Special K-Factors: New Buy-Side Capital Regime Sized to Fit

Special K-Factors: New Buy-Side Capital Regime Sized to Fit

By Steve Marlin
March 30, 2021, Risk

In 2019, the European Banking Authority published a draft proposal for the new prudential regime. Under the EU rules, the largest companies – those with balance sheet assets exceeding €30 billion ($35.38 billion) – will no longer qualify as MiFID-authorized investment firms and will instead be reclassified as credit institutions and be subject to prudential banking regulations.

Another tranche of firms whose assets are greater than €15 billion ($17.69 billion) but less than €30 billion will be MiFID-authorized, but from a prudential perspective will need to follow the banking rules. If the national competent authority deems them to be systemic firms, a third group with assets greater than €5 billion ($5.89 billion) and less than €15 billion can be authorized under MiFID but will need to comply with the banking rules. Together, these three groups comprise what the market refers to as Class I firms, which in the UK are and will continue to be supervised by the Prudential Regulation Authority.

full article