Question ID
2026_7891
Legal act
Directive (EU) 2019/2034 (IFD)
Topic
Supervision of investment firm groups
Article
24
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Individual
Subject matter
Requirement for a consolidated ICARA process under Directive (EU) 2019/2034
Question

Does Directive (EU) 2019/2034 require investment firms that are subject to prudential consolidation under Article 7 IFR to prepare, maintain and document an ICARA process on a consolidated basis? In particular, does Article 25(4) IFD impose an obligation to perform the ICARA at consolidated level, or does it merely extend the application of Part Three without creating a standalone consolidated‑ICARA requirement?

Background on the question

Following the introduction of consolidated‑level ICARA fields in a national supervisory reporting template, uncertainty has arisen as to whether the IFD/IFR framework requires investment firms subject to prudential consolidation to establish and maintain an ICARA process on a consolidated basis.

Article 24 IFD sets out the requirement for investment firms to perform an internal capital adequacy and risk assessment (ICARA), but does not specify that this assessment must be conducted at consolidated level. Article 25(4) IFD provides that the provisions of Part Three apply on both an individual and consolidated basis where prudential consolidation applies, but it is unclear whether this creates a standalone obligation to prepare a consolidated ICARA.

To date, market practice has generally been to perform the ICARA on a solo basis, even where prudential consolidation applies, and no RTS, ITS, EBA Guidelines or other supervisory guidance appear to explicitly require a consolidated ICARA. 

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because the issue it deals with is already explained or addressed in the regulatory framework, which is sufficiently clear and unambiguous.

The answer to the question is provided in the Joint EBA and ESMA Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms (EBA/GL/2022/09 - ESMA35-36-2621). The provision in paragraph 121 of the SREP Guidelines for investment firms states that 'Competent authorities should assess whether investment firms, which are not small and non-interconnected investment firms according to Article 12 of Regulation (EU) 2019/2033 or for which competent authorities exercised the discretion envisaged in the second subparagraph of Article 24(2) of Directive (EU) 2019/2034, at individual level, or investment firms groups, at consolidated level, have sound, effective and comprehensive arrangements strategies and processes in place to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital and liquid assets that they consider adequate to cover the nature and level of risks which they may pose to others and to which the investment firms themselves are or may be exposed to. Such arrangements, strategies and processes should be part of an internal capital adequacy and internal-risk assessment process that may be further split into an internal capital adequacy assessment process (ICAAP) and an internal liquidity adequacy assessment process (ILAAP).

Status
Rejected question