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Financial institutions are operating in a dynamic and rapidly changing environment. As a consequence of the global financial crisis and more recently Brexit and the Covid-19 pandemic, governments and regulators have become much more proactive with a view to improving oversight, regulation and protection of the consumer. As a consequence, the regulatory landscape has fundamentally changed and operations, structure and location of regulated businesses are continuously being adapted in response to these developments.

At Matheson we believe that your professional advisers should give you a commercial advantage in dealing with these changes. We have worked extensively over many years with a broad range of the largest financial institutions, including leading domestic firms and “brand name” multinationals including banks, insurers, investment services as well as Fintech and payment firms.

We continually look to use the breadth and depth of our experience to benefit our clients. In our view, dedicated teams with extensive industry sector knowledge offer the best value for clients.

Our Financial Institutions Group unites lawyers with extensive industry experience, corporate transactional experience and regulatory knowledge who are solely focused on financial institutions.

The key areas of our practice can be broadly summarised as follows:

Central to the success of our team is our excellent relationship with the Central Bank of Ireland.

Thought leadership

Thought leadership is particularly important to the Financial Institutions Group as we believe it is as important to shape public policy as it is to advise on it. We regularly make formal and informal submissions to the Central Bank, Department of Finance and other State bodies. Group members regularly write, speak and organise seminars/webinars on topics that are important to our clients. We consistently update our clients on developments in the area of financial services through our much praised FIG Forum. To subscribe, please click here. 

Collaboration

At Matheson the financial services sector is the largest single sector of our practice. The Financial Institutions Group works with many of Matheson’s market leading teams including teams in Finance and Capital Markets, Asset Management and Investment Funds, Aviation Finance and Transportation, Structured Finance and Securitisation, Tax, Restructuring and Insolvency and Financial Services Litigation.

 

Our Team

Updates relating to the Investment Firms Directive and Investment Firm Regulation

Jun 21, 2021, 15:20 PM
We are pleased to share with you a number of important updates relating to the Investment Firms Directive EU/2019/2034 (“IFD”) and the Investment Firm Regulation EU/2019/2033 (“IFR”).
Title : Updates relating to the Investment Firms Directive and Investment Firm Regulation
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Insight Type : Article
Insight Date : Jun 18, 2021, 00:00 AM

We are pleased to share with you a number of important updates relating to the Investment Firms Directive EU/2019/2034 (“IFD”) and the Investment Firm Regulation EU/2019/2033 (“IFR”).

Further down in this article we outline the reporting requirements for MiFID Investment Firms in relation to the submission of prudential returns on the 30 June 2021.

Exercise of National Discretions under IFD / IFR

As the introduction of the new prudential regime for investment firms under the Investment Firms Directive EU/2019/2034 (“IFD”) and the Investment Firm Regulation EU/2019/2033 (“IFR”) edges closer, we still await the publication of the Irish implementing legislation. However, we have got some clarity on the proposed exercise of national discretions.

On 24 May 2021, the Department of Finance published its  Feedback Statement on the exercise of a small number of national discretions under the IFD.  These national discretions relate to the appointment of a national competent authority (“NCA”) and to the remuneration rules and applicable exemptions (detailed in the table below).  The majority of the provisions under the IFD will be transposed on a fully harmonised basis.

However, we are still waiting for a clear picture on exactly what the Irish implementing legislation will look like, as the IFD and IFR also provide for a number of discretions to be exercised by NCAs.  The Central Bank of Ireland (the “Central Bank”) published its consultation paper on this (CP135) in January of this year, but has not yet indicated how it will exercise these discretions.  

National DiscretionExercise of National Discretion
Article 4(1) - The Minister has the discretion to designate a body as a single NCA for IFD / IFR.Article 4(1) - The Minister for Finance will designate the Central Bank as the NCA for IFD / IFR.
Article 32(3) - Member States or the NCA have the discretion to place additional restrictions on the types and designs of instruments, or additional prohibitions on the use of certain instruments, for the purposes of variable remuneration.Article 32(3) - The Minister for Finance will not exercise this discretion. The default provisions of the Directive will not be amended.
Article 32(5) & (6) - Member States or the NCA have the discretion to exempt certain Firms from the restrictions on variable remuneration. 
  • The current threshold, after which the restrictions come into effect, is for Firms with at least €100 million of on and off-balance sheet assets;

  • However, this threshold can be increased to up to €300 million if certain criteria are met (Article 32 (5));  

  • Similarly, this this threshold can be lowered below €100 million if certain criteria are met (Article 32 (6)).

Article 32(5) & (6)
  • The Minister for Finance will set of the default threshold to €300 million.
  • The Minister also designates that where the Central Bank of Ireland is satisfied that it is appropriate, taking into account the nature and scope of an investment Firm’s activities, the internal organisation of the investment Firm, and, where applicable, the characteristics of the group to which the investment Firm belongs, the Bank may specify a lower threshold than €300 million for a Firm with regards to the discretion afforded under Article 32(5) & (6).

Article 32(7) - Member States or the NCA may decide that an individual (i.e. staff member) in a Firm, entitled to variable remuneration below a certain threshold, shall not be entitled to the exemption because of specificities in terms of remuneration practices or because of the nature of the responsibilities and job profile of those staff members. 

  • The threshold below which a staff member is exempt from the variable remuneration restrictions is where an individual receives less than €50,000 variable remuneration and this does not represent more than 25% of their annual remuneration.
Article 32(7) - The Minister for Finance will not exercise this discretion. The default provisions of the Directive will not be amended.

Central Bank Publishes Important Information in relation to Reporting Requirements for MiFID Investment Firms

On 13 May 2021, the Central Bank updated the Reporting Requirements for MiFID Investment Firms in relation to the submission of prudential returns for the period ending 30 June 2021 and the timing of first reporting under the IFR.

Reporting Period ended 30 June 2021

The Central Bank requires all MiFID investment firms to report under the fourth Capital Requirements Directive EU/2013/36 (“CRD IV”) taxonomy 2.9 or the relevant capital reports for non-CRD IV investment firms, for 30 June 2021 as scheduled.

CRR / IFR Reporting

  • Capital Requirements Regulation EU/2013/575 (“CRR”) reporting will commence for all class one minus investment firms under taxonomy 3.0 for the period beginning 1 July 2021 (Including monthly liquidity returns).   
  • IFR reporting will commence for all class two investment firms on 30 September 2021.
  • IFR reporting will commence for all class three investment firms on 31 December 2021.
Class Two Investment FirmsClass Three Investment Firms

Class two investment firms will be required to report all of the following on a quarterly basis: 

  • Level and composition of own funds;  
  • Own funds requirements; 
  • Own funds calculations;
  • The level of activity in respect of the conditions set out under Article 12(1) of the IFR including the balance sheet and revenue break down by investment service and applicable K-factor;  
  • Concentration risk; and  
  • Liquidity requirements

Class three investment firms will be required to report all of the following on an annual basis: 

  • Level and composition of own funds; 
  • Own funds requirements;
  • Own funds calculations;
  • The level of activity in respect of the conditions set out under Article 12(1) of the IFR including the balance sheet and revenue break down by investment service and applicable K-factor; and 
  • Liquidity requirements.

For further information, please contact Joe BeashelIan O'MaraMegan Fennell or your usual Matheson contact.

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