Capital Markets Union: new rules for banks and investment firms ensure proportionality and foster resilience

Two new sets of rules in the area of banking and investment will enter into force over the coming days. First, the Investment Firm Directive and Investment Firm Regulation will come into application on Saturday, 26 June 2021. They will introduce a new tailored, targeted set of rules which will make life simpler for smaller investment firms while the largest, systemic investment firms will remain under the same prudential regime as European banks. These more proportionate rules – agreed by the European Parliament and the Council in November 2019 – are part of the EU’s efforts under the Capital Markets Union to foster competition and to encourage smaller firms to participate more actively in the EU’s capital markets. Additional information on the rules, as well as clarifications related to the entry into force of implementing measures is available here. Secondly, the Capital Requirements Regulation II (CRR II) comes into application on Monday, 28 June 2021. The CRR regime establishes the prudential requirements for banks and large investment firms, in particular for capital and liquidity, as well as requirements on reporting of prudential information to supervisors and on disclosing prudential information to the markets. The new CRR II rules – agreed by the European Parliament and the Council in May 2019 – will introduce more proportionality into EU rules for smaller financial institutions, as well as increase the banking sector’s resilience by including new requirements related to banks’ leverage and stable funding. They also introduce more risk-sensitive rules for calculating capital requirements.