ECB to Supervise Systemic Entities Under Investment Firms Regime
ECB announced that it will take over the supervision of the largest and most systemic investment firms under the Investment Firms Directive and Regulation (IFD and IFR), which applies as of June 26, 2021. These investment firms must apply for a banking license and will thus be supervised by ECB going forward. The first set of investment firms newly authorized as banks are expected to be added to the list of supervised banks in the second half of 2021, thus becoming subject to the European Banking Supervision.
With the new regime just around the corner, large investment firms need to prepare. Firms that qualify as a credit institution should gather the detailed information required for license application. This includes information on the capital position, business plan, financial projections, operational structure, governance arrangements, internal controls, and risk management. There will also be important changes to supervision. If the new credit institution—that is, the investment firm with a new license—is considered significant under the applicable criteria, it will be directly supervised by ECB. If it is classified as less significant, the national competent authority will be responsible for its direct supervision. ECB encourages large investment firms to reach out to their national supervisors to start a dialog on the transition to the new regime.
ECB will assess applications using its established processes for the licensing of credit institutions. This means that the entry point for all applications is the national supervisor of the country where the credit institution will be located, irrespective of whether the significance criteria are met or not. The national supervisors and ECB cooperate closely throughout the licensing process. However, ECB is ultimately responsible for making licensing decisions on all applicant credit institutions. While waiting for the new license to be granted, an investment firm may continue to provide services under its current investment firm license, although this will ultimately depend on how a member state transposes the rules. While waiting for the new license to be granted, an investment firm may continue to provide services under its current investment firm license, although this will ultimately depend on how a member state transposes the rules.
The new rules are intended to better reflect the actual risks taken by the different types of investment firms and to make the supervision of such firms more effective. The new regime introduces various categories of investment firms. Large investment firms carry out bank-like activities, meaning that they take on credit and risks (the same types of risks that banks are exposed to). Under the new rules, an investment firm qualifies as a credit institution if it deals on its own account or underwrites or places financial instruments on a firm commitment basis and has total assets of more than EUR 30 billion. Classification as a credit institution is either on a stand-alone basis or on a combined basis. A firm qualifies as a credit institution on a combined basis if it belongs to a group of entities that individually have assets below EUR 30 billion but whose total assets when combined reach or exceed this figure. Smaller investment firms will be subject to a new regime that is more tailored to their activities, risk profile and size.
Related Links
- Press Release
- Article on New Regime
- List of Supervised Banks (to be updated in H12021)
Keywords: Europe, EU, Banking, Securities, IFR/IFD, SSM, Systemic Risk, Investment Firms, Banking Supervision, ECB
Featured Experts

Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
EBA Finalizes Standards for Supervisory Disclosures Under IFDRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.