ECB to take over supervision of systemic investment firms

On 25 June 2021, the European Central Bank (ECB) communicated that it will take over supervision of systemic investment firms under the new EU legislation, which applies as of 26 June 2021.¹

The Investment Firms Regulation and Investment Firms Directive² introduce a new framework for the prudential supervision of investment firms. The largest and most systemic investment firms (referred to as Class 1 investment firms) must apply for a licence from the ECB and hence become subject to European banking supervision, under which significant banks will be directly supervised by the ECB.

More specifically, the EU legislation defines systemic investment firms as those that trade financial instruments on their own account or place financial instruments on a firm commitment basis and have total consolidated assets above EUR30 billion. The first set of investment firms newly authorised as credit institutions within the ambit of the Capital Requirements Regulation³ are expected to be added to the list of supervised banks in the second half of 2021, thus becoming subject to European banking supervision.

For the other new categories of investment firms (Class 2 and 3 investment firms), on 5 July 2021, the European Banking Authority (EBA) published final draft regulatory technical standards (RTS) and Implementing Technical Standards (ITS) on the cooperation and information exchange between competent authorities involved in prudential supervision of such investment firms. These draft standards, developed in consultation with the European Securities and Markets Authority (ESMA), are intended to provide for a solid framework for (i) cooperation in the supervision of investment firm groups through colleges of supervisors and (ii) for information exchange for investment firms operating in the EU through branches or the free provision of services.

The final draft RTS on colleges of supervisors for investment firm groups specify the conditions under which colleges of supervisors exercise their tasks. All the standards apply to Class 2 and 3 investment firms and have been prepared reflecting on the supervisory experience in exchange of information and functioning of colleges for credit institutions, adjusting them to the needs of investment firms’ supervision and embedding the proportionality principle.

Legal basis

The final draft RTS on colleges of supervisors for investment firm groups have been developed in accordance with Article 48(8) of Directive (EU) 2019/2034.

The final draft RTS and ITS on information exchange have been developed in accordance with Articles 13(7) and Article 13(8) of Directive (EU) 2019/2034, mandating EBA to develop regulatory and implementing technical standards on the exchange of information between home and host competent authorities supervising investment firms operating through branches.