Under development
These draft Regulatory Technical Standards (RTS) specify the qualitative and quantitative criteria to ensure that a sufficient level of scrutiny by investment firms and competent authorities is applied when identifying staff whose professional activities have a material impact on the investment firms‘ risk profile or assets it manages.
The European Banking Authority (EBA) outlined today its roadmap for the implementation of the new regulatory framework for investment firms and launched a public consultation on its first set of regulatory deliverables on prudential, reporting, disclosures and remuneration requirements. The roadmap outlines the EBA’s work plan for each of the mandates laid down in the IFR/IFD and clarifies the sequencing and rationale behind their prioritisation. Through these mandates, the EBA will contribute to the implementation of a regulatory framework that is calibrated to the size and nature of investment firms. This will strengthen supervision, which will rely more directly on the risks faced by the clients and the investment firms themselves. The consultations launched today run until 4 September 2020.
The first consultation paper on prudential requirements includes three draft Regulatory Technical Standards (RTS) on the reclassification of certain investment firms to credit institutions, five draft RTS on capital requirements for investment firms at solo level, and one draft RTS on the scope and methods of prudential consolidation for investment firms at group level.
The second consultation paper on reporting requirements and disclosures, includes draft Implementing Technical Standards (ITS) on the levels of capital, concentration risk, liquidity, the level of activities as well as disclosure of own funds; and draft RTS specifying the information that investment firms have to provide in order to enable the monitoring of the thresholds that determine whether an investment firm has to apply for authorisation as credit institution.
The third and fourth consultation papers on remuneration requirements include one draft RTS on the criteria to identify all categories of staff whose professional activities have a material impact on the firm’s risk profile or assets it manages (‘risk takers’); and one draft RTS specifying the classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration of risk takers.
When developing these RTS and ITS, the EBA has considered the proportionality principle so as to take into account the specificities of the different classes of investment firms.
Finally, to assess the impact of the provisions proposed in the regulatory deliverables, the EBA also launched a data collection exercise on a voluntary basis.
Comments to these consultations can be sent to the EBA by clicking on the ‘send your comments’ button on the consultation page. Please note that the deadline for the submission of comments is 4 September 2020.
All contributions received will be published following the closure of the consultation, unless specifically requested otherwise.
The EBA will hold a public hearing, which will take place via conference call on the following dates:
The dial in details will be communicated in due course.
The EBA has developed these draft RTS and ITS according to Article 8a(6)(a), Article 8a(6)(b) of the CRD and in Article 7(5), Article 13(4), Article 15(5)(a), Article 15(5)(b), Article 15(5)(c), Article 23(3), Article 49, Article 54, Article 55(5) of the Regulation (EU) 2019/2033 and Article 5(6), Article 30(4), Article 32(1)(j) of the Directive (EU) 2019/2034, which mandate the Authority to further specify, develop, determine a prudential framework for investment firms to ensure a level playing field among investment firms across the EU and supervisory convergence.
The Investment Firms Prudential Package consists of the Directive (EU) 2019/2034 and the Regulation (EU) 2019/2033, which were published in the Official Journal on 5 December 2019 and represents a new prudential framework for investment firms authorised under MIFID.
The mandates allocated to the EBA includes 18 draft RTS, 3 draft ITS, 6 sets of guidelines, 2 reports, the requirement for the EBA to maintain a list of capital instruments and a database of administrative sanctions, and a number of notifications in various areas.
The European Banking Authority (EBA) published today two final draft Regulatory Technical Standards (RTS) on (i) the criteria to identify all categories of staff whose professional activities have a material impact on the investment firm’s risk profile or asset it manages (‘risk takers’) and (ii) on the classes of instruments that adequately reflect the credit quality of the investment firm and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration. The objective of these RTS is to define and harmonise the criteria for the identification of such staff and the use of instruments or alternative arrangements for the purposes of variable remuneration so as to ensure a consistent approach across the EU.
Risk takers will be identified based on a combination of qualitative and quantitative criteria specified in the RTS. To ensure that all risk takers are identified, members of staff are identified as having a material impact on the institution’s risk profile as soon as they meet at least one of the qualitative or quantitative criteria in the RTS or, where necessary because of the specificities of their business model, additional internal criteria.
Following the feedback received during the consultation phase, the qualitative criteria have been revisited to enhance the application of proportionality. The final draft RTS also clarify how the criteria should be applied on a consolidated and individual basis. Finally, some flexibility in calculating the amount of remuneration for the application of the quantitative requirements has been introduced similarly to the remuneration framework applicable under the Capital Requirements Directive (CRD).
