EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis. The amendments to MiFID II are related to the information requirements, product governance, and position limits while amendments to CRD4 and 5 are related to the application of these directives to investment firms. To ensure a consistent application of the legal framework applicable to the investment firms set out in Article 67 of the Investment Firms Directive (IFD or Directive 2019/2034), the transposition deadline for CRD5 with respect to investment firms has been extended to June 26, 2021. Directive 2021/338 shall enter into force on the day following that of its publication in the Official Journal of the European Union.
An amendment to CRD4 is specified in Article 3 of Directive 2021/338, which states that, for the purpose of identifying staff whose professional activities have a material impact on the institution’s risk profile as referred to in Article 92(3), except as regards staff in investment firms, EBA shall develop draft regulatory technical standards setting out the criteria to define the following:
- Managerial responsibility and control functions;
- Material business unit and significant impact on the relevant business unit’s risk profile; and
- Other categories of staff not expressly referred to in Article 92(3) whose professional activities have an impact on the institution’s risk profile comparably as material as that of those categories of staff referred to therein.
Regarding the application of these regulatory technical standards to investment firms, the empowerment laid down in Article 94(2) of CRD4, as amended by CRD5, shall continue to apply until June 26, 2021. Furthermore, Article 4 (on transposition) of Directive 2021/338 specifies that member states shall adopt and publish by November 20, 2021 the laws, regulations, and administrative provisions necessary to comply with this Directive. They shall apply the measures from February 28, 2022. Member states shall communicate to EC the text of the main provisions of national law, which they adopt in the field covered by this Directive. By way of derogation from paragraph 1, the amendments to CRD4 and CRD5 shall apply from December 28, 2020. The amendments in Directive 2021/338 form a part of the changes proposed under the EU Capital Markets Recovery Package.
Effective Date: February 27, 2021
Keywords: Europe, EU, Banking, Securities, Investment Firms, COVID-19, IFD, CRD5, CRD4, Basel, Remuneration Requirements, European Council, European Parliament
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