01 July 2021
The European Banking Authority (EBA) published today an Opinion to ease the implementation of the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD), which entered into force on June 26. The IFR/IFD classify investment firms according to their business model and size, the latter of which is benchmarked on various threshold. For the vast majority of investment firms, sufficient clarity already exists with regards to the prudential regime, which applies to them. However, in a few cases, especially for investment firms of third country groups, the Opinion provides guidance on the actions to be taken in case of uncertainty on whether these investment firms should apply for an authorisation as a credit institution in the absence of the delegated act establishing the methodology for the calculation of the highest threshold (the EUR 30bn threshold), on which the EBA has currently opened a second public consultation.
The EBA road map on investment firms sets out the EBA’s considerations on the implementation of the IFR/IFD. With the entry into force of the new prudential regime for investment firms, concerns have been raised on a practical issue related to the implementation, given that the regulatory technical standard (RTS) on the determination of the EUR 30bn threshold is currently subject to a second consultation. The present Opinion provides clarity to both investment firms and their supervisors in the specific cases, where uncertainty about the relevant classification, and subsequent need for application for an authorisation as a credit institution, arises in the absence of the technical standards.
In general, the EBA advises competent authorities to apply a pragmatic approach for those investment firms, where the relevant EUR 30bn threshold for the identification of the prudential regime to be applied to the investment firm cannot be determined without the guidance provided in the EBA RTS currently being consulted on. More specifically, the EBA advises supervisors not to prioritise any supervisory or enforcement action in relation to the identification of investments firms, until six months after the final methodology is in place.
Legal basis and next steps
This Opinion is based on Article 9c of Regulation (EU) No 1093/2010, which mandates the EBA to take action in case the absence of delegated or implementing acts would raise legitimate doubts concerning the legal consequences flowing from the act or its proper application.
The Opinion relates to the application of Article 8(a) of Directive 2013/36/EU (CRD) and provides clarity on the approach to be taken by firms for the determination of the prudential regime to be applied. Concretely, it specifies how to determine whether the EUR 30bn threshold has been reached until the adoption of the EBA RTS on EUR 30bn threshold methodology.
The European Commission also issued a statement regarding the prudential requirements applicable to investment firms, which are currently considered as such, but which are required to take all the necessary steps to seek and obtain authorisation as credit institutions. The statement clarifies that these investment firms will continue to be subject to the CRR/CRD rules as they stood on the day prior to the date of application of the new framework, in accordance with Article 58 of the IFR, during the short period until they are granted authorisation by their competent authorities.
Opinion on appropriate supervisory and enforcement practices for the process of authorising investment firms as credit institutions