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

    CFPB Finalizes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) published a final rule that sets out data collection requirements on small business lending, under section 1071 of the Dodd-Frank Act.

    March 30, 2023 WebPage Regulatory News
    News

    BCBS to Consult on Pillar 3 Climate Risk Disclosures by End of 2023

    The Bank for International Settlements (BIS) published a summary of the recent Basel Committee (BCBS) meetings.

    March 23, 2023 WebPage Regulatory News
    News

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News
    News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News
    News

    US Congress Report Examines Data Privacy and Cybersecurity Regulations

    The U.S. Congressional Research Service published a report on banking, data privacy, and cybersecurity regulation.

    March 13, 2023 WebPage Regulatory News
    News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News
    News

    EU to Conduct One-Off Scenario Analysis to Assess Transition Risk

    The European authorities recently made multiple announcements that impact the banking sector.

    March 10, 2023 WebPage Regulatory News
    News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News
    News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News
    News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8810