Preparing For the New Investment Firms Regulation (IFR) – Complex Challenges
With the June 26, 2021 deadline looming, investment firms operating in Europe and authorized under MiFID must implement the Investment Firms Regulation’s complex new data collection, categorization, capital calculation, and reporting requirements
. Further, firms need to be ready to react quickly once the UK-specific regulations will be set, post Brexit.
The Investment Firms Regulation, promulgated under the broader Investment Firms Directive (IFD), states that non-systemically important investment firms are no longer classified as credit institutions falling under CRR and will now be grouped as either class 2 or 3 institutions. This will be based on thresholds using K-factors (quantitative indicators) that reflect the risks which IFR aims to address. Class 2 firms must calculate capital based on the K-factor formula and, among other things, IFR places greater emphasis on fixed overheads. The new categorizations and capital calculations are only some of the challenges around IFR compliance.
To prepare for the new Investment Firms Regulation reporting, organizations should be asking key questions: