Directive (EU) 2019/2034 on the prudential supervision of investment firms

What it is

to establish a proportionate and risk-based European prudential framework for investment firms. PROPOSED ACT: Regulation of the European Parliament and of the Council. ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council. BACKGROUND: investment firms play an important role in facilitating savings and investment flows across the EU. They offer investors (retail, professional, corporate) various services that give them access to the securities and derivatives markets (investment advice, portfolio management, brokerage, execution of orders, etc.). Unlike credit institutions, investment firms do not take deposits or make loans. This means that they are a lot less exposed to credit risk and the risk of depositors withdrawing their money at short notice. The Committee on Economic and Monetary Affairs adopted the report by Markus FERBER (EPP, DE) on the proposal for a directive of the European Parliament and of the Council on the prudential supervision of investment firms and amending Directives 2013/36/EU and 2014/65/EU. The committee recommended that the European Parliament's position adopted at first reading under the ordinary legislative procedure should amend the Commission's proposal as follows. Objective : the proposed proposal for a Directive establishes effective, appropriate and proportionate prudential arrangements at Union level that help to ensure that investment firms authorised to operate within the Union operate on a sound financial basis and are managed in an orderly way including in the best interests of their clients. To this end, it shall establish rules concerning: the initial capital of investment firms; supervisory powers and tools for the prudential supervision of investment firms by competent authorities; publication requirements for competent authorities in the field of prudential supervision of investment firms. provide a level playing field across the EU and guaranteeing effective prudential supervision, while keeping compliance costs in check and ensuring sufficient capital for the risks of most investment firms; strike a balance between ensuring the safety and soundness of different investment companies and avoiding excessive costs that might undermine the viability of their business activity; ensure harmonised prudential supervision of investment firms across the Union functioning promptly and efficiently. Competent authorities : Member States shall designate one or more competent authorities to carry out the functions and duties provided for in the Directive and inform the Commission, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) of this designation. Competent authorities may apply the requirements of Regulation (EU) No 575/2013 (the Own Funds Regulation, or CRR) on an undertaking other than a credit institution provided that certain conditions are met, for example (i) the undertaking is not a commodity dealer or an emission allowances dealer, or a collective investment undertaking, or an insurance undertaking or (ii) it carries out activities similar to…

Frequently asked