EBA seeks views on new prudential regime for investment firms

November 4, 2016

The European Banking Authority (EBA) launched today a consultation in response to the European Commission’s call for technical advice on the design of a new prudential regime for investment firms, which is specifically tailored to the needs of investment firms’ different business models and inherent risks. The aim of this work is to develop a single, harmonised set of requirements that are reasonably simple, proportionate, and more relevant to the nature of investment business. The consultation runs until 2 February 2017.

The EBA recommends a framework focused on the risks that investment firms pose to customers and to market integrity and liquidity. The proposal is that ongoing capital requirements shall be calculated based on capital factors that are attributed to one of these two broad types of risks.

The Discussion Paper also covers three possible alternatives to set minimum liquidity requirements for investment firms in a more appropriate way than the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR).

The original discussion summary can be found on the EBA website here along with a ‘send your comments’ link to provide feedback.