The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR. Regulation 2022/25 sets out provisions for methods to measure the risk-to-client K-factors and risk-to-firm K-factors. Regulation 2022/25 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Some of the K-factors, such as the net position risk K-factor (K-NPR), the concentration risk K-factor (K-CON), and the trading counterparty default K-factor (K-TCD), do not require further specifications as IFR details the methods for measuring them. However, in other cases such as assets under management (AUM), client money held (CMH), client orders handled (COH), assets safeguarded and administered (ASA), and daily trading flow (DTF), the methods for measuring those factors would benefit from further clarifications. For the purposes of measuring its risk-to-client K-factors in accordance with Article 16 of IFR, Regulation 2022/25 sets out that an investment firm shall include within each of the AUM, CMH, ASA, and COH factors, respectively, any amounts that relate to the investment services and activities of the investment firm, carried out by any tied agents registered to act on its behalf. Regulation 2022/25 also sets out provisions for the methods for measuring
- the assets under management in case of non-discretionary advisory arrangements of an ongoing nature and discretionary portfolio management
- client money held and assets safeguarded and administered
- the execution of orders in client orders handled
- the reception and transmission of orders in client orders handled
- cash trades for the purposes of client orders handled and daily trading flow
- derivatives for the purpose of client orders handled and daily trading flow
Effective Date: January 31, 2022
Keywords: Europe, EU, Banking, Securities, IFR, Regulatory Technical Standards, K-Factor Regime, Investment Firms, Regulatory Capital, EC
Previous ArticleESAs Publish List of Financial Conglomerates for 2021
The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.