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.
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Previous Article
BCBS Proposes to Amend Capital Treatment of Securitizations of NPLsRelated Articles
EBA Provides Clarity on Implementation of Certain COVID-19 Policies
EBA published a report on the implementation of selected COVID-19 policies within the prudential framework for banking sector.
BCBS Report Examines Progress on Adoption of Basel III Framework
BCBS published the eighteenth progress report on implementation of the Basel III regulatory framework in member jurisdictions.
BCBS Amends Guidelines on Sound Management of AML/CFT Risks
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
US Agencies Finalize Amendments to Swap Margin Rule
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
PRA Letter Sets Expectations on Approach to Managing Climate Risks
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS Publishes List of Internationally Active Insurance Groups
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC Launches Consultation on Review of Solvency II Directive
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
