The activities of investment firms are governed at EU-level by the Markets in Financial Instruments Directive. In addition, EU investment firms are also subject to distinct rules on how they should account for their risks. These prudential rules aim to ensure that investment firms have sufficient resources to remain financially viable and do not cause undue economic harm to their customers.

The prudential rules for investment firms are part of the wider EU prudential framework which mainly applies to banks. Currently, the requirements are set out in Directive 2013/36/EU and Regulation (EU) No 575/2013 on capital requirements for banks and investment firms (also known as “CRD IV/CRR”).

Review of the existing rules

In March 2017 the Commission published an inception impact assessment providing an overview of the problems to be addressed, outlining possible solutions and inviting stakeholders to give their feedback.

In December 2017 the Commission proposed a review of the prudential rules for investment firms. The aim of this review is to make life simpler for smaller investment firms, while bringing the largest, systemic ones under the same regime as European banks.

In April 2019, the European Parliament endorsed the legislation setting the building blocks of a capital markets union, including the review of the prudential rules for investment firms..

The contribution from ESAs

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) are working with the European Commission on the review of the prudential rules for investment firms. The two authorities are collecting data and have published reports and other documents on the issue.

Read more on the work carried out by the EBA and the ESMA on the review