On 29 July 2022, the European Banking Authority (EBA) published its final guidance on the criteria for the exemption of investment firms from liquidity requirements in accordance with Article 43(4) of Regulation (EU) 2019/2033. The guidelines ensure that all competent authorities granting this exemption follow the same harmonised approach, while preserving the IFR general objective of maintaining the prudential requirements proportional to the size and complexity of the smaller investment firms.

The EBA guidelines address three main elements:

  • the set of investment services and activities which make an investment firm eligible for the exemption;
  • the set of criteria a competent authority should assess before granting the exemption; and
  • guidance for competent authorities when granting and withdrawing the exemption.

These guidelines specify the set of investment services and activities that are provided by an investment firm to be eligible for the exemption from liquidity requirements. The guidelines also specify that competent authorities should have due consideration for ancillary services provided by an investment firm as well as for on and off-balance sheet positions, whereas such services or positions may give rise to liquidity risk. Therefore, investment firms providing services such as granting credit or loans or engaging in securities lending transactions, or having certain off-balance-sheet positions, should be precluded from being exempted especially when holding such positions at a significant scale.

The guidelines apply from two months after issuance date.