EC Publishes Regulations Supplementing Investment Firms Directive
The European Commission (EC) published three Delegated Regulations (2021/2153, 2021/2154, and 2021/2155) to supplement the Investment Firms Directive (IFD or Directive 2019/2034). Regulation 2021/2153 sets out regulatory technical standards specifying the criteria for subjecting certain investment firms to the requirements of Capital Requirements Regulation (CRR). Regulation 2021/2154 sets out regulatory technical standards specifying appropriate criteria to identify categories of staff whose professional activities have a material impact on the risk profile of an investment firm or of the assets that it manages. Regulation 2021/2155 sets out regulatory technical standards specifying the classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration.
Regulation 2021/2153 on Prudential Requirements. This Regulation specifies that the activities of an investment firm shall be considered to be carried out on such a scale that the failure or distress of the investment firm could lead to systemic risk where the investment firm exceeds certain thresholds, as specified in Article 1 of the Regulation. The Regulation also highlights that investment firms that are clearing members and that offer clearing services to other financial sector entities, which are not clearing members themselves, shall be considered for the purposes of Article 5(1)(b) of IFD. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Regulation 2021/2154 on Identification of Material Risk-Takers. This Regulation highlights that staff members shall be deemed to have a material impact on an investment firm’s risk profile or that of the assets it manages where one or more of the qualitative criteria, specified in the Regulation, are met. A staff member shall also be deemed to have a material impact on an investment firm’s risk profile or that of the assets it manages where any one of the quantitative criteria, specified in the Regulation, is met. The Regulation also stipulates that all amounts of the variable and fixed remuneration shall be calculated gross and on a full-time equivalent basis. Investment firms’ remuneration policies shall set out the reference year for the variable remuneration taken into account when calculating the total remuneration. That reference year shall be either the year preceding the financial year in which the variable remuneration is awarded or the year preceding the financial year for which the variable remuneration is awarded. Regulation 2021/2154 shall enter into force on the fifth day following that of its publication in the Official Journal of the European Union.
Regulation 2021/2155 on Instruments for Variable Remuneration. This Regulation sets out requirements for investment firms for Additional Tier 1, Tier 2, and other instruments used for the purposes of variable remuneration, to ensure that they appropriately reflect the credit quality of the investment firm. The Regulation also sets out provisions related to the write-down, write-up, and conversion mechanisms for different classes of instruments. Finally, the Regulation sets out provisions related to alternative arrangements that may be used by investment firms for the pay-out of variable remuneration under IFD. Regulation 2021/2155 shall enter into force on the fifth day following that of its publication in the Official Journal of the European Union.
Related Links
- Regulation 2021/2153 on Prudential Requirements
- Regulation 2021/2154 on Identification of Material Risk-Takers
- Regulation 2021/2155 on Instruments for Variable Remuneration
Effective Date: December 12, 2021 (Regulations 2021/2154 and 2021/2155)/December 27, 2021 (Regulation 2021/2153)
Keywords: Europe, EU, Banking, Securities, Investment Firms, Systemic Risk, Remuneration, IFD, IFR, CRR, Basel, Regulatory Capital, EC
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
BOT Issues Guidance on Operational Risk and Benchmark TransitionRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
