PS21/6: Implementation of Investment Firms Prudential Regime

Read PS21/6 (PDF)[2]

What we are changing

Introducing the IFPR means that there will be a single prudential regime for all FCA investment firms, simplifying the current approach for globally active systemically important banks.

It should reduce barriers to entry and allow for better competition between investment firms.

Some firms will have meaningful capital and liquidity requirements for the first time, adequate with the potential harm they can cause.

Who this applies to

The rules apply to any MIFID investment firm currently subject to any part of the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR). These include: 

• investment firms that are currently subject to BIPRU and GENPRU
• ‘full scope’, ‘limited activity’ and ‘limited licence’ investment firms currently subject to IFPRU and CRR
• ‘local’ investment firms
• matched principal dealers
• specialist commodities derivatives investment firms that benefit from the current exemptions on capital requirements and large exposures including:
• oil market participants (OMPs)
• energy market participants (EMPs)
• ‘exempt-CAD’ firms 
• investment firms that would be exempt from MiFID under Article 3 but have ‘opted-in’ to MiFID

The rules also apply to any regulated and unregulated holding companies of groups that contain an investment firm that are currently authorised under MiFID and or a Collective Portfolio Management Investment (CPMI).

Background

IFPR is a new prudential regime for UK firms authorised under the Markets in Financial Instruments Directive (MiFID).

This is the first of a series of PSs that will set out our rules to introduce the IFPR. This PS summarises the feedback we received to CP20/24[1].

Most respondents supported our proposals. In general, we have implemented our proposals as consulted on, and have made some amendments to provide more clarity on some of the feedback received. We have also made some small amendments to the rules as part of our drafting of our proposed rules for our second CP.

Next steps

Accompanying this PS are the near final rules for the topics included here. These rules will be made final once the FS Bill receives royal assent and the relevant statutory instruments are in place.

We do not expect to make any changes to these rules before they are made final, unless this is essential due to ongoing policy work, and feedback received, for the other CPs on the IFPR.

We issued a second CP in April 2021, CP21/7: A new UK prudential regime for MiFID investment firms[3]. We intend to publish a further CP this year and 2 further PSs summarising the feedback received and bringing together all our final rules.