As of last week, on June 26th, we saw the enforcement of the New Investment Firm Regulations (IFR) and the Investment Firm Directive (IFD) come into effect. The new law created three classes of investment firms, with some now requiring partial or full banking licenses. Of course, big change always brings growing pains, but there are some silver linings for firms once they’ve reached compliance.
So, are the IFR and IFD a blessing or a curse?
The short answer is: both.
Investment firms in class 1 will not only need to comply with the IFR and IFD but also the CRR and CRD. This means, of course, they are now under new and additional requirements with new and additional reporting requirements. Firms in class 2 and class 3 are now subject to prudential requirements, these are proportional to the size of the organization; thus, the burden on them is lower.
Class 1 firms that are applying for a banking license will indeed have to spend time, money, and resources doing so, but with that, there are benefits. For example, they can offer clients new and broader services like providing savings accounts and the like, attracting money from resources that were off-limits before. This naturally brings new business opportunities, which is always a plus.
Overall, these measures work to create a more even playing field for the industry. With lower burdens for smaller firms and higher for larger firms, this new system will create more balance between risks and rewards as well as a higher level of regulatory balance within. As a result, the competition becomes more fair and more sustainable while promoting the industry’s overall health.
Needless to say, firms will need to make some big decisions and do their homework regarding which direction they will take, and it needs to be tackled in a strategic way. Making sure you have the high-quality, and correct data to satisfy reporting will be essential for success.
ACE can, of course, help with all of this. We can help firms do an in-depth analysis of what changes need to happen regarding their companies architecture, data, and processes and help them set up a sustainable framework that ensures compliance and accurate reporting.
If you have any questions about the IFR or the IFD and how we can help, don’t hesitate to reach out.
As always, thanks for reading.
TEAM ACE