The European Banking Authority (EBA) published today its Opinion on the design and calibration of a new prudential framework for investment firms, which is specifically tailored to the needs of investment firms' different business models and inherent risks. The Opinion includes a series of recommendations aiming to develop a single and harmonised set of requirements that are reasonably simple, proportionate and relevant to the nature of investment firms authorised to provide MiFID services and activities.
The EBA has developed this Opinion in response to the European Commission's call for advice of 13 June 2016 on the design of a new prudential framework for those MiFID investment firms for which the current prudential regime of the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) is not appropriate.
The Opinion covers the design and calibration of capital and liquidity requirements, consolidated supervision, reporting requirements, the suitability of the proposed framework for commodity derivatives firms and the need of macroprudential tools. Further recommendations are provided on the applicability of the remuneration requirements and corporate governance rules to investment firms laid down in the CRD and CRR.
In addition, this Opinion includes recommendations for the introduction of very simple prudential requirements for small investment firms that provide limited services or activities.
The EBA Opinion is accompanied by a Report, which includes background information and the underlying rationale for each of the recommendations, as well as a detailed impact assessment based on the quantitative impact studies carried out by the EBA.
Legal basis and next steps
The EBA's response to the Commission's call for advice is based on Articles 8(2) and 34(1) of the Regulation establishing the EBA (Regulation (EU) No 1093/2010), which mandates the EBA to provide opinions to the European Parliament, the Council and the Commission on all issues related to its area of competence.
This Opinion is in response to the Commission's call for advice of 13 June 2016 and follows up on the first two recommendations included in the EBA's Report on investment firms published on 15 December 2015. The EBA provided its response to the first part of the call for advice on 19 October 2016, recommending how to identify those investment firms for which the CRD IV framework is the appropriate prudential framework.