The aim of this work is to develop a single, harmonised set of requirements that are reasonably simple, proportionate, and more relevant to the nature of investment business.
In particular, the European Banking Authority (EBA) recommends a framework focused on the risks that investment firms pose to customers and to market integrity and liquidity.
Therefore, the EBA is proposing that the ongoing capital requirements shall be calculated based on capital factors (K-factors) that are attributed to one of these two broad types of risks. As a result, firms that pose more risk to customers and markets should get higher capital requirements than those who pose less risk, and firms that pose similar risk to customers and markets but with more own risk should hold more capital than those with less own risk.
The Discussion Paper covers the most important aspects related to the new prudential requirements for investment firms, including three possible alternatives to set minimum liquidity requirements. All three alternatives aim at addressing the liquidity profile of investment firms in a more appropriate way than the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR).
Comments to this consultation can be sent to the EBA by 2 February 2017. A public hearing will then take place at the EBA premises on 1 December 2016 from 11 to 13 UK time.
Press release
Discussion paper
© EBA
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article