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
Related Articles
EC Regulation Sets Out Standards for Reporting and Disclosure of MREL
EC published the Implementing Regulation 2021/763 that lays down implementing technical standards for supervisory reporting and public disclosure of the minimum requirement for own funds and eligible liabilities (MREL).
EBA Report Notes Loan Origination Should Remain in Supervisory Focus
EBA published a report that examines the convergence of prudential supervisory practices in 2020 and offers conclusions of the EBA college monitoring activity.
APRA Decides to Standardize Submission Date for Quarterly Reporting
APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.
ECB Working Group Publishes Recommendations on EURIBOR Fallbacks
The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).
Bundesbank Publishes Supporting Documentation for Reporting by Banks
Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.
EBA Publishes Phase 1 of Reporting Framework 3.1
EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).
IOSCO Sees Support for Mandatory Sustainability Reporting
The Sustainable Finance Taskforce of IOSCO held two roundtables, with global stakeholders, on the IOSCO priorities to enhance the reliability, comparability, and consistency of sustainability-related disclosures and to collect views on the practical implementation of a global system architecture for these disclosures.
APRA to Finalize Capital Adequacy Standard Revisions by January 2022
Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA
ESMA Issues Guidelines on Outsourcing to Cloud Service Providers
ESMA published the final guidelines on outsourcing to cloud service providers.
EBA Publishes Data on Deposit Guarantee Schemes
EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.
