The Investment Firm Regulation (IFR), a new prudential framework developed by the European Commission (EC), will soon apply to all MiFID investment firms. The vast majority of investment firms will need to adapt to a new set of capital, liquidity, and reporting requirements. Whether or not you believe these rules are simpler and more proportionate to investment firms, you need to be prepared.
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The coming rules create a new prudential capital framework that is more tailored to the asset management industry – the previous structure was more focused on banks. While the changes will be modest for some firms, others will be significantly impacted by these new rules.
Commodity trading firms ─ currently outside the scope from the regulatory prudential framework in the EU ─ now need to prepare themselves to face increased regulation.
The prudential framework is a new rulebook developed by the European Commission for investment firms. It is designed to be simpler and more proportionate to a firm’s operations. Last month we looked at the impact on Exempt CAD firms. Now we examine the regime’s impact on the capital and liquidity requirements on MiFID managers.
Likely to come into force by the end of 2019, the prudential framework will hit some firms very hard, requiring them to maintain significantly greater levels of capital. We are running a series of articles assessing the material areas of change imposed by these new rules. In this first article, we examine the regime’s impact on the capital and liquidity requirements of Exempt-CAD firms.
For the first time in some years, the Financial Conduct Authority (FCA) has written to asset managers’ CEOs on prudential matters. The letter includes a plea by the FCA for data that it, and the EBA, can rely upon when aggregating firms’ submissions to understand the macro picture.
The premise of the new rules will be to ensure investment firms have a prudential framework designed to be simpler and more proportionate to the operations of these types of firms. However, these changes will result in significant alteration to how investment firms measure their capital for regulatory purposes.