What is it?

The EU has finalised and issued a new framework for the prudential regulation of investment firms. It will set new classification for investment firms that will in turn determine which of the new capital requirements apply to them. The framework will also set governance and remuneration requirements. As a broad overview:

..Class 1 firms will remain subject to the current CRD IV/CRR framework (as

amended by CRD V/CRR II);

..Class 2 firms will become subject to the new requirements in full (including

prudential requirements, remuneration and governance rules);

..Class 3 firms will be put under a less stringent ‘lighter’ regime within the new

framework (eg no need to calculate K-factors with respect to prudential

requirements).

..What form does it take? As with much recent EU financial services

legislation, the framework takes the form of a Regulation and a Directive.

Level 2 measures (such as regulatory technical standards) and guidance

setting out the detail are scheduled to follow prior to implementation.