Prudential Requirements of Investment Firms (Regulation)
The supervision of investment firms in the EU will become more adapted to their business models and risks. For this purpose, the EU Commission has proposed inter alia a Regulation on prudential requirements for investment firms.
In cep’s view, dividing investment firms into three classes may counteract the consolidation of the sector brought about by regulation. The fact that the Commission wants to make class 1 investment firms subject to the same regulation as the banks is also justified in the interests of financial stability. Graded regulation, however, harbours the risk of distorting competition. It is also doubtful whether the capital requirements applicable to investment firms will bring about the envisaged relief.