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
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