EBA publishes final draft technical standards on own funds requirements for investment firms

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on own funds requirements for investment firms based on fixed overheads. These RTS harmonise the calculation of capital requirements for those investment firms that have limited authorisation to provide investment services, as well as the conditions under which competent authorities can make adjustments to such requirements. These final draft RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in Europe.

For the calculation of the fixed overheads, these final draft RTS use the so-called ‘subtractive' approach whereby variable cost items are deducted from the total expenses as calculated according to the applicable accounting framework. They also introduce a special treatment of tied agents, since a tied agent exposes an investment firm to the same risk it is exposed to when it carries out business on its own.

These final draft RTS also introduce thresholds above which competent authorities can make adjustments to the capital requirements as well as minimum thresholds below which firms are exempted from the adjustments in capital requirements. This would help them avoid too burdensome requirements, especially if they are in a start-up phase.

The EBA finalised these draft RTS taking into account the responses to the consultation that ended on 30 September 2013.

Legal basis

The proposed final draft RTS have been developed on the basis of Regulation (EU) 575/2013 (Capital Requirements Regulation – CRR) and in consultation with the European Securities and Markets Authority (ESMA), so as to ensure a consistent framework for investment firms.

The final draft standards have been sent today to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.