EUROPEAN UNION: EBA Offers Opinion on MIFiD II

Friday September 29 2017

The European Banking Authority has issued a response to the European Commission’s MIFiD II consultation. The original consultation focused on the new prudential framework for MiFID investment firms which the currently operate under the prudential regime of the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR).

 The Opinion of the EBA to the Consultation encompasses issues such as capital and liquidity requirements, consolidated supervision, reporting requirements, the suitability of the proposed framework for commodity derivatives firms and the need of macroprudential tools.

 In addition, this Opinion includes recommendations for the introduction of very simple prudential requirements for small investment firms that provide limited services or activities.

One recommendation which the EBA has announced in order to do this is to introduce a new categorisation of MiFID investment firms distinguishing between:

1. a) systemic investment firms or investment firms which are exposed to the same types of risks as credit institutions (Class 1) to which the full CRD/CRR requirements should be applied;
2. b) other non-systemic investment firms (Class 2) above specific thresholds that should be subject to a more tailored prudential regime based on K-factors; and
3. c) small and non-interconnected investment firms (Class 3) providing limited services in terms of number and size to which a very simple regime should be applied

For additional information please click the link above.