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Update of 5 September 2017 on the Prudential framework for investment firms qualifying as "local firms” - expired from 13 November 2017

Published: 05 September 2017

At present there is uncertainty on the future continuation of the national prudential regime for investment firms that qualify as “local firm”. The European Banking Authority (EBA) will advise the European Commission (EC) on a new, harmonised prudential regime for all investment firms in the European Union by the end of September 2017, which will also apply to such firms dealing on own account. This new framework can lead to adjusted capital requirements and can also have an effect on the application of the rules on remuneration to firms dealing on own account.

The Factsheet, Prudential framework for investment firms qualifying as "local firms", updated for the last time on 24 November 2015, contains information on the national prudential regime for investment firms that have dealing on own account as their sole MiFID investment activity and whose activities are confined to those of local firms as referred to in Article 4(1)(4) of the Capital Requirements Regulation (No 575/2013 – CRR). DNB applies this national prudential framework since 1 January 2014.

DNB draws the attention of existing market participants as well as of potential new market entrants to the fact that there is currently uncertainty on the future continuation of this national prudential regime. This uncertainty relates to the development by the European Banking Authority (EBA) of a new prudential regime for investment firms, on which the EBA will submit an advice and a report to the European Commission by the end of September 2017.

On the basis of this EBA advice, amongst others, the European Commission will subsequently draft a legislative proposal for a new, harmonised prudential framework that will apply to all non-systemically important MiFID investment firms in the European Union, including firms dealing on own account that currently fall under the national prudential regime. This can lead to adjusted capital requirements, amongst others as regards initial capital and solvency, and can also have an effect on the application of the rules on remuneration as provided for in Chapter 1.7 of the Act on Financial Supervision (Wet op het financieel toezicht – Wft) to firms dealing on own account.

Existing market participants as well as potential new market entrants are urgently advised to take the aforementioned uncertainty with respect to the future continuation of this national prudential regime into account in making decisions on – for instance – their business model, governance or the place of their registered office.