European Securities and Markets Authority and European Banking Authority issue technical advice to the European Commission recommending targeted changes to the investment firms prudential regime

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) published joint technical advice to the European Commission in response to its Call for Advice on the Investment Firms Regulation and Investment Firms Directive, recommending that any reforms remain limited given stakeholder feedback that the framework is broadly fit for purpose. The advice focuses on improving proportionality and strengthening the framework’s contribution to a level playing field among investment firms and between investment firms and financial institutions carrying out similar activities. The joint report sets out areas where higher or lower alignment with the banking prudential framework could be beneficial, and identifies needs to clarify definitions, improve calculation methodologies and threshold monitoring, and harmonise the scope of calculations to support consistent application. It also addresses the adequacy of own funds requirements, the implications of the EU Banking Package, prudential consolidation of investment firm groups, remuneration-related aspects, and interactions with other regimes including the Market in Crypto-Assets Regulation, the Undertakings for Collective Investment in Transferable Securities framework, and the Alternative Investment Fund Managers rules. ESMA and the EBA will submit the joint report to the European Commission.