Response to discussion on a new prudential regime for investment firms

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Question 1: What are your views on the application of the same criteria, as provided for G-SIIs and O-SIIs, for the identification of ‘systemic and bank-like’ investment firms? What are your views on both qualitative and quantitative indicators or thresholds for ‘bank-like’ activities, being underwriting on a firm commitment basis and proprietary trading at a very large scale? What aspects in the identification of ‘systemic and bank-like’ investment firms could be improved?

In our view it might be simpler to describe the applicable capital requirements in relation to the different types of activities that investment firms may have authorization to perform under MiFID instead of class 1-3.

Question 2: What are your views on the principles for the proposed prudential regime for investment firms?

SIFA is positive to introducing a more appropriate prudential regime and a new categorisation of investment firms. SIFA would like to encourage the EBA initiative to revise and simplify the regulations regarding capital requirements for investment firms. The proposed regime is definitely a step in the right direction and it is our view that the requirements will be easier to apply.

However, we question the applicability of the regulation for fund managers. Fund managers are already subject to the capital requirements of the UCITS Directive and the AIFMD.

On page 5 f. of the Discussion Paper it says that “the DP will also be relevant for UCITS management companies or AIF managers authorized to conduct certain MiFID investment services or activities”. Considering that CRD IV and CRR are not applicable to neither UCITS nor AIF managers, SIFA seeks clarification on how the DP is relevant for those companies.

Fund managers are subject to appropriate capital requirements of the UCITS Directive or the AIFMD based on assets under management, but at least 25 % of the fixed overhead. Those requirements are easy to apply and cover operational risk. SIFA would urge EBA to consider those requirements as a model for investment firms performing portfolio management, thus creating a level-playing-field between investment firms and fund managers. It should be noted that a fund manager may manage fund assets both under its authorisation as fund manager (UCITS Directive or AIMFD) and under a separate authorisation to perform portfolio management why it makes sense that the capital requirements are the same for both activities.

Question 26: What are your views on the proposed approach to addressing group risk within investment firm-only groups? Do you have any other suggested treatments that could be applied, and if so, why?

Stureplan 6

Question 27: In the case of an investment firm which is a subsidiary of a banking consolidation group, do you see any difficulty in the implementation of the proposed capital requirements on an individual firm basis? If so, do you have any suggestion on how to address any such difficulties?

Stureplan 6

Question 28: What other aspects should the competent authorities take into account when addressing the additional prudential measures on an individual firm basis under the prudential regime for investment firms?

Stureplan 6

Question 29: What examples do you have of any excessive burden for investment firms arising from the current regulatory reporting regime?

We would like to provide one example regarding fund managers. Swedish fund managers that perform discretionary portfolio management are today required to apply CRD and CRR on that part of their business. This has over the years become an increasingly disproportionate administrative burden. Moreover, it is very difficult to apply two different set of capital requirements on one and the same company with the same balance sheet; one set for the fund management and another for the portfolio management. A recent legislative proposal has therefore suggested the disapplication of the CRD/CRR rules for fund managers.

Question 34: What are your views on having a separate prudential regime for investment firms? Alternatively, should the CRR be amended instead to take into account a higher degree of proportionality? Which type of investment firms, if any, apart from systemic and bank-like investment firms, would be better suited under a simplified CRR regime?

We strongly support a separate regime for investment firms. This would serve as a good example of “better regulation”.

Name of organisation

Swedish Investment Fund Association