EBA publishes Roadmap to 2021 NEW Investment Firms Regulation and Directive (IFR/IFD) implementation

MNK Risk Consulting > News > Regulatory Developments > EBA publishes Roadmap to 2021 NEW Investment Firms Regulation and Directive (IFR/IFD) implementation

Subject: EBA Roadmap on Investment Firms regarding the implementation of the NEW Investment Firms Regulation (IFR) and Investment Firms Directive (IFD) entering into force from June 2021.

Background Information on the NEW IFR/IFD Prudential Framework

The EU’s new IFR/IFD framework[1] entered into force in December 2019 and will be applicable for all EU Investment Firms from June 26, 2021. The EU’s new IFR/IFD framework reshapes how investment firms calculate their regulatory capital requirements and at what level these need to be maintained from June 2021. All firms in scope of the IFR/IFD need to fall within a specific class, based on their regulated activity but also within certain quantitative metrics in the form of “K-Factors”.

Systemically important and larger risky investment firms (i.e. Class 1) will be treated either as credit institutions or be held to the same rules under the CRR 2/CRD 5 framework and will become subject to SSM and SRM supervision.

All other investment firms (Class 2 and 3) in the EU will become subject to the new IFR/ IFD framework, which includes a consolidated set of regulatory capital and liquidity requirements with limited waivers along with rules on internal models, governance, remuneration and disclosure.

 

The EBA Roadmap for 2020-2025

The European Banking Authority (“EBA”), in consultation with the European Securities and Markets Authority (“ESMA”), released a Roadmap for the implementation of the new prudential regulatory framework for investment firms and launched a public consultation (ended September 4, 2020) for the implementation and further clarification of the IFR/IFD framework, which is divided into six thematic areas:

  1. Thresholds and criteria for Investment Firms to be subject to the Capital Requirements Regulation (“CRR”);
  2. Capital requirements and composition;
  3. Reporting and disclosure;
  4. Remuneration and governance;
  5. Supervisory convergence and the supervisory review process; and
  6. Mandates concerning environmental, social and governance (“ESG”) aspects.

 

The EBA is committed in to delivering on its IFR/IFD mandates following a four-phased approach running from 2020-2025, as follows:

  1. Phase 1: by December 2020 covering a total of 15 deliverables
  2. Phase 2: by June 2021 covering a total of 8 deliverables
  3. Phase 3: by December 2021 covering a total of 4 deliverables
  4. Phase 4: between December 2021 to June 2025

EBA’s mandate includes a total of 31 deliverables, out of which 18 are Regulatory Technical Standards (RTS), 3 Implementing Technical Standards (ITS), 6 sets of Guidelines, 2 reports, the requirement of EBA to maintain a list of capital instruments and a database of administrative sanctions, and a number of notifications in various areas.

The list with the EBA’s IFR/IFD mandates by the relevant area with expected deadlines can be found in the table below:

Regulation

Art.(para.)

Type of

level 2

product

Mandate summary Legal

deadline

EBA

deliverables

Phase
Thresholds and criteria for IFs subject to CRR
IFD 5(6) RTS RTS on the criteria for subjecting

certain IFs to the CRR (EUR 5 billion)

12 months

after EIF

December

2020

Phase 1
IFR 55(5) RTS RTS on the information related to the

thresholds for credit institutions

(5 billion)

Ongoing December

2020

Phase 1
CRD 8a(6a) RTS RTS on the information to be

provided for the authorisation as

credit institution

12 months

after EIF

December

2020

Phase 1
CRD 8a(6b) RTS RTS on the calculation of the

thresholds (EUR 30 billion) to be a

credit institution

12 months

after EIF

December

2020

Phase 1
Capital requirements and composition
IFR 13(4) RTS RTS to supplement the calculation of

the fixed overheads requirement

12 months

after EIF

December

2020

Phase 1
IFR 15(5) RTS RTS to specify the methods for

measuring the K-factors

12 months

after EIF

December

2020

Phase 1
IFR 15(5) RTS RTS on the definition of segregated

account

12 months

after EIF

December

2020

Phase 1
IFR 15(5) RTS RTS to specify adjustments to the KDTF coefficients 12 months

