The Cyprus Securities and Exchange Commission (CySEC) has issued a notification to entities it regulates and to participants in the market in general of the consultation process regarding a proposed amendment of the EU prudential rules for investment firms.
The existing prudential framework governing the provision of investment services stems from the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR). This framework was designed for credit institutions, and does not specifically address the particular risks that the investment services sector faces. The CRD/CRR system is regarded as complex and burdensome for most non-bank firms providing investment services and, depending on factors including their size and the range of services they provide, some investment firms are exempt from prudential regulation, some are subject to lighter prudential regulation, and others are subject to the full set of CRD and CRR provisions.
Under a proposal adopted by the European Commission in December 2017 for a regulation and a directive to amend the existing rules, only the largest and most systemic investment firms would remain under the existing CRD/CRR prudential framework. The vast majority of investment firms would be subject to a new bespoke regime with simpler, more appropriate prudential requirements.
Comments on the proposed legislation may be made via the European Commission's website until March 8 2018.