Investment Firm Regulation and Investment Firm Directive
What do investment firms need to know?
The Investment Firm Regulation (IFR) and Investment Firm Directive (IFD) establish a new prudential regime for investment firms. They are both due to apply from 26 June 2021 across Europe and for the most part in the UK. Many of the existing prudential rules for investment firms, e.g. those contained in CRD IV, were developed largely with deposit-taking institutions in mind.
Under the new regime, investment firms fall into one of three categories:
- Class 1: Systemic investment firms
- Class 2: Investment firms which exceed certain size and risk thresholds, but are not systemically important
- Class 3: The smallest and non-interconnected firms, that are subject to reduced requirements
The impact on firms is wide-ranging and includes:
- new capital requirements, to be calculated using the “K-factor” methodology designed to reflect the risks presented by firms;
- new rules on prudential consolidation, liquidity and concentration risk;
- a new approach to the Internal Capital Adequacy Assessment Process (ICAAP);
- new requirements on remuneration policies and practices; and
- extensive reporting and disclosure requirements.
Our Financial Services Regulatory team have produced a helpful guide, which can be accessed here, and a series of briefing papers on the main pillars of the regime and their expected impact, which can be accessed via the links below. If you would like to receive more information please get in touch with your usual A&O contact.
Read about the regime
News & insights
Blog Post: 23 JUNE 2021
The Monetary Authority of Singapore (MAS) has proposed mandatory reference checks be carried out by all financial institutions and regulated entities.Read more
Publications: 15 JUNE 2021
The SFC's latest annual and quarterly reports highlight the SFC's regulatory work since April 2019 and illustrate some key trends in its enforcement agenda.Read more
Publications: 11 JUNE 2021
The first step in shaping the UK's financial services regime post-Brexit.Read more
Publications: 10 JUNE 2021
There have been numerous publications relating to prudential regulation this week, including the BCBS’ consultation on its preliminary proposals for the prudential treatment of banks' cryptoasset…Read more