Prudential Regime

European Commission Calls for Further Technical Advice from EBA on Prudential Regime for Investment Firms under CRD IV

On July 6, 2016, the EBA published a call for advice, dated June 13, 2016, that it has received from the European Commission relating to the prudential requirements applicable to investment firms under the Capital Requirements Regulation (Regulation 575/2013) (“CRR”) and the CRD IV Directive (2016/36/EU) (together referred to as CRD IV).

The EBA already provided advice on this matter to the Commission in December 2015, in which it broadly concluded that the current prudential regime for investment purposes is not adequate. To better inform the Commission’s decision, it is seeking further technical advice from the EBA on the details of the high level recommendations set out in the December 2015 advice. It has asked the EBA to provide advice on the following:

  • the criteria and thresholds for each of the three proposed classes of investment firm;
  • the design and calibration of all relevant aspects of a new prudential regime for the three proposed classes of investment firm;
  • the application of the CRD IV remuneration requirements to the different proposed classes of investment firm, and if whether the proposed new classes would affect the applicability of the CRD IV corporate governance rules; and
  • any other issues or inconsistencies the EU competent authorities have identified in implementing the rules relating to investment firms.

The EBA is to consult with ESMA when preparing its advice. The deadline for preparing the advice on the analysis relating to class one investment firms is September 31, 2016. The EBA must prepare its final report on the substantive content and calibration of the proposed regimes for the different classes of investment firms to the Commission by June 30, 2017.