Representatives of the European Parliament and the Romanian Presidency of the Council of the EU reached an interim political agreement on Tuesday evening, 26 February, on the Directive and Regulation that make up the legislative package on ‘investment firms’ (see EUROPE 11930).
Presented at the end of 2017, the package introduces a three-category classification of investment firms according to their size, nature and complexity, which will make it possible to subject them to proportional prudential and supervisory requirements.
According to a European source, the final text is very close to the Council's position (see EUROPE 12166). In particular, it includes the classification of systemically important investment firms in “class 1”, as requested by the Member States.
The agreement provides that investment firms engaged in “bank-like” activities, such as dealing on own account or underwriting financial instruments, and whose consolidated assets exceed €15 billion, would automatically be subject to the 'CRR/CRD4' banking prudential framework.
As for investment firms with banking activities and consolidated assets between €5 billion and €15 billion, they may be required to apply the 'CRR/CRD4' framework by their supervisory authority, in particular if the firm’s size or activities would involve risks to financial stability.
Small companies that are not considered systemic will benefit from a new adapted regime. However, the text includes an “opt-in” clause authorising competent authorities to allow banking requirements to continue to apply to certain companies on a case-by-case basis to avoid disrupting their business model.
A transitional period of 5 years has also been set, so that companies have sufficient time to adapt to the new rules.
The co-legislators also agreed on strengthening the equivalence rules that would apply to investment firms from third countries, including British companies, once the country has left the EU.
The Commission will also be responsible for assessing the capital requirements applicable to companies providing banking type services to ensure that they are equivalent to those applicable in the EU. It may also, where the services provided and activities carried out by third-country companies in the Union are likely to be of systemic importance to the EU, attach specific operational conditions to its equivalence decision.
“With more than half of the investment firms being active in the EU coming from the United Kingdom, finalising this file happens right on time. We have beefed up the equivalence provisions significantly without excluding any services per se", said Parliamentary rapporteur Markus Ferber (EPP, Germany). The agreement has yet to be confirmed by both institutions. (Original version in French by Marion Fontana)