Featured Product

    EC Extends Transitional Regime for Capital Requirements for Non-EU CCP

    June 24, 2021

    EC has extended, by an additional year, the current transitional regime for the capital requirements that EU banks and investment firms must maintain when exposed to non-EU central counterparties (CCPs). This transitional regime will thus continue to apply until June 28, 2022. This is the last and final extension possible under the Capital Requirements Regulation (CRR). Exposures to the non-EU CCPs that will not be recognized by ESMA by June 28, 2022 will no longer be eligible for lower capital requirements after that date. EC suggests stakeholders to start preparing for this possibility. In addition, EC announced that CRR2 and Investment Firms Directive/Regulation (IFD/IFR) will apply from June 28, 2021 and June 26, 2021, respectively.

    The CRR regime establishes the prudential requirements for banks and large investment firms, in particular for capital and liquidity, as well as requirements on reporting of prudential information to supervisors and on disclosing prudential information to the markets. The new CRR2 rules will introduce more proportionality into EU rules for smaller financial institutions and increase resilience of the banking sector by including new requirements for leverage and stable funding. The rules also introduce more risk-sensitive rules for calculating capital requirements. Additionally, the new prudential framework for investment firms set out in the IFR and the IFD is designed to reflect better the nature, size, and complexity of investment firms’ activities compared to the CRR/Capital Requirements Directive (CRD) framework. IFD and IFR will introduce a new tailored, targeted set of rules that will make life simpler for smaller investment firms while the largest, systemic investment firms will remain under the same prudential regime as European banks. The capital requirements set in the IFR comprise three items:

    • Fixed overhead requirement, equal to a quarter of the annual fixed overheads of the firm
    • Permanent minimum capital requirement of EUR 75,000, EUR 150,000, or EUR 750,000, depending on the activities of the investment firm
    • Overall “K-factor” capital requirement, which is the sum of “K-factor requirements” grouped into three categories: Risk-to-Client, Risk-to-Market, and Risk-to-Firm

    The IFR and IFD apply to investment firms deemed sufficiently small and non-interconnected (class 3 firms) and to investment firms not falling under any of the other categories (class 2 firms). The large majority of EU investment firms fall in these two categories. Class 3 firms are subject to lighter requirements than class 2 firms. However, some investment firms remain subject to the CRR/CRD rules. This is the case for investment firms that perform dealing on account or underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis and meet a EUR 30 billion threshold for their consolidated assets (class 1 firms). It is also the case for investment firms that perform dealing on account or underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis and meet a EUR 15 billion threshold in terms of their consolidated assets or meet a EUR 5 billion threshold and are designated by their competent authorities following specific criteria (“class 1 minus” firms).

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Investment Firms, CCPs, CRR, IFD, IFR, Basel, Transitional Regime, Regulatory Capital, Qualifying CCPs, CRR2, ESMA, EC

    Featured Experts
    Related Articles
    News

    PRA and FPC Finalize Changes to Leverage Ratio Framework in UK

    The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA

    October 08, 2021 WebPage Regulatory News
    News

    CFPB Proposes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.

    October 08, 2021 WebPage Regulatory News
    News

    PRA Decides to Maintain O-SII Buffers for Another Year

    The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.

    October 08, 2021 WebPage Regulatory News
    News

    FSB Report Assesses Implementation of Recommendations on Stablecoins

    The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.

    October 07, 2021 WebPage Regulatory News
    News

    APRA Updates Loan Serviceability Expectations for Home Lending

    In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.

    October 06, 2021 WebPage Regulatory News
    News

    CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.

    October 06, 2021 WebPage Regulatory News
    News

    EBA and EIOPA Set Out Work Priorities for 2022

    The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.

    October 05, 2021 WebPage Regulatory News
    News

    MFSA Issues Reporting Updates and Guidance for Banks

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.

    October 05, 2021 WebPage Regulatory News
    News

    EC Publishes Decision on List of Equivalent Third Countries Under CRR

    The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).

    October 04, 2021 WebPage Regulatory News
    News

    EC Rule on Contractual Recognition of Write-Down and Conversion Powers

    EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.

    October 04, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7552