In addition, the 0.3% of staff with the highest remuneration criterion has been included to be applied only by firms that have more than 1 000 staff in order to reduce the burden for small firms. The quantitative criteria are based on the rebuttable assumption that the professional activities of those staff would have a material impact on the investment firm’s risk profile or asset it manages.
The final draft RTS introduce requirements for investment firms regarding Additional Tier 1, Tier 2 and other instruments used for the purposes of variable remuneration, to ensure that they appropriately reflect the credit quality of the investment firm as well as, to specify possible alternative arrangements for the pay out of variable remuneration where investment firms do not issue any of the instruments referred to in Article 32 of the Investment Firms Directive (IFD).
The provisions in the RTS are aligned with Commission Delegated Regulation 527/2014 on classes of instruments that are appropriate to be used for the purposes of variable remuneration under the CRD to ensure that, in particular, groups of credit institutions and investment firms are able to use a common set of instruments for remuneration purposes.
The EBA has been mandated, under Articles 30(4) and 32(1)(j) of the Directive (EU) 2019/2034, to develop, in cooperation with the European Securities and Markets Authority (ESMA), final draft RTS to specify the appropriate criteria to identify the categories of staff whose professional activities have a material impact on the risk profile of the investment firm or asset it manages; and to develop draft RTS to specify the classes of instruments that satisfy the conditions set out in point (j)(iii) of paragraph 1 of Article 32 and to specify possible alternative arrangements set out in point (k) of paragraph 1 of Article 32.
The European Banking Authority (EBA) outlined today its roadmap for the implementation of the new regulatory framework for investment firms and launched a public consultation on its first set of regulatory deliverables on prudential, reporting, disclosures and remuneration requirements. The roadmap outlines the EBA’s work plan for each of the mandates laid down in the IFR/IFD and clarifies the sequencing and rationale behind their prioritisation. Through these mandates, the EBA will contribute to the implementation of a regulatory framework that is calibrated to the size and nature of investment firms. This will strengthen supervision, which will rely more directly on the risks faced by the clients and the investment firms themselves. The consultations launched today run until 4 September 2020.
The first consultation paper on prudential requirements includes three draft Regulatory Technical Standards (RTS) on the reclassification of certain investment firms to credit institutions, five draft RTS on capital requirements for investment firms at solo level, and one draft RTS on the scope and methods of prudential consolidation for investment firms at group level.
The second consultation paper on reporting requirements and disclosures, includes draft Implementing Technical Standards (ITS) on the levels of capital, concentration risk, liquidity, the level of activities as well as disclosure of own funds; and draft RTS specifying the information that investment firms have to provide in order to enable the monitoring of the thresholds that determine whether an investment firm has to apply for authorisation as credit institution.
The third and fourth consultation papers on remuneration requirements include one draft RTS on the criteria to identify all categories of staff whose professional activities have a material impact on the firm’s risk profile or assets it manages (‘risk takers’); and one draft RTS specifying the classes of instruments that adequately reflect the credit quality of the investment firm as a going concern and possible alternative arrangements that are appropriate to be used for the purposes of variable remuneration of risk takers.
When developing these RTS and ITS, the EBA has considered the proportionality principle so as to take into account the specificities of the different classes of investment firms.
Finally, to assess the impact of the provisions proposed in the regulatory deliverables, the EBA also launched a data collection exercise on a voluntary basis.
Comments to these consultations can be sent to the EBA by clicking on the ‘send your comments’ button on the consultation page. Please note that the deadline for the submission of comments is 4 September 2020.
All contributions received will be published following the closure of the consultation, unless specifically requested otherwise.
The EBA will hold a public hearing, which will take place via conference call on the following dates:
The dial in details will be communicated in due course.
The EBA has developed these draft RTS and ITS according to Article 8a(6)(a), Article 8a(6)(b) of the CRD and in Article 7(5), Article 13(4), Article 15(5)(a), Article 15(5)(b), Article 15(5)(c), Article 23(3), Article 49, Article 54, Article 55(5) of the Regulation (EU) 2019/2033 and Article 5(6), Article 30(4), Article 32(1)(j) of the Directive (EU) 2019/2034, which mandate the Authority to further specify, develop, determine a prudential framework for investment firms to ensure a level playing field among investment firms across the EU and supervisory convergence.
The Investment Firms Prudential Package consists of the Directive (EU) 2019/2034 and the Regulation (EU) 2019/2033, which were published in the Official Journal on 5 December 2019 and represents a new prudential framework for investment firms authorised under MIFID.
The mandates allocated to the EBA includes 18 draft RTS, 3 draft ITS, 6 sets of guidelines, 2 reports, the requirement for the EBA to maintain a list of capital instruments and a database of administrative sanctions, and a number of notifications in various areas.