Supervision and capital requirements for investment firms: European Parliament views

ABBL Published 01.10.2018

Right before Christmas 2017 the European Commission came forward with two legislative proposals on the supervision (directive) and the capital requirements (regulation) for investment firms.  Ever since the European Parliament and the Council have been working on the two texts with the former’s Economic and Monetary Committee (ECON) adopting this Monday its version of the legislation in the making.

One main element is that smaller non-systemic investment firms are not to have to apply bank rules but will be subject to a lighter regime specified in the two pieces of expected legislation.

The big investment firms – defined as those where the average monthly assets exceed 30 billion euros – will have to apply bank capital requirements. Nevertheless national competent authorities may decide to apply bank rules to firms below the threshold if they deem that the firm’s activities may pose a systemic risk to the financial system in their jurisdiction or at EU level.

A positive element is also that the transition from a non-systemic to a systemic firm status has been made smoother and more predictable. Indeed the period in which thresholds must be exceeded has been extended.

The ECON vote mostly kept the Commission proposal on remuneration despite some amendments that did not pass, but introduced new disclosure requirements on investment policy. ESG factors were also introduced to be taken into account when determining prudential requirements.

At the final vote the report shepherded by the EPP rapporteur Markus Ferber enjoyed a solid majority of 35 to 9 (directive on supervision) respectively 33 to 8 (regulation on capital requirements). To be noted is that the report has been followed and worked upon for the socialist group by the Luxembourg MEP Mady Delvaux.

The European Parliament will have to formally confirm its negotiation mandate with the Council and the Commission in an upcoming plenary session. The Council is yet to determine its position in due time.


By Antoine Kremer, ABBL & ALFI Head of European Affairs


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