EBA investment funds consultation unpicked

Author: Tom Young | Published: 8 Nov 2016

The European Banking Authority’s (EBA) plans to create a prudential framework for investment firms could finally do away with the ill-fitting Basel Market Risk approach of previous years. But larger firms are unhappy with the more onerous capital requirements that are likely to follow.

On November 4 the EBA released a discussion paper in response to the European Commission's call for technical advice on the design of a new prudential regime for investment firms. The final rules are expected to be tailored to investment firms’ different business models and inherent risks.

According to the EBA, the aim is to develop a single, harmonised rulebook that is simple and proportionate. Crucially, the rules will have a clear distinction between the larger firms that face capital rules similar to banks and the smaller ones where such buffers are deemed unnecessary.

The move has been welcomed by many, who view the current...