Circular C426: Updates for the new prudential framework of Investment Firms (IFR/IFD)

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Circular C426: Updates for the new prudential framework of Investment Firms (IFR/IFD)

Cyprus Securities and Exchange Commission (CySEC) continuously updates all Cypriot Investments Firms (CIFs) about the European Banking Authority (EBA) actions regarding the implementation of the new prudential regulatory framework – IFR/IFD (see the relevant article on our website) which will be implemented on 26 June 2021. Specifically, on 02 February 2021, CySEC issued Circular C426 to provide CIFs with the latest updates regarding the final draft technical standards for IFR/IFD, the reporting and disclosures requirements under the new prudential regulatory framework, the launch on consultation papers and public hearing by the EBA and the next steps that all CIFs are requested to take in order to ensure compliance with the new requirements by the date of entry.

Final draft technical standards regarding IFR/IFD

On 16 December 2020, EBA published a package of seven (7) final draft regulatory technical standards (RTS) with respect to the implementation of the IFR/IFD. The said publication was part of the phase 1 of the EBA roadmap on investment firms and includes among others the main aspects on the new prudential regime in relation to the calculation of the new regulatory capital requirements. Additional RTS are expected to be published by the EBA. MAP RMS shall keep you updated with any developments on RTS under the new prudential framework.

Further details with respect to the seven (7) final draft RTS and EBA Roadmap on Investment firms can be found on MAP RMS website.

Reporting and disclosures requirements under IFR/IFD

In mid-2020 EBA issued draft implementing technical standards (ITS) on reporting requirements for investment firms together with a set of templates and instructions for the reporting obligations of Class 2 and 3 investment firms. The following templates introduced by EBA and can be downloaded here:

Annex Title
ITS Annex I Reporting for investment firms
RTS Annex I  Reporting of thresholds – templates
ITS Annex III Reporting for small and non-interconnected investment firms
ITS Annex VI Disclosure of own funds
ITS Annex VIII Reporting on group capital test

Further to the above, please note that EBA will issue the final version of these ITS together with the final reporting and disclosures templates within the upcoming weeks. Upon issuance of the final version of reporting templates by EBA, CySEC will adopt and enhance the templates so as to publish the new forms that the CIFs will use for the calculation of their capital adequacy requirements based on IFR/IFD.

Launch of Consultation Papers and Public hearing by the EBA

EBA launched a publish consultation on its new guidelines on remuneration policies and internal governance policies of investment firms on 17 December 2020. The public consultation consists of the following papers:

Consultation Paper title Link to send your comments
Guidelines on sound remuneration policies for Investment (*)
Guidelines on internal governance for Investment Firms  (*)

* According to CySEC, all CIFs are invited to send their comments on the above EBA consultation papers by clicking on the ‘send your comments’ button which can be found on the above links by 17 March 2021

Further to the above public consultation, EBA will also hold a public hearing in regards to the above consultation papers on 17 February 2021. If you are interested to participate the public hearing you can register here by 15 February 2021.

Next Actions

CySEC urges all CIFs to take the following steps/actions to ensure compliance with the requirements under the new prudential regulatory framework:

  • Study IFR and IFD along with the published final draft RTS as well as review the draft reporting templates issued by EBA;
  • Assess and identify the class that they will be categorized at from 26 of June;
  • Familiarize themselves with the new capital and reporting requirements
  • Identify the data needed for the calculation of the new capital requirements under the k-factors methodology;
  • Review their internal records and systems and proceed with any changes needed to ensure that the data needed for the k-factors methodology will be available at all times.

MAP RMS can assist you with the assessment of your capital adequacy and risk management framework under the new requirements and advise you with any proactive steps to be taken to ensure compliance by 26 June 2021.