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European Commission Proposes More Appropriate Capital Requirements for Smaller EU Investment Firms
2 January 2018
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On 20 December 2017, the European Commission adopted proposals which aim to amend the current prudential framework for investment firms set out in the Capital Requirements Directive and Regulation (CRD IV/CRR) and in the Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR) and to introduce more proportionate and risk-sensitive rules.
Under these proposals, the vast majority of EU investment firms (including investment advisors, placement agents, portfolio managers and other financial intermediaries that provide regulated financial services) would be subject to a completely new regime of capital and prudential requirements.
Investment firms which are considered systemic (Class 1 firms) will remain under the regime for banks (CRD IV/CRR) and will be regulated like banks “in all respects”. In addition, the European Central Bank will directly supervise Class 1 firms under the Single Supervisory Mechanism. This represents another step in the shift from national to central European supervision.
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