EBA provides clarification on the implementation of the new prudential regime for investment firms

The European Banking Authority (EBA) published today an Opinion to ease the implementation of the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD), which entered into force on June 26. The IFR/IFD classify investment firms according to their business model and size, the latter of which is benchmarked on various threshold. For the vast majority of investment firms, sufficient clarity already exists with regards to the prudential regime, which applies to them. However, in a few cases, especially for investment firms of third country groups, the Opinion provides guidance on the actions to be taken in case of uncertainty on whether these investment firms should apply for an authorisation as a credit institution in the absence of the delegated act establishing the methodology for the calculation of the highest threshold (the EUR 30bn threshold), on which the EBA has currently opened a second public consultation.

The EBA road map on investment firms sets out the EBA’s considerations on the implementation of the IFR/IFD. With the entry into force of the new prudential regime for investment firms, concerns have been raised on a practical issue related to the implementation, given that the regulatory technical standard (RTS) on the determination of the EUR 30bn threshold is currently subject to a second consultation. The present Opinion provides clarity to both investment firms and their supervisors in the specific cases, where uncertainty about the relevant classification, and subsequent need for application for an authorisation as a credit institution, arises in the absence of the technical standards.

In general, the EBA advises competent authorities to apply a pragmatic approach for those investment firms, where the relevant EUR 30bn threshold for the identification of the prudential regime to be applied to the investment firm cannot be determined without the guidance provided in the EBA RTS currently being consulted on. More specifically, the EBA advises supervisors not to prioritise any supervisory or enforcement action in relation to the identification of investments firms, until six months after the final methodology is in place.

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