05 October 2020
Must a small and non-interconnected investment firm have an ICAAP and ILAAP in place under the IFR/IFD?
We intend to make the Internal Capital and Liquidity Adequacy Assessment Process (ICAAP and ILAAP) mandatory for all small and non-interconnected investment firms (as meant in Article 12 of the IFR), with the exception of investment firms that solely provide an investment service as referred to in subparagraphs (a) or (d1) of the definition of providing an investment service in Section 1:1 of the Financial Supervision Act (Wet op het financieel toezicht – Wft). Investment firms may observe proportionality with respect to ICAAP and ILAAP, which means these processes must be appropriate and proportionate to the nature, scale and complexity of the activities of the investment firm concerned.
Under Article 24(1) of the IFD, which will be implemented through Section 3:17(1) of the Wft and the Decree on Prudential Rules for Financial Undertakings (Besluit prudentiële regels Wft – Bpr), investment firms that do not qualify as small and non-interconnected investment firms must have an ICAAP and ILAAP in place. The ICAAP and ILAAP include the arrangements, strategies and processes of investment firms for the ongoing review and maintenance of the amounts, composition and distribution of internal capital and liquid assets that they consider sufficient to cover the risks (given their nature and extent) they may pose to others and to which the investment firms themselves are or may be exposed. Under Article 24(2) of the IFD, which will be implemented in the Bpr, we have the power to extend the ICAAP and ILAAP requirement to investment firms that qualify as small and non-interconnected.
1 This concerns the following investment services: receive and pass on orders from customers relating to financial instruments in a professional or business capacity, and providing advice relating to financial instruments in a professional or business capacity.