The European Banking Authority (EBA) has published final draft Regulatory Technical Standards (RTS) on own funds requirements for investment firms based on fixed overheads.

The purpose of the RTS is to harmonise the calculation of capital requirements for those investment firms that have limited authorisation to provide investment services, as well as the conditions under which regulatory authorities in Member States can make adjustments to such requirements. The RTS are part of the Single Rulebook which is aimed at enhancing regulatory harmonisation in the banking sector in the EU.

The RTS:

  • use a so-called ‘subtractive’ approach to the calculation of fixed overheads whereby variable cost items are deducted from the total expenses as calculated according to the applicable accounting framework;
  • introduce a special treatment of tied agents, since a tied agent exposes an investment firm to the same risk it is exposed to when it carries out business on its own; and
  • introduce thresholds about which regulatory authorities in Member States can make adjustments to the capital requirements as well as minimum thresholds below which firms are exempted from the adjustments in capital requirements.

The RTS have been sent to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.

View EBA final draft regulatory technical standards on own funds requirements for investment firms based on fixed overheads under article 97(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), 29 January 2014

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