU text provides for national discretions, or has ambiguities.
The IFD and IFR represent a significant change to how MiFID investment firms will be prudentially regulated. Investment firms should be aware of the scale of the change the IFD and IFR represent. In addition to various less material changes compared to the existing regime, major changes described in the discussion paper include:
- An update to the initial capital required for authorization
- Changes to the rules on the definition of capital
- New own funds requirements, including the introduction of the K-factor approach
- New rules on prudential consolidation, group risk, and concentration risk
- Applying liquidity requirements to all investment firms
- A new approach for investment firms' internal risk and prudential assessments and the supervision of those requirements
- New requirements on remuneration policies
- Changes to reporting and disclosure requirements
Related Links
Comment Due Date: September 25, 2020
Keywords: Europe, UK, Securities, IFR, IFD, MIFID, Regulatory Capital, Investment Firms, Reporting, Disclosures, ESG, FCA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EC Announces Additions to Membership of Sustainable Finance PlatformRelated Articles
EBA Publishes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR
The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
