On 4 June 2020, the European Banking Authority (EBA) outlined its roadmap for the implementation of the new regulatory framework for investment firms and launched a public consultation on its first set of regulatory deliverables on prudential, reporting, disclosures and remuneration requirements.

The roadmap outlines the EBA’s work plan for each of the mandates laid down in the Investment Firm Regulation and Investment Firm Directive (IFR/IFD) and clarifies the sequencing and rationale behind their prioritisation.

A significant number of mandates have been given to the EBA under the IFD and the IFR. The mandates cover a broad range of areas related to the prudential treatment of investment firms. These include 18 regulatory technical standards (RTS), 3 implementing technical standards (ITS), 6 sets of guidelines, 2 reports, and the requirement for the EBA to maintain a list of capital instruments and a database of administrative sanctions, and a number of notifications in various areas. Overall, the mandates are divided into four phases, mostly in accordance with the legal deadlines.

The first consultation paper on prudential requirements includes three draft RTS on the reclassification of certain investment firms to credit institutions, five draft RTS on capital requirements for investment firms at solo level, and one draft RTS on the scope and methods of prudential consolidation for investment firms at group level.

The second consultation paper on reporting requirements and disclosures, includes draft ITS on the levels of capital, concentration risk, liquidity, the level of activities as well as disclosure of own funds; and draft RTS specifying the information that investment firms have to provide in order to enable the monitoring of the thresholds that determine whether an investment firm has to apply for authorisation as a credit institution.

The third and fourth consultation papers on remuneration requirements include one draft RTS on the criteria to identify all categories of staff whose professional activities have a material impact on the firm’s risk profile or assets it manages (‘risk takers’); and one draft RTS specifying the classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration of risk takers.

The consultations run until 4 September 2020.

The EBA will hold a public hearing, which will take place via conference call on the following dates:

  • 30 June 2020, from 11:00 to 13:00 CET, for the consultation paper on the classification of investment firms as credit institutions and capital requirements; and
  • 30 June 2020 from 14:00 to 16:00 CET for the consultation papers on supervisory reporting and disclosure and variable remuneration requirements.

To help our financial services clients navigate the implications of the new prudential regime, we have created an IFD/IFR transition hub on the NRF Institute. For further information please contact Jochen Vester.