after EIF

December

2020

Phase 1
IFR 23(3) RTS RTS to specify the calculation of the

amount of the total margin and the

method of calculation of K-CMG

12 months

after EIF

December

2020

Phase 1
IFR 9(4) List Monitoring and publication of eligible

own funds instruments and funds for

class 3 firms

12 months

after EIF

December

2020

Phase 1
IFD 42(6) RTS RTS on liquidity risk measurement 18 months

after EIF

June 2021 Phase 2
IFR 43(4) GL GL to specify the criteria when

exempting Article 12(1) IFs (class 3)

from the liquidity requirements

None June 2022 Phase 4
IFD 37(4) GL GL on benchmarking of internal

models

None June 2022 Phase 4
IFR 7(5) RTS RTS on prudential consolidation 12 months

after EIF

December

2020

Phase 1
Reporting and disclosure
IFR 54(3) ITS ITS on supervisory reporting 12 months

after EIF

December

2020

Phase 1
IFR 52(3) RTS RTS to specify templates for

investment policy disclosures

18 months

after EIF

June 2021 Phase 2
IFR 49(2) ITS ITS to specify templates for own

funds disclosures

18 months

after EIF

December

2020

Phase 1
Remuneration and governance
IFD 26(4) GL GL to specify the content of the

application of governance

arrangements

None First quarter

of 2021

Phase 2
IFD 30(4) RTS RTS to specify appropriate criteria to

identify the categories of staff whose

professional activities have a material

impact on the IF’s risk profile

18 months

after EIF

October

2020

Phase 1
IFD 32(8) RTS RTS to specify instruments for

variable remuneration convertible

into CET1

18 months

after EIF

October

2020

Phase 1
IFD 34(2 GL GL on benchmarking of remuneration

practices and the gender pay gap

None Last quarter

of 2021

Phase 3
IFD 34(3) GL GL on the application of sound

remuneration policies

None Last quarter

of 2021

Phase 3
IFD 34(4) Others EBA to publish supervisory

information on high earners (the EBA

may issue GL to facilitate data

collection)

None Last quarter

of 2021

Phase 3
Supervisory convergence and supervisory review and Pillar 2
IFD 13(7) RTS RTS on information exchange

between CAs in different Member

States

18 months

after EIF

June

2021

Phase 2
IFD 13(8) ITS ITS to establish standard forms,

templates and procedures for

supervisory information sharing

18 months

after EIF

June

2021

Phase 2
IFD 48(8) RTS RTS on how colleges of supervisors

exercise their tasks

18 months

after EIF

June

2021

Phase 2
IFD 40(6) RTS RTS on Pillar 2 add-ons 18 months

after EIF

June

2021

Phase 2
IFD 45(2) Others EBA to publish aggregated

information for SREP

Ongoing End of 2022 Phase 4
IFD 45(2) Others EBA to report to European Parliament

and Council on degree of

convergence

None End of 2023 Phase 4
IFD 45(2) GL GL on procedures and methodologies

for the SREP

None End of 2022 Phase 4
IFD 57(4) ITS ITS format, structure, content lists

and annual publication date (on laws,

discretions, SREP and sanctions)

18 months

after EIF

September

2021

Phase 2
ESG exposure
IFD 35 Report Report and (if appropriate GL) on

technical criteria related to exposures

with substantial ESG for the SREP

2 years

after EIF

December

2021

Phase 3
IFR 34(2) Report Report on the prudential treatment

of assets exposed to activities

associated with ESG objectives

2 years

after EIF

2022-2025

(discussion

paper

followed by

report)

Phase 4

 

Contact us should you need assistance in the implementation of the new IFR/IFD framework to your Company.

E-mail: [email protected]mnkriskconsulting.com

     Tel: +357 25 508 201

 

[1] Consisting of Regulation EU 2019/2033 – the Investment Firms Regulation (IFR) and Directive EUR 2019/2034 – the Investment Firms Directive (IFD)

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