On 11 April 2018, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on the proposed Directive on the prudential supervision of investment firms. The draft report contains a draft European Parliament legislative resolution which sets out suggested amendments to the draft Directive.
The Rapportuer for the draft Directive, Markus Ferber MEP, broadly supports the proposal but believes that a number of changes are necessary. These are broadly as follows:
- Own funds requirements: Member State competent authorities should be able to allow Class 3 firms to use different instruments than those listed in the Capital Requirements Regulation (CRR) to fulfil their own funds requirements. CRR requirements might be burdensome for certain types of legal business entities (such as partnerships);
- Movements between Class 2 and Class 3: certain changes have been suggested to increase the possibility for investment firms to have sufficient clarity and time to adapt to the new requirements where applicable;
- Capital and liquidity requirements and K- Factors: a revised and clarified definition of certain activities ensures that the risks covered correspond to the fullest extent possible to the actual risks. Moreover, a number of suggested changes are intended to smooth out the calculation of K-Factors;
- Reporting, governance and remuneration: rules on reporting, governance and remuneration are simplified. The Rapporteur believes that the rules as drafted create too much burden for firms and are not justified in light of the nature of the firms concerned; and
- Third-country regime and equivalence: the Rapporteur believes that the draft Directive does not address this issue. The draft report seeks a more robust equivalence regime avoiding that EU banks be potentially placed in a less favourable position than third country investment firms. The Rapporteur adds that an equivalence decision should be granted and withdrawn in accordance with the procedure of a delegated act and that the European Parliament should have a say on this important decision.