European Council Agrees to Endorse Commission Proposal for the Investment Firms Regulation and the Investment Firms Directive

Published 7 January 2019

PrintCategory: Investors Regulation

Following a Commission proposal from December 2017, the Council agreed on 7 January 2019 to endorse the Commission’s legislative proposals for the prudential treatment of investment firms, encompassing

  • the Investment Firms Regulation (“IFR”) and
  • the Investment Firms Directive (“IFD”).

IFR and IFD will mainly impact MiFID II type investment firms. Key highlights include:

  • Use of a new set of quantitative factors (“K-Factors”) to classify investment firms as either Class 1, 2 or 3 and tailor regulatory levels to be based on a firm’s classification, thus leading to a more prudential treatment of investment firms.
  • Redrafting the definition of credit institutions to encompass systemic investment firms that undertake “bank like activity”. These very large investment firms will be categorized as Class 1 Firms and will (continue to) be subject to the CCR/CRD IV (and the upcoming CRD V) regime.
  • Non-systemic investment firms will be categorized as Class 2 Firms. Even smaller, non-interconnected firms will be classified as Class 3 Firms. The new IFR and IFD regime will apply to these firms in various degrees, leading certain firms to be (partially) excluded from the CRR/CRD IV regime.

Trilogues regarding the regime are ongoing between the Commission, Council and Parliament. Adoption is expected following plenary hearing.

Click here to read the Council’s press release.


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