EBA recommends that only investment firms identified as GSIIs and OSIIs be subject to the full CRDIV/CRR

20 October 2016

The European Banking Authority (EBA) responded today to the European Commission's call for technical advice on the criteria to identify the class of investment firms for which the prudential regime laid down in the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) is applicable. In general, the EBA recommends that only those investment firms that are currently identified as Global Systemically Important Institutions (GSIIs) and Other Systemically Important Institutions (OSIIs) remain subject to the full CRD/CRR regime.
 
The Commission's call for advice of 13 June 2016 follows up on the first two recommendations included in the EBA's Report on investment firms  published on 15 December 2015. In particular, the EBA recommends that the following criteria be used to identify those investment firms that should continue to be subject to the CRD/CRR framework: (i) systemic importance; (ii) interconnectedness with the financial system; (iii) complexity; and (iv) bank-like activities.
 
Although this recommendation relies on the EBA Guidelines for the identification of OSIIs, some caveats should be considered when these Guidelines are applied to investment firms. For this reason and in the context of the review of the overall regulatory framework, the EBA also notes that a specific set of Guidelines might be necessary to identify systemic and bank-like investment firms. However, no special derogation or change to the CRR is suggested at this stage.
 

Legal basis and next steps

The EBA's response to the Commission's call for advice is based on Articles 8(2) and 34(1) of the Regulation establishing the EBA (Regulation (EU) No 1093/2010), which mandates the EBA to provide opinions to the European Parliament, the Council and the Commission on all issues related to its area of competence. 
 
Today's response only focuses on the first recommendation included in the EBA's Report on investment firms. The response to the second recommendation, which suggests that a specific prudential regime should be designed for those investment firms for which the CRD/CRR is not applicable, will be provided separately by 30 June 2017.