Investment Firms Regulation and Directive ('IFR/IFD') - a new regulatory framework for Investment Firms

IFR/IFD package published

Highlights:

• Reforms CRR and CRD based prudential regulatory framework for investment firms on the basis of a new classification between (i) systemically relevant firms to be regulated as banks; (ii) small and not interconnected firms; and (iii) all other investment firms.
• Introduces a new capital requirements methodology using quantitative indicators (K-factors) based on risks to customers, market access and the firm itself. 
• Adapts governance, remuneration and reporting requirements for such firms (including changes to financial and COREP returns for a number of firms).
• The aim of the framework is to simplify and harmonise the prudential classification of investment firms seeking to increase proportionality and risk-sensitivity - it is not intended to increase capital requirements significantly beyond the current level.
• The IFRD package does not apply to credit institutions offering MiFID II services, UCITS Management Companies and Alternative Investment Fund Managers but it applies to deminimis AIFMs providing MiFID II services. 

IFR starts applying and IFD implementation also expected

By this date, local Category 3 firms authorised by the MFSA before 26/12/2019 are required to increase their own funds to €250,000, with all other Category 3 local firms having to increase own funds to €750,000.

The European Banking Authority 3.1 Reporting framework is expected to apply

This will include Implementing Technical Standards on reporting and disclosure requirements - providing a standardised set of reporting templates for Investment Firms subject to the IFRD Package. These are to be submitted to the MFSA in XBRL format on a quarterly or annual basis as applicable. 

Category 3 local firms authorised by the MFSA before 26/12/2019 are required to increase their own funds by a minimum of EUR 100,000 annually reaching a minimum of €750,000 by 2026.