EBA Proposes New Prudential Capital Framework for MiFID Investment Firms

How will the EBA's Recommendations redraw investment management business in the EU-27 and what can stakeholders do to stay ahead of the curve?

On 29 September 2017, the European Banking Authority (EBA) published its long awaited "Recommendations" in its “September Opinion” that, once finalised by the European Commission, are set to introduce a new simpler and more risk-sensitive prudential capital regime for MiFID investment firms. This Client Alert highlights the September Opinion's Recommendations and its proposals to establish a more tiered and proportionate prudential capital regime for those MIFID Investment Firms. In concrete terms the EBA's September Opinion proposes two things in respect of Investment Firms:

1. categorise Investment Firms by risk type. These Classes are:

  • Class 1 = those that undertake bank like activity and to which the full CRD IV/CRR Framework should be applied;
  • Class 2 = other non-systemic Investment Firms whose activity places these above quantitative and qualitative thresholds that are used to categorise Class 3 entities;
  • Class 3 = smaller and non-interconnected entities; and

2. set capital requirements in a manner that is more proportionate to the risks specific to the Class of Investment Firms. This is achieved by reference to specific methodology of so-called "K-Factors" and may translate into many firms needing to raise capital to meet such new relevant regulatory capital requirements.

Download the publication here

Key Contacts

Michael Huertas LL.M., MBA


Baker McKenzie, Frankfurt

P: + 49 69 2 99 08 376

michael.huertas[at]bakermckenzie [dot] com

Sandra Wittinghofer


Baker McKenzie, Frankfurt

P: + 49 69 2 99 08 275

sandra.wittinghofer[at]bakermckenzie [dot] com