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A primer in the European Commission’s proposed new prudential rules for investment firms
Journal of Financial Compliance,
2
(4),
380-387
(2019)
Abstract
This paper considers the European Banking Authority (EBA) and European Commission proposals for a new prudential rulebook for investment firms. It is relevant to staff in finance, risk and compliance functions at asset management, securities trading and broker-dealer firms and their advisers. The paper opens by considering the EBA’s objectives in proposing a new prudential regime for investment firms. It then goes on to consider the European Commission’s proposal for new legislation that would give effect to these new requirements. It examines the scope of the new rules and the new categorisation of investment firms. The following requirements of the new rules are considered in detail: capital requirements, internal risk management processes, reporting to regulators, disclosure to the market and the minimum liquid assets buffer. The reader will glean an elementary understanding of the new rule requirements on each of these areas. For readers in the UK, there is an assessment of how changes in the UK’s future relationship with the European Union may have an impact on the introduction of this proposed legislation. Finally, the paper considers the most likely practical impact of the new rules on different types of investment firms.
Keywords: prudential; asset manager; broker dealer; capital requirements
The full article is available to subscribers to the journal.
Author's Biography
Ian Kelly is Head of Regulatory Advisory, Europe at the Royal Bank of Canada (RBC). He focuses on regulatory policy developments, capital requirements, the Internal Capital Adequacy Assessment Process (ICAAP) and regulatory reporting. His remit includes prudential policy development for RBC’s banking and wealth management entities in Europe. He represents RBC at trade body forums and in interactions with financial regulators and rule makers. Ian began his career at the UK Financial Services Authority (FSA) where he worked in a variety of roles including capital adequacy policy development, implementation of the Retail Distribution Review (RDR) and investment firm supervision. He then spent several years as a consultant at PwC and Deloitte where he advised investment brokers and asset managers on Financial Conduct Authority (FCA) prudential requirements and the impact of incoming regulatory changes, for example, the Capital Requirements Directive IV (CRD IV) and the Prudential Sourcebook for Investment Firms (IFPRU). Ian’s analyses have been published in trade magazines and financial law textbooks. He holds a masters in commercial law from the University of Edinburgh.
