Tue. Dec 6th, 2022

14 November 2022

The European Banking Authority (EBA) today published its final Regulatory Technical Standards (RTS) on specific liquidity measurement for investment firms under the Investment Firms Directive (IFD). These RTS will ensure that all competent authorities follow the same harmonised approach when adopting the decision to impose further liquidity requirements to an investment firm.  

The IFD allows competent authorities to increase an investment firm’s liquidity requirements if, following the assessment of liquidity risk in accordance with the supervisory review and evaluation process (SREP), they conclude that the investment firm is exposed to material liquidity risks, which are not sufficiently covered by the minimum liquidity requirements set out in the Investment Firms Regulation (IFR).

In order to have a harmonised application of the specific liquidity requirements, these RTS address in detail the main elements that may affect the liquidity risk of an investment firm. In particular, competent authorities will have to assess:

  • all elements specific to each service provided by the investment firm under the Markets in Financial Instruments Directive (MiFID);
  • other elements that could have a material impact, such as external factors, group structure, operational or reputational risks.

For small and non-interconnected investment firms, competent authorities are expected to assess only a limited set of those elements. This aims at preserving the proportional approach envisaged by the IFR and IFD.

Legal basis and next steps

The EBA has developed these RTS in accordance with Article 42(6) of Directive (EU) 2019/2034 (IFD) that mandates the EBA to develop draft RTS to specify in a manner that is appropriate to the size, the structure and the internal organisation of investment firms and the nature, scope and complexity of their activities how the liquidity risk and elements of liquidity risk are to be measured. The minimum liquidity requirements for all investment firms are set out in Part Five of Regulation 2019/2033 (IFR).

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