The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published today a discussion paper on the potential review of the investment firms’ prudential framework. The discussion paper aims at gathering early stakeholder feedback to inform the response to the European Commission’s call for advice (CfA). The consultation runs until 30 August 2024. To assess the impact of the possible changes discussed in the paper, the EBA also launched a data collection exercise on a voluntary basis.

The discussion paper touches upon a broad range of topics, including:

the adequacy of the current prudential requirements,
an analysis of the existing methodology,
risks not covered by the current framework.
It also discusses the implications of the adoption of the new EU Banking package (CRD VI and CRR 3) concerning the trading book, the fundamental review of the trading book (FRTB) and credit valuation adjustments (CVA).

Furthermore, prudential consolidation and a possible extension to crowdfunding and crypto-assets service providers are also considered. In this respect, the discussion paper provides an overview of the interaction of IFD/IFR with requirements applicable to undertakings for collective investment in transferable securities (UCITS) management companies and alternative investment funds managers (AIFMs) providing MiFID services on an ancillary basis or investment firms providing services related to crypto-assets.

The discussion paper also covers aspects related to remuneration in relation to investment firms, AIFMs and UCITS management companies, including the scope of application, remuneration policies, the requirements on variable remuneration, their oversight, disclosure and transparency. Finally, the discussion paper includes a short section on the treatment of firms currently non-prudentially regulated and active in commodity markets.

An ad-hoc data collection addressed to competent authorities, investment firms, and UCITS management companies and AIFMs is launched in parallel to the publication of the discussion paper.

Submission of responses
Comments to this consultation can be sent to the EBA via the consultation page. Please note that the deadline for the submission of comments is 3 September 2024.

All contributions received will be published following the close of the consultation, unless requested otherwise.

Public hearing and Next steps
A public hearing on this consultation will take place via conference call on 20 June 2024 starting at 14:00 CET.

EBA and ESMA will prepare the joint EBA-ESMA Report in response to the CfA, which will include a broad assessment of the provisions of the IFR and IFD and their interaction with other regulations.