23 September 2020
The new European prudential framework for investment firms entered into force on 26 June 2021. For most investment firms, the Investment Firm Directive (IFD) and the Investment Firm Regulation supersede the prudential requirements of the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD).
Appropriate and proportionate
The aim of the new regulatory framework is to provide more risk-sensitive and proportionate prudential requirements for investment firms. For example, the solvency requirements are based on indicators appropriate to the specific risks of investment firms, such as assets under management and advice. The framework also introduces a liquidity requirement related to investment firms’ fixed costs. For small investment firms that meet certain criteria, the new regulation provides for simpler solvency requirements and more exemptions.
The largest and systemically important investment firms – with assets of at least EUR 15 billion at group level (excluding non-EU subsidiaries) remain subject to the CRR/CRD framework, like banks. In addition, the supervisory authority may decide to apply the CRR/CRD framework to investment firms with assets worth at least EUR 5 billion, if they are deemed systemically important.
The new IFR/IFD requirements entered into force on 26 June 2021. A five-year transition regime applies regarding the new solvency requirements.
Below is a factsheet on some of the key elements of the IFR/IFD, including classification, capital requirements, liquidity requirement, consolidated supervision, ICLAAP/SREP and data requests.
It will provide guidance to the sector on selected topics. Please note that this factsheet does not reflect a normative interpretation or policy statements.